10-Q

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2018

or

¨ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period ended from                to                    

Commission File Number     000-50400

Select Bancorp, Inc.

(Exact name of Registrant as specified in its charter)

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)

Registrant's telephone number, including area code (910) 892-7080

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. Yes x No ¨

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). Yes x No ¨

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" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨
	Emerging growth company ¨

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 ¨ No x

As of August 1, 2018, the Registrant had outstanding 14,025,187 shares of Common Stock, $1.00 par value per share.

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets June 30, 2018 and December 31, 2017	3
	Consolidated Statements of Operations Three Months and Six Months Ended June 30, 2018 and 2017	4
	Consolidated Statements of Comprehensive Income Three Months and Six Months Ended June 30, 2018 and 2017	5
	Consolidated Statements of Changes in Shareholders’ Equity Six Months Ended June 30, 2018 and 2017	6
	Consolidated Statements of Cash Flows Six Months Ended June 30, 2018 and 2017	7
	Notes to Consolidated Financial Statements	9
Item 2 -	Management’s Discussion and Analysis of Financial Condition and  Results of Operations	42
Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4 -	Controls and Procedures	57
Part II.	OTHER INFORMATION
Item 1 -	Legal Proceedings	59
Item 1A -	Risk Factors	59
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3 -	Defaults Upon Senior Securities	59
Item 4 -	Mine Safety Disclosures	59
Item 5-	Other Information	59
Item 6 -	Exhibits	60
	Signatures	61

- 2 -

Part I. Financial Information

Item 1 - Financial Statements

SELECT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2018			December 31,
	(Unaudited)			2017*
	(In thousands, except share and per share data)
ASSETS
Cash and due from banks	$	20,997		$	16,554
Interest-earning deposits in other banks		62,498			37,996
Certificates of deposit		1,000			1,500
Federal funds sold		-			6,645
Investment securities available for sale, at fair value		55,733			63,774
Loans held for sale		349			98
Loans		992,885			982,626
Allowance for loan losses		(9,528	)		(8,835	)
NET LOANS		983,357			973,791
Accrued interest receivable		3,888			3,997
Stock in Federal Home Loan Bank of Atlanta (“FHLB”), at cost		3,882			2,490
Other non-marketable securities		876			1,019
Foreclosed real estate		1,497			1,258
Premises and equipment, net		18,141			18,268
Bank owned life insurance		28,772			28,431
Goodwill		24,579			24,904
Core deposit intangible (“CDI”)		2,564			3,101
Assets held for sale		796			846
Other assets		7,802			9,463
TOTAL ASSETS	$	1,216,731		$	1,194,135
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Demand	$	236,793		$	227,066
Savings		55,906			69,503
Money market and NOW		259,689			250,864
Time		441,096			447,611
TOTAL DEPOSITS		993,484			995,044
Short-term debt		21,071			28,279
Long-term debt		57,372			19,372
Accrued interest payable		528			427
Accrued expenses and other liabilities		3,574			14,898
TOTAL LIABILITIES		1,076,029			1,058,020
Shareholders’ Equity:
Preferred stock, no par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2018 and December 31, 2017		-			-
Common stock, $1.00 par value, 25,000,000 shares authorized; 14,024,887 and 14,009,137 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively		14,025			14,009
Additional paid-in capital		96,032			95,850
Retained earnings		30,865			25,858
Common stock issued to deferred compensation trust, at cost; 291,964 and 295,231 shares at June 30, 2018 and December 31, 2017, respectively		(2,477	)		(2,518	)
Directors’ Deferred Compensation Plan Rabbi Trust		2,477			2,518
Accumulated other comprehensive income (loss)		(220	)		398
TOTAL SHAREHOLDERS’ EQUITY		140,702			136,115
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,216,731		$	1,194,135

* Derived from audited consolidated financial statements.

See accompanying notes.

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SELECT BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018		2017			2018		2017
	(In thousands, except share and per share data)
INTEREST INCOME
Loans	$	13,527	$	9,024		$	26,684	$	17,731
Federal funds sold and interest-earning deposits in other banks		307		119			518		207
Investments		353		326			707		656
TOTAL INTEREST INCOME		14,187		9,469			27,909		18,594
INTEREST EXPENSE
Money market, NOW and savings deposits		325		117			639		220
Time deposits		1,489		880			2,843		1,639
Short-term debt		81		63			210		118
Long-term debt		363		137			584		267
TOTAL INTEREST EXPENSE		2,258		1,197			4,276		2,244
NET INTEREST INCOME		11,929		8,272			23,633		16,350
PROVISION FOR LOAN LOSSES		557		1,083			698		889
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		11,372		7,189			22,935		15,461
NON-INTEREST INCOME
Fees on the sale of mortgages		158		-			184		-
Service charges on deposit accounts		245		216			521		431
Other fees and income		823		562			1,686		1,077
TOTAL NON-INTEREST INCOME		1,226		778			2,391		1,508
NON-INTEREST EXPENSE
Personnel		4,656		3,702			9,397		7,116
Occupancy and equipment		861		492			1,749		1,064
Deposit insurance		213		75			378		147
Professional fees		420		251			690		571
CDI amortization		262		88			537		181
Merger/acquisition related expenses		-		-			1,826		-
Information systems		1,045		534			2,047		1,038
Foreclosed-related expenses		91		(25	)		103		(9	)
Other		1,054		863			2,159		1,677
TOTAL NON-INTEREST EXPENSE		8,602		5,980			18,886		11,785
INCOME BEFORE INCOME TAX		3,996		1,987			6,440		5,184
INCOME TAXES		886		651			1,433		1,733
NET INCOME	$	3,110	$	1,336		$	5,007	$	3,451
NET INCOME PER COMMON SHARE
Basic	$	0.22	$	0.11		$	0.36	$	0.30
Diluted	$	0.22	$	0.11		$	0.36	$	0.29
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		14,019,273		11,662,117			14,015,511		11,657,391
Diluted		14,086,671		11,727,110			14,084,288		11,720,841

See accompanying notes.

- 4 -

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
	(In thousands)
Net income	$	3,110		$	1,336		$	5,007		$	3,451
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale		(271	)		151			(807	)		233
Tax effect		63			(55	)		189			(85	)
Total		(208	)		96			(618	)		148
Total comprehensive income	$	2,902		$	1,432		$	4,389		$	3,599

See accompanying notes.

- 5 -

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

(in thousands, except share data)

													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 (loss)			Equity
Balance at December 31, 2016		-	$	-		11,645,413	$	11,645	$	69,597	$	22,673	$	(2,340	)	$	2,340		$	358		$	104,273
Net income		-		-		-		-		-		3,451		-			-			-			3,451
Other comprehensive income, net		-		-		-		-		-		-		-			-			148			148
Stock option exercises		-		-		17,058		17		85		-		-			-			-			102
Stock based compensation		-		-		-		-		43		-		-			-			-			43
Director equity incentive plan, net		-		-		-		-		-		-		(57	)		57			-			-
Balance at June 30, 2017		-	$	-		11,662,471	$	11,662	$	69,725	$	26,124	$	(2,397	)	$	2,397		$	506		$	108,017
Balance at December 31, 2017		-	$	-		14,009,137	$	14,009	$	95,850	$	25,858	$	(2,518	)	$	2,518		$	398		$	136,115
Net income		-		-		-		-		-		5,007		-			-			-			5,007
Other comprehensive loss		-		-		-		-		-		-		-			-			(618	)		(618	)
Stock option exercises		-		-		15,750		16		93		-		-			-			-			109
Stock based compensation		-		-		-		-		89		-		-			-			-			89
Director equity incentive plan, net		-		-		-		-		-		-		41			(41	)		-			-
Balance at June 30, 2018		-	$	-		14,024,887	$	14,025	$	96,032	$	30,865	$	(2,477	)	$	2,477		$	(220	)	$	140,702

See accompanying notes.

- 6 -

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

	Six Months Ended
	June 30,
	2018			2017
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	5,007		$	3,451
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		698			889
Depreciation and amortization of premises and equipment		870			575
Amortization and accretion of investment securities		323			282
Amortization of deferred loan fees and costs		(351	)		(291	)
Amortization of core deposit intangible		537			181
Stock-based compensation		89			43
Accretion on acquired loans		(1,706	)		(450	)
Amortization of acquisition premium on time deposits		(139	)		(161	)
Net accretion of acquisition discount on borrowings		(8	)		(87	)
Increase in cash surrender value of bank owned life insurance		(341	)		(283	)
Proceeds from loans held for sale		10,306			-
Originations of loans held for sale		(10,374	)		-
Gain on sales of loans held for sale		(184	)		-
Net (gain) loss on sale and write-downs of foreclosed real estate		53			(61	)
Gain on sale of premises and equipment		-			(9	)
Write-down on assets held for sale		50			-
Change in assets and liabilities:
Net change in accrued interest receivable		109			122
Net change in other assets		2,175			(514	)
Net change in accrued expenses and other liabilities		(11,223	)		(121	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(4,109	)		3,566
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption (purchase) of FHLB stock		(1,392	)		110
Redemption (purchase) of non-marketable security		143			37
Purchase of investment securities available for sale		-			(759	)
Maturities of investment securities available for sale		650			3,255
Mortgage-backed securities pay-downs		6,262			2,860
Net change in loans outstanding		(8,585	)		(63,323	)
Proceeds from sale of foreclosed real estate		86			384
Proceeds from sale of premises and equipment		-			95
Purchases of premises and equipment		(743	)		(247	)
NET CASH USED BY INVESTING ACTIVITIES		(3,579	)		(57,588	)

See accompanying notes.

- 7 -

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

	Six Months Ended
	June 30,
	2018			2017
	(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	$	(1,421	)	$	60,153
Proceeds from long-term debt		38,000			-
Repayments on short-term debt		(7,200	)		(3,444	)
Repayments on long-term debt		-			(200	)
Proceeds from stock option exercises		109			102
NET CASH PROVIDED BY FINANCING ACTIVITIES		29,488			56,611
NET CHANGE IN CASH AND CASH EQUIVALENTS		21,800			2,589
CASH AND CASH EQUIVALENTS, BEGINNING		62,695			55,714
CASH AND CASH EQUIVALENTS, ENDING	$	84,495		$	58,303
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	4,175		$	2,224
Taxes		927			1,768
Non-cash transactions:
Unrealized gains (losses) on investment securities available for sale, net of tax		(618	)		148
Transfers from loans to foreclosed real estate		378			2,426

See accompanying notes.

- 8 -

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

NOTE A - BASIS OF PRESENTATION

Select Bancorp, Inc. (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.

The Bank was originally incorporated as New Century Bank on May 19, 2000 and began banking operations on May 24, 2000. On July 25, 2014, the Company acquired Select Bank & Trust Company, Greenville, North Carolina, and changed the Bank’s legal name to Select Bank & Trust Company. On December 15, 2017, the Company acquired Premara Financial, Inc. and its subsidiary Carolina Premier Bank through the merger of Premara with and into the Company, followed immediately by the merger of Carolina Premier with and into the Bank. The Bank continues as the only banking subsidiary of the Company with its headquarters and operations center located in Dunn, NC. The Bank is engaged in general commercial and retail banking in central and eastern North Carolina, as well as in Charlotte, North Carolina and northwest South Carolina. The Bank is subject to the supervision and regulation of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks.

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 and six month periods ended June 30, 2018 and 2017, 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 and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

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 2017 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2018. 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 June 30, 2018 presentation. Such reclassifications had no effect on shareholders’ equity or net income as previously reported.

- 9 -

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

NOTE B - PER SHARE RESULTS

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 June 30, 2018 and 2017 there were 121,300 and 23,300 anti-dilutive options outstanding, respectively.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted average shares used for basic net income available to common shareholders		14,019,273		11,662,117		14,015,511		11,657,391
Effect of dilutive stock options		67,398		64,993		68,777		63,450
Weighted average shares used for diluted net income available to common shareholders		14,086,671		11,727,110		14,084,288		11,720,841

NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS

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

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU requires a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017. The Tax Act included a reduction to the corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. The amount of the reclassification would be the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company early adopted this pronouncement by retrospective application to each period in which the effect of the change in the tax rate under the 2017 Tax Act is recognized. The impact of the reclassification from other comprehensive income to retained earnings of $67,000 was included in the Statement of Changes in Shareholders’ Equity for the year ended December 31, 2017.

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 —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 adopted ASU 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not necessary. See Note H Revenue Recognition for more information.

- 10 -

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

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In January 2016, the 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) require equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminate 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) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) require 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) require 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) clarify 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 adopted early. The guidance did not have a significant impact on the Company's financial position, results of operations or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 applies a right-of-use (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.   In transition, lessees and lessors are required to recognize and measure 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.

- 11 -

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

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

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.   The Company has dedicated staff 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, the FASB amended ASU 2016-15, Statement of Cash Flows (Topic 230): Classifications of Certain Cash Receipts and Cash Payments, of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments were effective for the Company January 1, 2018 and did not have a material effect on its financial statements.

In January 2017, the FASB ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting was updated.  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 ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment was amended 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.

- 12 -

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

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In February 2017, the FASB ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) clarified 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 were effective for the Company January 2018 and did not have a material effect on its financial statements.

In May 2017, the FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost amended the requirements in the 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 were effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption was permitted. These amendments did not have a material effect on the financial statements.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities to clarify certain aspects of the guidance issued in ASU 2016-01. The amendments will be effective for the third quarter of 2018 subsequent to adopting the amendments in ASU 2016-01. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2018, the FASB issued ASU 2018-4, Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 which incorporate into the Accounting Standards Codification recent

SEC guidance which was issued in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The amendments were effective upon issuance. These amendments did not have a material effect on its financial statements.

In March 2018, the FASB issued ASU 2018-05 – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update) which updated the Income Taxes Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to the income tax accounting implications of the Tax Cuts and Jobs Act. The amendments were effective upon issuance. These amendments did not have a material effect on its financial statements.

In May 2018, the FASB amended the Financial Services—Depository and Lending Topic of the Accounting Standards Codification to remove outdated guidance related to Circular 202. The amendments were effective upon issuance and did not have a material effect on the financial statements.

In June 2018, the FASB amended the Compensation—Stock Compensation Topic of the Accounting Standards Codification. The amendments expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect these amendments to have a material effect on its financial statements.

- 13 -

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

 NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

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.

- 14 -

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

NOTE D - FAIR VALUE MEASUREMENTS

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:

Fair Value Hierarchy

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:

· Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

· Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

· Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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

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NOTE D – FAIR VALUE MEASUR SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D – FAIR VALUE MEASUREMENTS (continued)

Investment Securities Available-for-Sale (“AFS”)

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 entities, and municipal bonds. There have been no changes in valuation techniques for the three and six months ended June 30, 2018. 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 June 30, 2018 and December 31, 2017 (in thousands):

Investment securities  available for sale June 30, 2018	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 – GSE's	$	11,259	$	-	$	11,259	$	-
Mortgage-backed securities - GSE’s		24,778		-		24,778		-
Corporate Bonds		1,792		-		1,792		-
Municipal bonds		17,904		-		17,904		-
Total investment held for sale	$	55,733	$	-	$	55,733	$	-

Investment securities   available for sale   December 31, 2017	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 – GSE's	$	13,364	$	-	$	13,364	$	-
Mortgage-backed securities - GSE’s		29,684		-		29,684		-
Corporate Bonds		1,888		-		1,888		-
Municipal bonds		18,838		-		18,838		-
Total investment held for sale	$	63,774	$	-	$	63,774	$	-

- 16 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D – FAIR VALUE MEASUREMENTS (continued)

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

Impaired Loans

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”. 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 June 30, 2018 and December 31, 2017, 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 June 30, 2018, the discounts to appraised value used are weighted between 3% and 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 June 30, 2018.

Foreclosed Real Estate

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 June 30, 2018, the discounts used ranged between 6% and 10%. There have been no changes in valuation techniques for the three months ended June 30, 2018.

Assets held for sale

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 and selling costs ranged between 1% and 25 % at June 30, 2018. There have been no changes in the valuation techniques for the three months ended June 30, 2018.

- 17 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D – FAIR VALUE MEASUREMENTS (continued)

Loans held for sale

The Company originated fixed and variable rate residential mortgage loans on a service release 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 is classified within Level 2 of the hierarchy. 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.

- 18 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D – FAIR VALUE MEASUREMENTS (continued)

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 June 30, 2018 and December 31, 2017 (in thousands):

Asset Category June 30, 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	$	2,139	$	-	$	-	$	2,139
Loans held for sale		349		-		349		-
Assets held for sale		796		-		-		796
Foreclosed real estate		1,497		-		-		1,497
Total	$	4,781	$	-	$	349	$	4,432

Asset Category December 31, 2017	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	$	899	$	-	$	-	$	899
Loans held for sale		98		-		98		-
Assets held for sale		846		-		-		846
Foreclosed real estate		1,258		-		-		1,258
Total	$	3,101	$	-	$	98	$	3,003

- 19 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE D – FAIR VALUE MEASUREMENTS (continued)

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

	June 30, 2018
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	20,997	$	20,997	$	20,997	$	-	$	-
Certificates of deposit		1,000		1,000		1,000		-		-
Interest-earning deposits in other banks		62,498		62,498		62,498		-		-
Investment securities available for sale		55,733		55,733		-		55,733		-
Loans held for sale		349		349				349		-
Loans, net		983,357		965,859		-		-		965,859
Accrued interest receivable		3,888		3,888		-		3,888		-
Stock in FHLB		3,882		3,882		-		-		3,882
Other non-marketable securities		876		876		-		-		876
Assets held for sale		796		796		-		-		796
Financial liabilities:
Deposits	$	993,484	$	993,467	$	-	$	993,467	$	-
Short-term debt		21,071		21,071		-		21,071		-
Long-term debt		57,372		54,862		-		54,862		-
Accrued interest payable		528		528		-		528		-

	December 31, 2017
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,554	$	16,554	$	16,554	$	-	$	-
Certificates of deposits		1,500		1,500		1,500		-		-
Interest-earning deposits in other banks		37,996		37,996		37,996		-		-
Federal funds sold		6,645		6,645		6,645		-		-
Investment securities available for sale		63,774		63,774		-		63,774		-
Loans held for sale		98		98		-		98		-
Loans, net		973,791		972,475		-		-		972,475
Accrued interest receivable		3,997		3,997		-		3,997		-
Stock in the FHLB		2,490		2,490		-		-		2,490
Other non-marketable securities		1,019		1,019		-		-		1,019
Assets held for sale		846		846		-		-		846
Financial liabilities:
Deposits	$	995,044	$	991,977	$	-	$	991,977	$	-
Short-term debt		28,279		28,279		-		28,279		-
Long-term debt		19,372		14,640		-		14,640		-
Accrued interest payable		427		427		-		427		-

- 20 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - INVESTMENT SECURITIES

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	11,384	$	19	$	(144	)	$	11,259
Mortgage-backed securities – GSE’s		25,069		81		(372	)		24,778
Corporate bonds		1,776		24		(8	)		1,792
Municipal bonds		17,790		135		(21	)		17,904
	$	56,019	$	259	$	(545	)	$	55,733

As of June 30, 2018 accumulated other comprehensive income included net unrealized losses totaling $286,000. Deferred tax assets resulting from these net unrealized losses totaled $66,000.

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

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	13,241	$	148	$	(25	)	$	13,364
Mortgage-backed securities – GSE’s		29,571		213		(100	)		29,684
Corporate bonds		1,858		44		(14	)		1,888
Municipal bonds		18,583		255		-			18,838
	$	63,253	$	660	$	(139	)	$	63,774

As of December 31, 2017, accumulated other comprehensive income included net unrealized gains totaling $521,000. Deferred tax liabilities resulting from these net unrealized gains totaled $123,000.

- 21 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - INVESTMENT SECURITIES (continued)

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	2,337	$	21	$	-		$	2,358
After 1 year but within 5 years		37,703		118		(466	)		37,355
After 5 years but within 10 years		7,004		47		(60	)		6,991
After 10 years		8,975		73		(19	)		9,029
	$	56,019	$	259	$	(545	)	$	55,733

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	975	$	5	$	-		$	980
After 1 year but within 5 years		45,418		406		(125	)		45,699
After 5 years but within 10 years		7,823		81		(14	)		7,890
After 10 years		9,037		168		-			9,205
	$	63,253	$	660	$	(139	)	$	63,774

Securities with a carrying value of $12.0 million and $7.5 million at June 30, 2018 and December 31, 2017, 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. 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 June 30, 2018 and December 31, 2017. The Company has not had any securities sales for the first six months of 2018 or 2017.

- 22 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE E - INVESTMENT SECURITIES (continued)

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

	June 30, 2018
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies-GSE’s	$	6,662	$	(97	)	$	1,265	$	(47	)	$	7,927	$	(144	)
Mortgage-backed securities-GSE’s		17,693		(310	)		2,425		(62	)		20,118		(372	)
Corporate bonds		754		(8	)		-		-			754		(8	)
Municipal bonds		3,763		(21	)		-		-			3,763		(21	)
Total temporarily impaired securities	$	28,872	$	(436	)	$	3,690	$	(109	)	$	32,562	$	(545	)

At June 30, 2018, the Company had three securities with an unrealized loss for more than twelve months of $109,000. Eleven U.S. government agency GSE’s and twenty-seven mortgage-backed GSE’s, one corporate bond and eight municipal bonds had unrealized losses for less than twelve months totaling $436,000 at June 30, 2018. All unrealized losses are attributable to the general trend of interest rates. There were no sales of investment securities during the first half of 2018.

	December 31, 2017
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	1,651	$	(9	)	$	1,415	$	(16	)	$	3,066	$	(25	)
Mortgage-backed securities - GSE’s		8,137		(55	)		2,449		(45	)		10,586		(100	)
Corporate bonds		1,752		(14	)		-		-			1,752		(14	)
Municipal bonds		1,101		-			-		-			1,101		-
Total temporarily impaired securities	$	12,641	$	(78	)	$	3,864	$	(61	)	$	16,505	$	(139	)

At December 31, 2017, the Company had two mortgage-backed GSE’s and two U.S Government agencies – GSE’s with an aggregate unrealized loss for twelve or more consecutive months of $61,000. The Company had 16 securities with a loss for twelve months or less. Two U.S. government agency GSE’s, three municipals, two corporates and nine mortgage-backed GSE’s had unrealized losses for less than twelve months totaling $78,000 at December 31, 2017. 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 securities sold during 2017.

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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 June 30, 2018 and December 31, 2017:

	June 30,						December 31,
	2018						2017
				Percent						Percent
	Amount			of total			Amount			of total
	(dollars in thousands)
Real estate loans:
1-to-4 family residential	$	158,453			15.96	%	$	156,901			15.97	%
Commercial real estate		428,900			43.20	%		403,100			41.02	%
Multi-family residential		63,002			6.34	%		76,983			7.83	%
Construction		178,098			17.94	%		177,933			18.11	%
Home equity lines of credit (“HELOC”)		51,149			5.15	%		52,606			5.35	%
Total real estate loans		879,602			88.59	%		867,523			88.28	%
Other loans:
Commercial and industrial		102,237			10.30	%		106,164			10.80	%
Loans to individuals		12,551			1.26	%		10,097			1.04	%
Overdrafts		91			0.01	%		147			0.01	%
Total other loans		114,879			11.57	%		116,408			11.85	%
Gross loans		994,481						983,931
Less deferred loan origination fees, net		(1,596	)		(0.16	)%		(1,305	)		(0.13	)%
Total loans		992,885			100.00	%		982,626			100.00	%
Allowance for loan losses		(9,528	)					(8,835	)
Total loans, net	$	983,357					$	973,791

For PCI loans acquired from Legacy Select, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of June 30, 2018 and December 31, 2017 were:

(dollars in thousands)	June 30, 2018		December 31, 2017
Contractually required payments	$	27,355	$	29,285
Nonaccretable difference		2,493		2,717
Cash flows expected to be collected		24,862		26,568
Accretable yield		3,102		3,307
Carrying value	$	21,760	$	23,261

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.

- 24 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE F - LOANS (continued)

At June 30, 2018, the Company had pre-approved but unused lines of credit for customers totaling $172.9 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 $138.0 million of loans was pledged to the FHLB to secure borrowings at June 30, 2018.

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

	June 30, 2018
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	1,527	$	814	$	2,289	$	4,630	$	97,607	$	102,237
Construction		233		373		401		1,007		177,091		178,098
Multi-family residential		-		-		-		-		63,002		63,002
Commercial real estate		1,804		-		986		2,790		426,110		428,900
Loans to individuals & overdrafts		28		-		4		32		12,610		12,642
1-to-4 family residential		1,441		707		355		2,503		155,950		158,453
HELOC		70		-		522		592		50,557		51,149
Deferred loan (fees) cost, net		-		-		-		-		-		(1,596	)
	$	5,103	$	1,894	$	4,557	$	11,554	$	982,927	$	992,885

	December 31, 2017
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	215	$	396	$	96	$	707	$	105,457	$	106,164
Construction		27		359		384		770		177,163		177,933
Multi-family residential		30		-		-		30		76,953		76,983
Commercial real estate		1,464		-		528		1,992		401,108		403,100
Loans to individuals & overdrafts		22		-		7		29		10,215		10,244
1-to-4 family residential		2,824		721		771		4,316		152,585		156,901
HELOC		103		-		329		432		52,174		52,606
Deferred loan (fees) cost, net		-		-		-		-		-		(1,305	)
	$	4,685	$	1,476	$	2,115	$	8,276	$	975,655	$	982,626

- 25 -

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

NOTE F - LOANS (continued)

Impaired Loans

The following tables present information on loans, excluding PCI loans and loans evaluated collectively as a homogeneous group that were considered to be impaired as of June 30, 2018 and December 31, 2017:

							Three months ended					Six months ended
	As of June 30, 2018						June 30, 2018					June 30, 2018
			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	$	2,462	$	3,835	$	-	$	3,031	$	57		$	2,447	$	130
Construction		375		481		-		377		1			380		2
Commercial real estate		5,571		6,774		-		5,226		94			4,999		155
Loans to individuals & overdrafts		-		-		-		-		-			-		-
Multi-family residential		225		225		-		228		3			230		6
1-to-4 family residential		693		1,066		-		806		(16	)		989		25
HELOC		577		965		-		870		12			800		31
Subtotal:		9,903		13,346		-		10,538		151			9,845		349
With an allowance recorded:
Commercial and industrial		140		140		47		141		1			141		1
Construction		26		26		14		26		-			13		-
Commercial real estate		-		-		-		-		-			-		-
Loans to individuals & overdrafts		4		4		4		2		-			2		-
Multi-family residential		-		-		-		-		-			-		-
1-to-4 family residential		148		155		12		149		2			175		7
HELOC		70		70		21		35		1			52		1
Subtotal:		388		395		98		353		4			383		9
Totals:
Commercial		8,799		11,481		61		9,029		156			8,210		294
Consumer		4		4		4		2		-			2		-
Residential		1,488		2,256		33		1,860		(1	)		2,016		64
Grand Total:	$	10,291	$	13,741	$	98	$	10,891	$	155		$	10,228	$	358

Impaired loans at June 30, 2018 were approximately $10.3 million and were composed of $4.6 million in nonaccrual loans and $5.7 million in loans that were still accruing interest. Recorded investment represents the current principal balance of the loan. Approximately $388,000 in impaired loans had specific allowances provided for them while the remaining $9.9 million had no specific allowances recorded at June 30, 2018. Of the $9.9 million with no allowance recorded, $642,000 of those loans have had partial charge-offs recorded.

- 26 -

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

NOTE G - LOANS (continued)

Impaired Loans (continued)

							Three months ended				Six months ended
	As of December 31, 2017						June 30, 2017				June 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	$	940	$	1,234	$	-	$	1,077	$	21	$	1,119	$	40
Construction		385		490		-		169		1		198		5
Commercial real estate		4,428		5,606		-		3,958		54		4,019		113
Loans to individuals & overdrafts		1		1		-		-		-		-		-
Multi-family residential		234		234		-		48		-		197		-
1-to-4 family residential		1,077		1,209		-		1,022		20		1,111		33
HELOC		602		926		-		654		12		844		22
Subtotal:		7,667		9,700		-		6,928		108		7,488		213
With an allowance recorded:
Commercial and industrial		142		142		50		-		-		1		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		1,429		10		1,563		20
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		-		-		-		-
1-to-4 family residential		-		-		-		302		5		298		11
HELOC		202		202		11		16		-		33		-
Subtotal:		344		344		61		1,747		15		1,895		31
Totals:
Commercial		6,129		7,706		50		6,681		86		7,097		178
Consumer		1		1		-		-		-		-		-
Residential		1,881		2,337		11		1,994		37		2,286		66
Grand Total:	$	8,011	$	10,044	$	61	$	8,675	$	123	$	9,383	$	244

Impaired loans at December 31, 2017 were approximately $8.0 million and consisted of $2.1 million in non-accrual loans and $5.9 million in loans still in accruing status. Recorded investment represents the current principal balance for the loan. Approximately $344,000 of the $8.0 million in impaired loans at December 31, 2017 had specific allowances aggregating $61,000 while the remaining $7.7 million had no specific allowances recorded. Of the $7.7 million with no allowance recorded, partial charge-offs to date amounted to $2.0 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.

- 27 -

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

NOTE G - 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 six months ended June 30, 2018 and 2017:

	Three months ended June 30, 2018						Six months ended June 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	$	408	$	403		1	$	408	$	403
Commercial real estate		2		892		817		2		892		817
Commercial & industrial		2		533		510		6		1,579		1,555
Total		5	$	1,833	$	1,730		9	$	2,879	$	2,775

	Three months ended June 30, 2017						Six months ended June 30, 2017
			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	$	17		1	$	17	$	17
Commercial & industrial		1		44		44		1		44		44
Total		2	$	61	$	61		2	$	61	$	61

Loans may be considered troubled debt restructurings for reasons other than below market interest rates, extended payment terms or forgiveness of principal.

- 28 -

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

NOTE G - 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 period ended June 30, 2018 and 2017:

	Twelve months ended				Twelve months ended
	June 30, 2018				June 30, 2017
	Number		Recorded		Number		Recorded
	of loans		investment		of loans		investment
			(Dollars in thousands)
Extended payment terms:
Commercial & industrial		6	$	1,544		2	$	927
Commercial real estate		1		384		-		-
1-to-4 family residential		2		470		1		77
Total		9	$	2,398		3	$	1,004

At June 30, 2018, the Bank had forty-three loans with an aggregate balance of $8.3 million that were considered to be troubled debt restructurings. Of those TDRs, twenty-six loans with a balance totaling $5.6 million were still accruing as of June 30, 2018. The remaining TDRs with balances totaling $2.7 million as of June 30, 2018 were in non-accrual status.

At June 30, 2017, the Bank had thirty-two loans with an aggregate balance of $4.7 million that were considered to be troubled debt restructurings. Of those TDRs, seventeen loans with a balance totaling $3.2 million were still accruing as of June 30, 2017. The remaining TDRs with balances totaling $1.5 million as of June 30, 2017 were in non-accrual status.

- 29 -

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

NOTE G - LOANS (continued)

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

Total loans:

June 30, 2018
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
			(dollars in thousands)
Superior	$	1,347	$	-	$	-	$	-
Very good		1,657		138		1,227		-
Good		13,772		11,840		57,922		5,475
Acceptable		38,592		43,219		246,499		38,768
Acceptable with care		38,502		121,370		115,438		18,218
Special mention		2,413		757		4,365		316
Substandard		5,954		774		3,449		225
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	102,237	$	178,098	$	428,900	$	63,002

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	152,353	$	49,918
Special mention		2,381		247
Substandard		3,719		984
	$	158,453	$	51,149

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	12,521
Non –pass		121
	$	12,642

- 30 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Total Loans:

December 31, 2017
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
	(dollars in thousands)
Superior	$	1,207	$	-	$	-	$	-
Very good		2,454		111		420		-
Good		13,161		11,343		46,790		11,394
Acceptable		44,968		40,558		249,988		46,246
Acceptable with care		38,631		124,593		97,798		18,787
Special mention		3,172		583		3,771		322
Substandard		2,571		745		4,333		234
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	106,164	$	177,933	$	403,100	$	76,983

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	149,767	$	51,326
Special mention		3,270		253
Substandard		3,864		1,027
	$	156,901	$	52,606

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	10,233
Non-pass		11
	$	10,244

- 31 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Determining the fair value of Purchased Credit Impaired (“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 companies.

The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2018 and 2017:

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2018			2017			2018			2017
	(dollars in thousands)
Accretable yield, beginning of period	$	3,040		$	2,465		$	3,307		$	2,626
Accretion		(348	)		(260	)		(702	)		(520	)
Reclassification from (to) nonaccretable difference		78			72			63			79
Other changes, net		332			3			434			95
Accretable yield, end of period	$	3,102		$	2,280		$	3,102		$	2,280

- 32 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - 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 six month periods ended June 30, 2018, respectively:

	Three months ended June 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	$	729		$	1,686	$	3,590		$	1,275	$	645		$	125		$	697		$	8,747
Provision for loan losses		37			82		330			137		(16	)		200			(109	)		661
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	781		$	1,768	$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	144		$	-	$	66		$	-	$	-		$	-		$	-		$	210
Provision for loan losses		(90	)		-		(14	)		-		-			-			-			(104	)
Loans charged-off		-			-		-			-		-			-			-			-
Recoveries		-			-		-			-		-			-			-			-
Balance, end of period	$	54		$	-	$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	873		$	1,686	$	3,656		$	1,275	$	645		$	125		$	697		$	8,957
Provision for loan losses		(53	)		82		316			137		(16	)		200			(109	)		557
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	835		$	1,768	$	3,978		$	1,421	$	618		$	320		$	588		$	9,528
Ending Balance: individually evaluated for impairment	$	47		$	14	$	-		$	12	$	21		$	4		$	-		$	98
Ending Balance: collectively evaluated for impairment	$	788		$	1,754	$	3,978		$	1,409	$	597		$	316		$	588		$	9,430
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	98,078		$	176,956	$	414,666		$	149,664	$	50,452		$	12,576		$	61,753		$	964,145
Ending Balance: collectively evaluated for impairment PCI loans	$	1,557		$	741	$	8,663		$	7,948	$	50		$	62		$	1,024		$	20,045
Ending Balance: individually evaluated for impairment	$	2,602		$	401	$	5,571		$	841	$	647		$	4		$	225		$	10,291
Ending Balance	$	102,237		$	178,098	$	428,900		$	158,453	$	51,149		$	12,642		$	63,002		$	994,481

- 33 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

	Six months ended June 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		27			(193	)		612			345		109			26			(203	)		723
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	781		$	1,768		$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	65		$	-		$	66		$	-	$	-		$	-		$	-		$	131
Provision for loan losses		(11	)		-			(14	)		-		-			-			-			(25	)
Loans charged-off		-			-			-			-		-			-			-			-
Recoveries		-			-			-			-		-			-			-			-
Balance, end of period	$	54		$	-		$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	807		$	1,955		$	3,370		$	1,058	$	549		$	305		$	791		$	8,835
Provision for loan losses		16			(193	)		598			345		109			26			(203	)		698
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	835		$	1,768		$	3,978		$	1,421	$	618		$	320		$	588		$	9,528

- 34 -

SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - 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 six month periods ended June 30, 2017, respectively:

	Three months ended June 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	$	958		$	1,177	$	3,169		$	770	$	589		$	465		$	583	$	7,711
Provision for loan losses		(119	)		111		1,110			143		(28	)		(294	)		149		1,072
Loans charged-off		(35	)		-		(373	)		-		-			(34	)		-		(442	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	5		$	-	$	294		$	-	$	12		$	-		$	-	$	311
Provision for loan losses		(5	)		-		12			16		(12	)		-			-		11
Loans charged-off		-			-		(294	)		-		-			-			-		(294	)
Recoveries		-			-		-			-		-			-			-		-
Balance, end of period	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	963		$	1,177	$	3,463		$	770	$	601		$	465		$	583	$	8,022
Provision for loan losses		(124	)		111		1,122			159		(40	)		(294	)		149		1,083
Loans charged-off		(35	)		-		(667	)		-		-			(34	)		-		(736	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,925		$	939	$	563		$	142		$	732	$	8,488
Ending Balance: individually evaluated for impairment	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Ending Balance: collectively evaluated for impairment	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	87,122		$	125,207	$	285,314		$	95,242	$	41,431		$	10,315		$	70,268	$	714,899
Ending Balance: collectively evaluated for impairment PCI loans	$	31		$	894	$	7,788		$	6,880	$	193		$	107		$	750	$	16,643
Ending Balance: individually evaluated for impairment	$	1,053		$	164	$	4,304		$	1,522	$	681		$	-		$	48	$	7,772
Ending Balance	$	88,206		$	126,265	$	297,406		$	103,644	$	42,305		$	10,422		$	71,066	$	739,314

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G - LOANS (continued)

Allowance for Loan Losses (Continued)

	Six months ended June 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		(466	)		(18	)		1,081			58		(2	)		(139	)		102		616
Loans charged-off		(37	)		-			(623	)		-		(69	)		(50	)		-		(779	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	37		$	-		$	-		$	-	$	12		$	-		$	-	$	49
Provision for loan losses		(37	)		-			306			16		(12	)		-			-		273
Loans charged-off		-			-			(294	)		-		-			-			-		(294	)
Recoveries		-			-			-			-		-			-			-		-
Balance, end of period	$	-		$	-		$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	1,248		$	1,301		$	3,448		$	846	$	623		$	317		$	628	$	8,411
Provision for loan losses		(503	)		(18	)		1,387			74		(14	)		(139	)		102		889
Loans charged-off		(37	)		-			(917	)		-		(69	)		(50	)		-		(1,073	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,925		$	939	$	563		$	142		$	732	$	8,488

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE G – LOANS HELD FOR SALE

We originate fixed and variable rate residential mortgage loans on a service release 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. 2014-09 Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified Topic 606. As stated in Note C Recent Accounting Pronouncements, 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.

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE H – REVENUE RECOGNITION (continued)

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 safety 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 presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2018 and 2017.

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
	(dollars in thousands)
Service Charges on Deposit Accounts	$	245	$	216	$	521	$	413
Other		364		343		771		609
Noninterest Income (in-scope of Topic 606)		609		559		1,292		1,040
Noninterest Income (out-of-scope of Topic 606)		617		219		1,099		468
Total Non-interest Income	$	1,226	$	778	$	2,391	$	1,508

Contract Balances

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 transfer a service to a customer for which the 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 therefore, does not experience significant contract balances. As of June 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE H – REVENUE RECOGNITION (continued)

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 I – OTHER REAL ESTATE OWNED

The following table explains changes in other real estate owned during the six months ended June 30, 2018 and 2017 (dollars in thousands):

	Six Months			Six Months
	Ended June 30,			Ended June 30,
	2018			2017
	(dollars in thousands)
Beginning balance January 1	$	1,258		$	599
Sales		(86	)		(384	)
Write-downs and gains/(losses) on sales		(53	)		61
Transfers		378			2,426
Ending balance	$	1,497		$	2,702

At June 30, 2018 and December 31, 2017, the Company had $1.5 million and $1.3 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 $135,000 at June 30, 2018. At December 31, 2017, the Company had no such loans.

Note J – Business Combinations

On July 20, 2017, the Company executed a merger agreement with Premara Financial, Inc. (“Premara”), a bank holding company headquartered in Charlotte, North Carolina, whose wholly owned subsidiary, Carolina Premier Bank, was a North Carolina state-chartered commercial bank. On December 15, 2017, the Company completed its previously announced acquisition of Premara and pursuant to the terms of the merger agreement, Premara was merged with and into the Company, followed immediately by the merger of Carolina Premier Bank with and into the Bank. Carolina Premier had approximately $279.6 million in assets as of the merger date, December 15, 2017. The merger expanded the Bank’s North Carolina presence with a branch in Charlotte and marked the Bank’s initial entry into South Carolina with the acquisition of branches in Rock Hill, Blacksburg and Six Mile, South Carolina.

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Note J – Business Combinations (continued)

Premara had 3,179,808 shares of common stock outstanding as of the merger closing date. Under the terms of the merger agreement, 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) were converted to the $12.65 per share cash merger consideration, for aggregate cash consideration of $11,993,212 (exclusive of cash paid-in-lieu of fractional shares) which was paid out subsequent to December 31, 2017. Pursuant to the merger agreement, each warrant or stock option to acquire shares of Premara common stock issued and outstanding as of the effective time of the merger was converted into the right to receive from the Company a cash payment equal to $12.65 less the exercise price of such warrant or option, as applicable and paid out prior to year-end. The remaining 2,231,728 Premara common shares were converted into stock consideration at the merger exchange ratio of 1.0463 shares of Company common stock for each share of Premara common stock, resulting in the issuance of 2,334,999 new shares of Company common stock. The transaction was valued at approximately $40.6 million in the aggregate based on 3,179,808 shares of Premara common stock outstanding on December 15, 2017. The shares of Premara common stock converted to the Company’s common stock are valued at $12.14 per share, the low price of Select common stock on December 15, 2017.

The merger with Premara was accounted for under the acquisition method of accounting with the Company as the legal and accounting acquirer and Premara as the legal and accounting acquiree. The assets and liabilities of Premara, as of the effective date of the acquisition, are recorded at their respective fair values. For the acquisition of Premara, estimated fair values of assets acquired and liabilities assumed are based on the information that is available, and the Company believes this information provides a reasonable basis for determining fair values.

Goodwill recorded for Premara represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations. During the first quarter of 2018, goodwill decreased by $325,000 due to adjustments to liabilities assumed and the tax re-measurement associated with the completion of the final short-year tax return. Merger-related expenses in the first quarter of 2018 totaled $1.8 million which were recorded as noninterest expense as incurred.

The following tables reflect the pro forma total net interest income, noninterest income and net income for the six months ended June 30, 2017 as though the acquisition of Premara had taken place on January 1, 2017 and actual amounts for the six months ended June 30, 2018. The pro forma results have not been adjusted to remove non-recurring acquisition-related expenses, and are not necessarily indicative of the results of operations that would have occurred had the acquisition actually taken place on January 1, 2017, nor of future results of operations.

	Six Months Ended June 30
	2018		2017
	(dollars in thousands, except per share)
Net interest income	$	23,633	$	22,422
Non-interest income		2,391		2,358
Net income available to common shareholders		5,007		4,728
Earnings per share, basic	$	0.36	$	0.34
Earnings per share, diluted	$	0.36	$	0.34
Weighted average common shares outstanding, basic		14,015,511		13,992,390
Weighted average common shares outstanding, diluted		14,084,226		14,055,840

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SELECT BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

NOTE K – SUBSEQUENT EVENTS

The Company has evaluated for subsequent events through the date and time the financial statements were issued and has determined there are no reportable subsequent events.

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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; and diversion of management’s time and attention to merger-related issues.

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 and York, Pickens and Cherokee counties in South Carolina. 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 combined company is now known as 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. On December 15, 2017, the Company acquired Premara Financial, Inc. (“Premara”) and its banking subsidiary Carolina Premier Bank (“Carolina Premier”) located in Charlotte, North Carolina and the cities of Rock Hill, Blacksburg and Six Mile, South Carolina. Under the terms of that 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 cash for each outstanding share of Premara common stock, with approximately 70% of such shares being exchanged for shares of the Company’s common stock and 30% being exchanged for cash.

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We closed our branch located at 6390 Ramsey Street, Fayetteville, North Carolina and transferred accounts to our Fayetteville branch located at 2818 Raeford Road during September 2015. The property that housed our former Ramsey Street branch is included in assets held for sale on the consolidated balance sheet as of June 30, 2018.

Comparison of Financial Condition at

June 30, 2018 and December 31, 2017

During the first six months of 2018, total assets increased by $22.6 million to $1.2 billion as of June 30, 2018. The increase in assets was due primarily to loan growth funded by deposits in other banks and borrowings. Earning assets at June 30, 2018 totaled $1.1 billion and consisted of $983.4 million in net loans, $55.7 million in investment securities, $63.5 million in overnight investments and interest-bearing deposits in other banks and $4.8 million in non-marketable equity securities, of which $3.9 million is FHLB stock. Total deposits and shareholders’ equity at the end of the second quarter of 2018 were $993.5 million and $140.7 million, respectively.

Since the end of 2017, gross loans have increased by $10.3 million to $992.9 million as of June 30, 2018. At June 30, 2018, gross loans consisted of $102.2 million in commercial and industrial loans, $428.9 million in commercial real estate loans, $63.0 million in multi-family residential loans, $12.6 million in loans to individuals, $158.5 million in 1-to-4 family residential real estate loans, $51.1 million in HELOCs, and $178.1 million in construction loans. Deferred loan fees, net of costs, on these loans were $1.6 million at June 30, 2018.

At June 30, 2018, there were no federal funds sold compared to $6.6 million, at December 31, 2017. At June 30, 2018 and December 31, 2017 there were no repurchase agreements. Interest-earning deposits in other banks were $62.5 million at June 30, 2018, an increase of $24.5 million from December 31, 2017. The Company’s investment securities at June 30, 2018 were $55.7 million, a decrease of $8.0 million from December 31, 2017. The Company decreased the size of its investment securities portfolio during the first six months of 2018 in order to provide funding for higher yielding loans. The investment portfolio as of June 30, 2018 consisted of $11.3 million in government agency debt securities, $24.8 million in mortgage-backed securities, $1.8 million in corporate bonds and $17.9 million in municipal securities. The net unrealized loss on these securities was $286,000.

At June 30, 2018, the Company had an investment of $3.9 million in FHLB stock, which increased from $2.5 million at December 31, 2017. Also, the Company had $876,000 in other non-marketable securities at June 30, 2018, which decreased by $143,000 from December, 31, 2017.

At June 30, 2018, non-earning assets were $109.0 million, an increase of $2.2 million from $106.8 million as of December 31, 2017. Non-earning assets included $21.0 million in cash and due from banks, bank premises and equipment of $18.1 million, goodwill of $24.6 million, core deposit intangible of $2.6 million, accrued interest receivable of $3.9 million, foreclosed real estate of $1.5 million, $28.8 million in bank owned life insurance (“BOLI”), $796,000 of assets held for sale, and other assets of $7.8 million which included $4.6 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.

Total deposits at June 30, 2018 were $993.5 million and consisted of $236.8 million in non-interest-bearing demand deposits, $259.7 million in money market and NOW accounts, $55.9 million in savings accounts, and $441.1 million in time deposits. Total deposits decreased by $1.6 million from $995.0 million as of December 31, 2017, due primarily to a decrease in savings deposits as a result of customers moving funds into higher yielding deposit products. The Bank had no brokered demand deposits and $71.9 million in brokered time deposits as of June 30, 2018.

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As of June 30, 2018, the Company had $21.1 million of short-term debt (of which none was repurchase agreements with local customers), $57.4 million of long-term debt, of which $45.0 million are FHLB borrowings and $12.4 million in junior subordinated debentures. The increase in long-term debt was implemented as an interest rate sensitivity measure in the upward interest environment.

Total shareholders’ equity at June 30, 2018 was $140.7 million, an increase of $4.6 million from $136.1 million as of December 31, 2017. This increase is primarily due to year to date earnings of $5.0 million. Accumulated other comprehensive income relating to available for sale securities decreased $618,000 during the six months ended June 30, 2018 due to the increase in interest rates. Other changes in shareholders’ equity included increases of $89,000 in stock-based compensation and $109,000 from the exercise of stock options.

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

At June 30, 2018, the Company had $5.1 million in loans that were 30 to 89 days past due. This represented 0.51% of gross loans outstanding on that date. This is an increase from December 31, 2017 when there were $4.7 million in loans that were 30-89 days past due or 0.48% of gross loans outstanding. Non-accrual loans increased from $2.1 million at December 31, 2017 to $4.6 million at June 30, 2018. Past dues have increased due to non-timely payments from customers and nonaccruals increased primarily as a result of deterioration on loans.

The percentage of non-performing loans (non-accrual loans and accruing troubled debt restructurings) to total loans increased from 0.71% at December 31, 2017 to 1.02% at June 30, 2018. The Company had an increase of $2.4 million in non-accruals from $2.1 million at December 31, 2017 and an increase in accruing troubled debt restructurings from $4.9 million at December 31, 2017 to $5.6 million as of June 30, 2018. Of the non-accrual loans as of June 30, 2018, seven commercial real estate loans totaled $986,000, five construction loans totaled $401,000, four commercial loans totaled $1.3 million, seven HELOC loans totaled $522,000, four agricultural loans totaled $1.0 million, fourteen 1-to-4 family residential loans totaled $355,000 and one consumer loan made up the remaining balance.

At June 30, 2018, the Company had forty-three loans totaling $8.3 million that were considered to be troubled debt restructurings. Twenty-six of these loans totaling $5.6 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.

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The table below sets forth, for the 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.

	For Periods Ended
	June 30,			December 31,
	2018			2017
	(dollars in thousands)
Non-accrual loans	$	4,557		$	2,115
Accruing TDRs		5,561			4,863
Total non-performing loans		10,118			6,978
Foreclosed real estate		1,497			1,258
Total non-performing assets	$	11,615		$	8,236
Accruing loans past due 90 days or more	$	1,894		$	1,476
Allowance for loan losses	$	9,528		$	8,835
Non-performing loans to period end loans		1.02	%		0.71	%
Non-performing loans and accruing loans past due 90 days or more to period end loans		1.21	%		0.86	%
Allowance for loans losses to period end loans		0.96	%		0.90	%
Allowance for loan losses to non-performing loans		94	%		127	%
Allowance for loan losses to non-performing assets		82	%		107	%
Allowance for loan losses to non-performing assets and accruing loans past due 90 days or more		71	%		91	%
Non-performing assets to total assets		0.95	%		0.69	%
Non-performing assets and accruing loans past due 90 days or more to total assets		1.11	%		0.81	%

Total non-performing assets (non-accrual loans, accruing TDRs, and foreclosed real estate) at June 30, 2018 and December 31, 2017 were $11.6 million and $8.2 million, respectively. The allowance for loan losses at June 30, 2018 represented 82% of non-performing assets compared to 107% at December 31, 2017.

Total impaired loans at June 30, 2018 were $10.3 million. This includes $4.6 million in loans that were classified as impaired because they were in non-accrual status and $5.7 million in loans that were determined to be impaired for other reasons. Of these loans, $388,000 required a specific reserve of $98,000 at June 30, 2018.

Total impaired loans at December 31, 2017 were $8.0 million. This includes $2.1 million in loans that were classified as impaired because they were in non-accrual status and $5.9 million in loans that were determined to be impaired for other reasons. Of these loans, $344,000 required a specific reserve of $61,000 at December 31, 2017.

The allowance for loan losses was $9.5 million at June 30, 2018 or 0.96% of gross loans outstanding as compared to 0.90% reported as a percentage of gross loans at December 31, 2017. This increase resulted primarily from changes in loans requiring a specific reserve plus qualitative factors related to interest rates 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 has resulted in a lower percentage of the allowance for loan losses to gross loans. The allowance for loan losses at June 30, 2018 represented 94% of non-performing loans compared to 127% at December 31, 2017. It is management’s assessment that the allowance for loan losses as of June 30, 2018 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.

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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.

	June 30, 2018
(dollars in thousands)	1 Year or Less		Over 1 to 3 Years		Over 3 to 5 Years		More Than 5 Years		Total
Time deposits	$	315,441	$	107,410	$	18,245	$	-	$	441,096
Short-term borrowings		21,071		-		-		-		21,071
Long-term debt		-		20,000		25,000		12,372		57,372
Operating leases		1,200		1,691		1,130		133		4,154
Total contractual obligations	$	337,712	$	129,101	$	44,375	$	12,505	$	523,693

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 June 30, 2018 and December 31, 2017, the Company had $16.4 million and $24.6 million in non 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. At June 30, 2018 and December 31, 2017, the Company had $10.4 million and $13.8 million of 1-to-4 family residential loans that exceeded the regulatory LTV limits, respectively. The total amount of these loans represented 20.9% and 31.2% of total risk-based capital as of June 30, 2018 and December 31, 2017, 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 various factors such as 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.

- 46 -

At June 30, 2018 the Company had five product type groups which exceeded this guideline; Real Estate Construction – Speculative and Presold, which represented 41% of risk-based capital, or $52.6 million, 1-4 Family Rental, which represented 48%, or $61.7 million, Office Building which represented 52% of risk-based capital or $66.8 million, Real Estate Construction spec & presold, which represents 42% or $54.4 million and Multifamily Residential, which represented 50% of risk-based capital, or $64.4 million. All other commercial real estate groups were at or below the 40% threshold. At December 31, 2017, the Company exceeded the 40% guideline in five product types. The 1-to-4 Family Residential Rental category represented 52% of Risk-Based Capital or $64.4 million, Real Estate Commercial Construction represented 51% of Risk-Based Capital or $62.3 million, Real Estate Construction Spec & Presold represented 42% or $51.6 million, Office Building category represented 56% or $68.8 million, and the Multi-family Residential category represented 61% of Risk-Based Capital or $74.6 million. All other commercial 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 June 30, 2018 and December 31, 2017.

Acquisition, Development and Construction Loans

(dollars in thousands)

	June 30, 2018									December 31, 2017
				Land and Land									Land and Land
	Construction			Development			Total			Construction			Development			Total
Total ADC loans	$	153,363		$	24,735		$	178,098		$	149,856		$	28,077		$	177,933
Average Loan Size	$	267		$	339					$	262		$	265
Percentage of total loans		15.45	%		2.49	%		17.94	%		15.25	%		2.86	%		18.11	%
Non-accrual loans	$	1,039		$	-		$	1,039		$	384		$	-		$	384

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 ratios and performance of similar loans in the Company’s market area.

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Geographic Concentrations

Certain risks exist arising 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 June 30, 2018 and December 31, 2017.

	June 30, 2018										December 31, 2017
	ADC Loans		Percent			HELOC		Percent			ADC Loans		Percent			HELOC		Percent
	(dollars in thousands)
Harnett County	$	6,059		3.40	%	$	5,528		10.81	%	$	5,076		2.85	%	$	5,365		10.20	%
Alamance County		2,079		1.17	%		1,266		2.47	%		1,727		0.97	%		1,075		2.04	%
Beaufort County		900		0.51	%		1,243		2.43	%		147		0.08	%		1,649		3.13	%
Brunswick County		9,254		5.20	%		1,621		3.17	%		8,509		4.78	%		1,696		3.22	%
Carteret County		3,140		1.76	%		2,731		5.34	%		3,279		1.84	%		2,795		5.31	%
Cherokee County		13		0.01	%		53		0.10	%		-		-%			59		0.11	%
Craven County		1,085		0.61	%		443		0.87	%		923		0.52	%		578		1.10	%
Cumberland County		20,275		11.38	%		3,425		6.70	%		23,105		12.99	%		4,196		7.98	%
Mecklenburg County		21,053		11.82	%		3,366		6.58	%		10,826		6.08	%		3,249		6.18	%
New Hanover County		20,566		11.55	%		2,830		5.53	%		19,445		10.93	%		2,136		4.06	%
Pasquotank County		960		0.54	%		1,538		3.01	%		1,115		0.63	%		1,730		3.29	%
Pickens County		-		-	%		99		0.19	%		-		-	%		72		0.14	%
Pitt County		16,096		9.04	%		6,827		13.35	%		17,421		9.79	%		6,727		12.79	%
Robeson County		1,237		0.70	%		3,712		7.26	%		837		0.47	%		3,606		6.85	%
Sampson County		25		0.01	%		1,996		3.90	%		26		0.01	%		1,694		3.22	%
Wake County		18,811		10.56	%		1,701		3.32	%		25,785		14.49	%		1,281		2.44	%
Wayne County		3,286		1.84	%		3,471		6.79	%		10,475		5.89	%		4,185		7.96	%
Wilson County		158		0.09	%		67		0.13	%		85		0.05	%		71		0.13	%
York County		525		0.29	%		973		1.90	%		408		0.23	%		1,454		2.76	%
All other locations		52,576		29.52	%		8,259		16.15	%		48,744		27.40	%		8,988		17.09	%
Total	$	178,098		100.00	%	$	51,149		100.00	%	$	177,933		100.00	%	$	52,606		100.00	%

Interest Only Payments

Another risk factor that exists in the total loan portfolio pertains to loans with interest only payment terms. At June 30, 2018, the Company had $201.6 million in loans that had terms permitting interest only payments. This represented 20.3% of the total loan portfolio. At December 31, 2017, the Company had $291.8 million in loans that had terms permitting interest-only payments. This represented 29.7% of the total loan portfolio. Recognizing the risk inherent with interest-only loans, it is customary and general industry practice that loans in the ADC portfolio permit 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 $68.6 million, or 6.9% of total loans, at June 30, 2018 compared to $66.7 million, or 6.8% of total loans, at December 31, 2017. The Company’s ten largest customer relationships totaled $101.0 million, or 10.2% of total loans, at June 30, 2018 compared to $90.0 million, or 9.2% of total loans, at December 31, 2017. 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.

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Comparison of Results of Operations for the

Three Months Ended June 30, 2018 and 2017

General. During the second quarter of 2018, the Company had net income of $3.1 million as compared with net income of $1.3 million for the second quarter of 2017. Net income per common share for the second quarter of 2018 was $0.22, basic and diluted, compared with net income per common share of $0.11, basic and diluted, for the second quarter of 2017. Results of operations for the second quarter of 2018 were primarily impacted by an increase of $3.7 million in net interest income, and an increase in non-interest expenses of $2.6 million and a decrease in the provision for loan losses of $526,000. Non-interest expenses increased $2.6 million which was primarily related to increased personnel expense of $954,000, occupancy expense of $369,000, deposit insurance expense of $138,000, professional fees of $169,000, information systems expense of $511,000 and, core deposit intangible amortization of $174,000 and other associated expenses of $191,000. The Company recorded a provision for loan losses of $557,000 for the second quarter of 2018 compared to $1.1 million in the second quarter of 2017. Net interest margin of 4.41% in the second quarter of 2018 increased 23 basis points from the same period in 2017 resulting from the accretion of the credit mark associated with the acquired loan portfolio.

Net Interest Income. Net interest income increased to $11.9 million for the second quarter of 2018 from $8.3 million for the second quarter of 2017. The Company’s total interest income was primarily affected by the increase in loan balances due to growth. Average total interest-earning assets were $1.1 billion in the second quarter of 2018 compared with $799.2 million during the same period in 2017, while the yield on those assets increased 47 basis points from 4.78% to 5.25% which was primarily due to the yield accretion on the acquired loans and the increase of rates on recently originated loans.

The Company’s average interest-bearing liabilities increased by $232.5 million to $839.1 million for the quarter ended June 30, 2018 from $606.6 million for the same period one year earlier and the cost of those funds increased from 0.79% to 1.08%, or 29 basis points. During the second quarter of 2018, the Company’s net interest margin was 4.41% and net interest spread was 4.17%. In the same quarter ended one year earlier, net interest margin was 4.18% and net interest spread was 3.99%.

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. Historical loss rates are 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 second quarter of 2018, the Company recorded a provision for loan losses of $557,000 based primarily on loan growth, which was a decrease of approximately $526,000 compared to the provision for loan losses recorded in the second quarter of 2017. The Company, however, has seen a slight deterioration of credit metrics primarily related to past dues, non-accruals of acquired loans and TDRs during 2018 compared to the second quarter of 2017, where the Company recorded a provision for loan losses of $1.1 million based primarily on loan growth and charge offs on three loans.

Non-Interest Income. Non-interest income for the quarter ended June 30, 2018 was $1.2 million, an increase from $778,000 in the second quarter of 2017. Service charges on deposit accounts increased $29,000 to $245,000 for the quarter ended June 30, 2018 from $216,000 for the same period in 2017. Other non-deposit fees and income increased $261,000 from the second quarter of 2017 to the second quarter of 2018 due to the merger. Fees from presold mortgages increased non-interest income $158,000 in the second quarter of 2018. The Company did not sell any investment securities in the second quarter of 2018 or 2017.

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Non-Interest Expenses. Non-interest expenses increased by $2.6 million to $8.6 million for the quarter ended June 30, 2018, from $6.0 million for the same period in 2017. In general, categories of non-interest expenses that increased were offset by decreases in other areas. The following are highlights of the significant categories of non-interest expenses during the second quarter of 2018 compared to the same period in 2017:

· Personnel expenses increased $954,000 to $4.7 million, due to increased staff, employment taxes and benefits costs.

· Deposit insurance expense increased $138,000, due to growth.

· Core deposit intangible increased $174,000 as scheduled.

· Occupancy and equipment expense increased by $369,000 to $861,000, due to branch additions due to the merger with Premara.

· Information systems expense increased by $511,000 due to merger with Premara and new customers.

· Other non-interest expenses increased by $191,000, due to increases in several categories of other non-interest expenses related to the merger with Premara.

Provision for Income Taxes. The Company’s effective tax rate was 22.2% and 32.8% for the quarters ended June 30, 2018 and 2017, respectively. The effective tax rate was impacted by an adjustment resulting from enacted lower corporate tax rates for the State of North Carolina in 2017 plus a federal tax rate reduction resulting from the passage of the Tax Cuts and Jobs Act in December 2017.

As of June 30, 2018 and December 31, 2017, the Company had a net deferred tax asset in the amount of $4.6 million and $4.5 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 June 30, 2018 and December 31, 2017, 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.

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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
	June 30, 2018									June 30, 2017
	(dollars in thousands)
	Average						Average			Average						Average
	balance			Interest			rate			balance			Interest			rate
Interest-earning assets:
Loans, gross of allowance	$	981,829		$	13,533			5.53	%	$	707,526		$	9,036			5.12	%
Investment securities		59,256			385			2.61	%		59,140			370			2.51	%
Other interest-earning assets		46,598			307			2.64	%		32,574			119			1.47	%
Total interest-earning assets		1,087,683			14,225			5.25	%		799,240			9,525			4.78	%
Other assets		131,542									88,172
Total assets	$	1,219,225								$	887,412
Interest-bearing liabilities:
Deposits:
Savings, NOW and money market	$	323,431			325			0.40	%	$	210,667			117			0.22	%
Time deposits over $100,000		329,268			1,142			1.39	%		247,596			652			1.06	%
Other time deposits		115,054			347			1.21	%		92,074			228			0.99	%
Borrowings		71,337			444			2.50	%		56,284			200			1.43	%
Total interest-bearing liabilities		839,090			2,258			1.08	%		606,621			1,197			0.79	%
Non-interest-bearing deposits		236,817									169,638
Other liabilities		3,508									3,082
Shareholders' equity		139,810									108,071
Total liabilities and shareholders' equity	$	1,219,225								$	887,412
Net interest income/interest rate spread (taxable-equivalent basis)				$	11,967			4.17	%				$	8,328			3.99	%
Net interest margin (taxable-equivalent basis)								4.41	%								4.18	%
Ratio of interest-earning assets to interest-bearing liabilities		129.63	%								131.75	%
Reported net interest income
Net interest income/net interest margin (taxable-equivalent basis)				$	23,713								$	8,328
Less:
taxable-equivalent adjustment					(80	)								(56	)
Net Interest Income				$	23,633			4.41	%				$	8,272			4.15	%

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Comparison of Results of Operations for the

Six months ended June 30, 2018 and 2017

General. During the first six months of 2018, the Company had net income of $5.0 million as compared with net income of $3.5 million for the first six months of 2017. Net income per share for the first six months of 2018 was $0.36, basic and diluted, compared with net income per share of $0.30, basic and $0.29 diluted, for the first six months of 2017. Results of operations for the first six months of 2018 compared to 2017 was primarily impacted by an increase of $9.3 million in interest income offset by an increase in interest expense of $2.0 million and a reduction in provision for loan losses of $191,000, an increase of $883,000 in non-interest income and increased non-interest expenses of $7.1 million and a reduction in the federal corporate income tax rate. Net interest margin of 4.42% in the first six months of 2018 increased 21 basis points from the same period in 2017.

Net Interest Income. Net interest income increased to $23.6 million for the first six months of 2018 from $16.4 million for the first six months of 2017. The Company’s total interest income was affected by the increase in total loan balances. Average total interest-earning assets were $1.1 billion in the first six months of 2018 compared with $787.9 million during the same period in 2017, while the yield on those assets increased 43 basis points from 4.79% to 5.22% as a result of increases in the prime interest rate which contributed to the increase in loan yield.

The Company’s average interest-bearing liabilities increased by $240.0 million to $835.2 million for the six months ended June 30, 2018 from $595.2 million for the same period one year earlier and the cost of those funds increased from 0.76% to 1.03%, or 27 basis points. During the first six months of 2018, the Company’s net interest margin was 4.42% and net interest spread was 4.19%. In the same period ended one year earlier, net interest margin was 4.21% and net interest spread was 4.03%.

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. Historical loss rates are 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. Loan growth and the increase in qualitative factors were the primary contributors to the 2018 provision expense.

Non-Interest Income. Non-interest income for the six months ended June 30, 2018 was $2.4 million, an increase of $883,000 from the first six months of 2017. Service charges on deposit accounts increased $90,000 to $521,000 for the six months ended June 30, 2018 from $431,000 for the same period in 2017, primarily due to the merger with Carolina Premier Bank. Other non-deposit fees and income increased $609,000 from the first six months of 2017 to the first six months of 2018, primarily due to the merger. Fees from presold mortgages increased non-interest income $184,000 in the first six months of 2018. The Company did not sale any investment securities during the first six months of 2018 or 2017.

Non-Interest Expenses. Non-interest expenses increased by $7.1 million to $18.9 million for the six months ended June 30, 2018, from $11.8 million for the same period in 2017. The following are highlights of the significant categories of non-interest expenses during the first six months of 2018 versus the same period in 2017:

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· Personnel expenses increased $2.3 million to $9.4 million, due to additions in staff, employment taxes and benefits costs.

· Occupancy and equipment expenses increased by $685,000 due to branch additions.

· Professional fees increased by $119,000 in the first six months of 2018 to $690,000 compared to $571,000 in the 2017 period primarily due to contracted internal audit and consulting fees.

· Deposit insurance expense increased $231,000 due to the merger.

· Merger expenses increased $1.8 million due to the acquisition.

· Other non-interest expenses increased by $482,000, due to small increases in several categories of other non-interest expenses and the merger.

Provision for Income Taxes. The Company’s effective tax rate was 22.3% and 33.4% for the six months ended June 30, 2018 and 2017, respectively. The effective tax rate was impacted by an adjustment resulting from enacted lower corporate tax rates for the State of North Carolina in 2017 plus a federal tax rate reduction resulting from the passage of the Tax Cuts and Jobs Act in December 2017.

As of June 30, 2018 and December, 31, 2017, the Company had a net deferred tax asset in the amount of $4.6 million and $4.5 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 June 30, 2018 and December 31, 2017, 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.

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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 six months ended									For the six months ended
	June 30, 2018									June 30, 2017
	(dollars in thousands)
	Average						Average			Average						Average
	balance			Interest			rate			balance			Interest			rate
Interest-earning assets:
Loans, gross of allowance	$	976,395		$	26,700			5.51	%	$	692,982		$	17,755			5.17	%
Investment securities		61,081			771			2.55	%		60,175			748			2.51	%
Other interest-earning assets		43,348			518			2.41	%		34,774			207			1.20	%
Total interest-earning assets		1,080,824			27,989			5.22	%		787,931			18,710			4.79	%
Other assets		128,139									84,216
Total assets	$	1,208,963								$	872,147
Interest-bearing liabilities:
Deposits:
Savings, NOW and money market	$	320,660			639			0.40	%	$	211,941			220			0.21	%
Time deposits over $100,000		329,704			2,172			1.33	%		234,918			1,191			1.02	%
Other time deposits		114,638			671			1.18	%		91,191			448			0.99	%
Borrowings		70,173			794			2.28	%		57,155			385			1.36	%
Total interest-bearing liabilities		835,175			4,276			1.03	%		595,205			2,244			0.76	%
Non-interest-bearing deposits		228,050									166,919
Other liabilities		7,279									3,052
Shareholders' equity		138,459									106,971
Total liabilities and shareholders' equity	$	1,208,963								$	872,147
Net interest income/interest rate spread (taxable-equivalent basis)				$	23,713			4.19	%				$	16,466			4.03	%
Net interest margin (taxable-equivalent basis)								4.42	%								4.21	%
Ratio of interest-earning assets to interest-bearing liabilities		129.41	%								132.38	%
Reported net interest income
Net interest income/net interest margin (taxable-equivalent basis)				$	23,713								$	16,466
Less:
taxable-equivalent adjustment					(80	)								(115	)
Net Interest Income				$	23,633			4.41	%				$	16,351			4.18	%

- 54 -

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 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 11.4% of total assets at June 30, 2018 and increased as compared to 10.5% as of December 31, 2017. This increase in liquid assets to total assets resulted primarily from investment pay-downs and maturities and long-term borrowings.

The Company has been a net seller of federal funds 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 $0 at June 30, 2018. 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 June 30, 2018, the Company had existing credit lines with other financial institutions to purchase up to $172.9 million in federal funds. Also, as a member of the FHLB of Atlanta, the Company may obtain advances of up to 10% of total assets, subject to available collateral. A floating lien of $138.0 million of qualifying loans is pledged to the FHLB to secure borrowings. At June 30, 2018, the Company had $66.1 million in FHLB advances outstanding. Another source of short-term borrowings is securities sold under agreements to repurchase. At June 30, 2018, in addition to FHLB advances, total borrowings consisted of junior subordinated debentures of $12.4 million.

Total deposits were $993.5 million at June 30, 2018. Time deposits, which are the only deposit accounts that have stated maturity dates, are generally considered to be rate sensitive. Time deposits represented 44.4% of total deposits at June 30, 2018. Time deposits of $250,000 or more represented 11.8% of the Company’s total deposits at June 30, 2018. At quarter-end, the Company had $71.9 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 capital requirements. A new part of the capital ratios profile under the Basel III rules is the 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. 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 11.6% at June 30, 2018.

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As the following table indicates, at June 30, 2018, 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		12.52	%		8.00	%
Tier 1 risk-based capital ratio		11.63	%		6.00	%
Leverage ratio		10.44	%		4.00	%
Common equity Tier 1 risk-based capital ratio		10.51	%		4.50	%

				Regulatory
	Actual			Minimum			Well-Capitalized
Select Bank & Trust	Ratio			Requirement			Requirement
Total risk-based capital ratio		12.02	%		8.00	%		10.00	%
Tier 1 risk-based capital ratio		11.13	%		6.00	%		8.00	%
Leverage ratio		9.99	%		4.00	%		5.00	%
Common equity Tier 1 risk-based capital ratio		11.13	%		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 June 30, 2018.

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.

Item 3. Quantitative and Qualitative Disclosures about Market 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 of assets 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.

- 56 -

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 March 31, 2018.

	March 31, 2018
(dollars in thousands)	Estimated Exposure to NII			Estimated Exposure to EVE
Immediate change in interest rates:
+ 4.0%		18.0	%		6.2	%
+ 3.0%		14.1			5.3
+ 2.0%		9.9			4.2
+ 1.0%		5.2			2.5
No change		-			-
- 1.0%		(5.2	)		(3.8	)

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 rate changes, and management actions taken in response to the preceding conditions.

Item 4. Controls and 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.

- 57 -

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 second quarter of 2018. In connection with such evaluation, the Company has determined that there have been no changes in internal control over financial reporting during the second quarter of 2018 that have materially affected or are reasonably likely to materially affect, the Company's internal control over financial reporting.

- 58 -

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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

There have been no material changes to the risk factors that we have previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018.

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

The Company announced a repurchase program on August 31, 2016, 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 repurchase transactions conducted during the three-month period covered by this Report.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

- 59 -

Item 6. Exhibits

Exhibit Index

		Incorporated by Reference (Unless Otherwise Indicated)
Exhibit No.	Description of Exhibit	Form	Exhibit	Filing Date	SEC File No.
10.1	Select Bancorp, Inc. 2018 Omnibus Stock Incentive Plan	8-K	10.1	05/24/18	000-50400
31.1	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
32.1	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
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, in XBRL (eXtensible Business Reporting Language)			Filed herewith

- 60 -

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: August 8, 2018	By:	/s/ William L. Hedgepeth II
		William L. Hedgepeth II
		President and Chief Executive Officer
Date: August 8, 2018	By:	/s/ Mark A. Jeffries
		Mark A. Jeffries
		Executive Vice President and Chief Financial Officer

- 61 -

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William L. Hedgepeth II, certify that:

(1) I have reviewed this quarterly report for the quarter ended June 30, 2018 on Form 10-Q of Select Bancorp, Inc. (the "Registrant");

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 8, 2018	By:	/s/ William L. Hedgepeth II
		William L. Hedgepeth II
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Mark A. Jeffries, certify that:

(1) I have reviewed this quarterly report for the quarter ended June 30, 2018 on Form 10-Q of Select Bancorp, Inc. (the "Registrant");

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4) The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5) The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 8, 2018	By:	/s/ Mark A. Jeffries
		Mark A. Jeffries
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned hereby certifies that (i) the Form 10-Q filed by Select Bancorp, Inc. (the "Issuer") for the quarter ended June 30, 2018, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

Date: August 8, 2018	By:	/s/ William L. Hedgepeth II
		William L. Hedgepeth II
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned hereby certifies that (i) the Form 10-Q filed by Select Bancorp, Inc. (the "Issuer") for the quarter ended June 30, 2018, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

Date: August 8, 2018	By:	/s/ Mark A. Jeffries
		Mark A. Jeffries
		Executive Vice President and Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 01, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Registrant Name	SELECT BANCORP, INC.
Entity Central Index Key	0001263762
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	SLCT
Entity Common Stock, Shares Outstanding		14,025,187

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	[1]
ASSETS
Cash and due from banks	$ 20,997	$ 16,554
Interest-earning deposits in other banks	62,498	37,996
Certificates of deposit	1,000	1,500
Federal funds sold	0	6,645
Investment securities available for sale, at fair value	55,733	63,774
Loans held for sale	349	98
Loans	992,885	982,626
Allowance for loan losses	(9,528)	(8,835)
NET LOANS	983,357	973,791
Accrued interest receivable	3,888	3,997
Stock in Federal Home Loan Bank of Atlanta ("FHLB"), at cost	3,882	2,490
Other non-marketable securities	876	1,019
Foreclosed real estate	1,497	1,258
Premises and equipment, net	18,141	18,268
Bank owned life insurance	28,772	28,431
Goodwill	24,579	24,904
Core deposit intangible ("CDI")	2,564	3,101
Assets held for sale	796	846
Other assets	7,802	9,463
TOTAL ASSETS	1,216,731	1,194,135
Deposits:
Demand	236,793	227,066
Savings	55,906	69,503
Money market and NOW	259,689	250,864
Time	441,096	447,611
TOTAL DEPOSITS	993,484	995,044
Short-term debt	21,071	28,279
Long-term debt	57,372	19,372
Accrued interest payable	528	427
Accrued expenses and other liabilities	3,574	14,898
TOTAL LIABILITIES	1,076,029	1,058,020
Shareholders' Equity:
Preferred stock, no par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2018 and December 31, 2017	0	0
Common stock, $1.00 par value, 25,000,000 shares authorized; 14,024,887 and 14,009,137 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	14,025	14,009
Additional paid-in capital	96,032	95,850
Retained earnings	30,865	25,858
Common stock issued to deferred compensation trust, at cost; 291,964 and 295,231 shares at June 30, 2018 and December 31, 2017, respectively	(2,477)	(2,518)
Directors' Deferred Compensation Plan Rabbi Trust	2,477	2,518
Accumulated other comprehensive income (loss)	(220)	398
TOTAL SHAREHOLDERS' EQUITY	140,702	136,115
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,216,731	$ 1,194,135

[1] Derived from audited consolidated financial statements.

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	14,024,887	14,009,137
Common stock, shares outstanding	14,024,887	14,009,137
Deferred Compensation, Share-based Payments [Member]
Common stock, shares outstanding	291,964	295,231

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
INTEREST INCOME
Loans	$ 13,527	$ 9,024	$ 26,684	$ 17,731
Federal funds sold and interest-earning deposits in other banks	307	119	518	207
Investments	353	326	707	656
TOTAL INTEREST INCOME	14,187	9,469	27,909	18,594
INTEREST EXPENSE
Money market, NOW and savings deposits	325	117	639	220
Time deposits	1,489	880	2,843	1,639
Short-term debt	81	63	210	118
Long-term debt	363	137	584	267
TOTAL INTEREST EXPENSE	2,258	1,197	4,276	2,244
NET INTEREST INCOME	11,929	8,272	23,633	16,350
PROVISION FOR LOAN LOSSES	557	1,083	698	889
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	11,372	7,189	22,935	15,461
NON-INTEREST INCOME
Fees on the sale of mortgages	158	0	184	0
Service charges on deposit accounts	245	216	521	431
Other fees and income	823	562	1,686	1,077
TOTAL NON-INTEREST INCOME	1,226	778	2,391	1,508
NON-INTEREST EXPENSE
Personnel	4,656	3,702	9,397	7,116
Occupancy and equipment	861	492	1,749	1,064
Deposit insurance	213	75	378	147
Professional fees	420	251	690	571
CDI amortization	262	88	537	181
Merger/acquisition related expenses	0	0	1,826	0
Information systems	1,045	534	2,047	1,038
Foreclosed-related expenses	91	(25)	103	(9)
Other	1,054	863	2,159	1,677
TOTAL NON-INTEREST EXPENSE	8,602	5,980	18,886	11,785
INCOME BEFORE INCOME TAX	3,996	1,987	6,440	5,184
INCOME TAXES	886	651	1,433	1,733
NET INCOME	$ 3,110	$ 1,336	$ 5,007	$ 3,451
NET INCOME PER COMMON SHARE
Basic	$ 0.22	$ 0.11	$ 0.36	$ 0.30
Diluted	$ 0.22	$ 0.11	$ 0.36	$ 0.29
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	14,019,273	11,662,117	14,015,511	11,657,391
Diluted	14,086,671	11,727,110	14,084,288	11,720,841

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income	$ 3,110	$ 1,336	$ 5,007	$ 3,451
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale	(271)	151	(807)	233
Tax effect	63	(55)	189	(85)
Total	(208)	96	(618)	148
Total comprehensive income	$ 2,902	$ 1,432	$ 4,389	$ 3,599

XML

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total		Preferred Stock [Member]	Common Stock [Member]	Additional paid-in Capital [Member]	Retained Earnings [Member]	Common Stock Issued to Deferred Compensation Trust [Member]	Deferred Comp Plan [Member]	Accumulated Other Comprehensive Income (loss) [Member]
Balance at Dec. 31, 2016	$ 104,273		$ 0	$ 11,645	$ 69,597	$ 22,673	$ (2,340)	$ 2,340	$ 358
Balance (in shares) at Dec. 31, 2016			0	11,645,413
Net income	3,451		$ 0	$ 0	0	3,451	0	0	0
Other comprehensive income (loss), net	148		0	0	0	0	0	0	148
Stock option exercises	102		$ 0	$ 17	85	0	0	0	0
Stock option exercises (in shares)			0	17,058
Stock based compensation	43		$ 0	$ 0	43	0	0	0	0
Director equity incentive plan, net	0		0	0	0	0	(57)	57	0
Balance at Jun. 30, 2017	108,017		$ 0	$ 11,662	69,725	26,124	(2,397)	2,397	506
Balance (in shares) at Jun. 30, 2017			0	11,662,471
Balance at Dec. 31, 2017	136,115	[1]	$ 0	$ 14,009	95,850	25,858	(2,518)	2,518	398
Balance (in shares) at Dec. 31, 2017			0	14,009,137
Net income	5,007		$ 0	$ 0	0	5,007	0	0	0
Other comprehensive income (loss), net	(618)		0	0	0	0	0	0	(618)
Stock option exercises	109		$ 0	$ 16	93	0	0	0	0
Stock option exercises (in shares)			0	15,750
Stock based compensation	89		$ 0	$ 0	89	0	0	0	0
Director equity incentive plan, net	0		0	0	0	0	41	(41)	0
Balance at Jun. 30, 2018	$ 140,702		$ 0	$ 14,025	$ 96,032	$ 30,865	$ (2,477)	$ 2,477	$ (220)
Balance (in shares) at Jun. 30, 2018			0	14,024,887

[1] Derived from audited consolidated financial statements.

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 5,007	$ 3,451
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses	698	889
Depreciation and amortization of premises and equipment	870	575
Amortization and accretion of investment securities	323	282
Amortization of deferred loan fees and costs	(351)	(291)
Amortization of core deposit intangible	537	181
Stock-based compensation	89	43
Accretion on acquired loans	(1,706)	(450)
Amortization of acquisition premium on time deposits	(139)	(161)
Net accretion of acquisition discount on borrowings	(8)	(87)
Increase in cash surrender value of bank owned life insurance	(341)	(283)
Proceeds from loans held for sale	10,306	0
Originations of loans held for sale	(10,374)	0
Gain on sales of loans held for sale	(184)	0
Net (gain) loss on sale and write-downs of foreclosed real estate	53	(61)
Gain on sale of premises and equipment	0	(9)
Write-down on assets held for sale	50	0
Change in assets and liabilities:
Net change in accrued interest receivable	109	122
Net change in other assets	2,175	(514)
Net change in accrued expenses and other liabilities	(11,223)	(121)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(4,109)	3,566
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption (purchase) of FHLB stock	(1,392)	110
Redemption (purchase) of non-marketable security	143	37
Purchase of investment securities available for sale	0	(759)
Maturities of investment securities available for sale	650	3,255
Mortgage-backed securities pay-downs	6,262	2,860
Net change in loans outstanding	(8,585)	(63,323)
Proceeds from sale of foreclosed real estate	86	384
Proceeds from sale of premises and equipment	0	95
Purchases of premises and equipment	(743)	(247)
NET CASH USED BY INVESTING ACTIVITIES	(3,579)	(57,588)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	(1,421)	60,153
Proceeds from long-term debt	38,000	0
Repayments on short-term debt	(7,200)	(3,444)
Repayments on long-term debt	0	(200)
Proceeds from stock option exercises	109	102
NET CASH PROVIDED BY FINANCING ACTIVITIES	29,488	56,611
NET CHANGE IN CASH AND CASH EQUIVALENTS	21,800	2,589
CASH AND CASH EQUIVALENTS, BEGINNING	62,695	55,714
CASH AND CASH EQUIVALENTS, ENDING	84,495	58,303
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for: Interest	4,175	2,224
Cash paid during the period for: Taxes	927	1,768
Non-cash transactions:
Unrealized gains (losses) on investment securities available for sale, net of tax	(618)	148
Transfers from loans to foreclosed real estate	$ 378	$ 2,426

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE A - BASIS OF PRESENTATION

Select Bancorp, Inc. (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.

The Bank was originally incorporated as New Century Bank on May 19, 2000 and began banking operations on May 24, 2000. On July 25, 2014, the Company acquired Select Bank & Trust Company, Greenville, North Carolina, and changed the Bank’s legal name to Select Bank & Trust Company. On December 15, 2017, the Company acquired Premara Financial, Inc. and its subsidiary Carolina Premier Bank through the merger of Premara with and into the Company, followed immediately by the merger of Carolina Premier with and into the Bank. The Bank continues as the only banking subsidiary of the Company with its headquarters and operations center located in Dunn, NC. The Bank is engaged in general commercial and retail banking in central and eastern North Carolina, as well as in Charlotte, North Carolina and northwest South Carolina. The Bank is subject to the supervision and regulation of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks.

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 and six month periods ended June 30, 2018 and 2017, 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 and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

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 2017 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2018. 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 June 30, 2018 presentation. Such reclassifications had no effect on shareholders’ equity or net income as previously reported.

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PER SHARE RESULTS

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE B - PER SHARE RESULTS

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 June 30, 2018 and 2017 there were 121,300 and 23,300 anti-dilutive options outstanding, respectively.         

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted average shares used for basic net income available to common shareholders		14,019,273		11,662,117		14,015,511		11,657,391
Effect of dilutive stock options		67,398		64,993		68,777		63,450
Weighted average shares used for diluted net income available to common shareholders		14,086,671		11,727,110		14,084,288		11,720,841

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2018

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS

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

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU requires a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017. The Tax Act included a reduction to the corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. The amount of the reclassification would be the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company early adopted this pronouncement by retrospective application to each period in which the effect of the change in the tax rate under the 2017 Tax Act is recognized. The impact of the reclassification from other comprehensive income to retained earnings of $67,000 was included in the Statement of Changes in Shareholders’ Equity for the year ended December 31, 2017.

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 —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 adopted ASU 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not necessary. See Note H Revenue Recognition for more information.

In January 2016, the 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) require equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminate 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) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) require 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) require 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) clarify 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 adopted early. The guidance did not have a significant impact on the Company's financial position, results of operations or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 applies a right-of-use (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.   In transition, lessees and lessors are required to recognize and measure 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.   The Company has dedicated staff 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, the FASB amended ASU 2016-15, Statement of Cash Flows (Topic 230): Classifications of Certain Cash Receipts and Cash Payments, of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments were effective for the Company January 1, 2018 and did not have a material effect on its financial statements.

In January 2017, the FASB ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting was updated.  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 ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment was amended 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 ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) clarified 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 were effective for the Company January 2018 and did not have a material effect on its financial statements.

In May 2017, the FASB ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost amended the requirements in the 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 were effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption was permitted. These amendments did not have a material effect on the financial statements.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities to clarify certain aspects of the guidance issued in ASU 2016-01. The amendments will be effective for the third quarter of 2018 subsequent to adopting the amendments in ASU 2016-01. All entities may early adopt these amendments for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2018, the FASB issued ASU 2018-4, Investments—Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273 which incorporate into the Accounting Standards Codification recent

SEC guidance which was issued in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The amendments were effective upon issuance. These amendments did not have a material effect on its financial statements.

In March 2018, the FASB issued ASU 2018-05 – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update) which updated the Income Taxes Topic of the Accounting Standards Codification. The amendments incorporate into the Accounting Standards Codification recent SEC guidance related to the income tax accounting implications of the Tax Cuts and Jobs Act. The amendments were effective upon issuance. These amendments did not have a material effect on its financial statements.

In May 2018, the FASB amended the Financial Services—Depository and Lending Topic of the Accounting Standards Codification to remove outdated guidance related to Circular 202. The amendments were effective upon issuance and did not have a material effect on the financial statements.

In June 2018, the FASB amended the Compensation—Stock Compensation Topic of the Accounting Standards Codification. The amendments expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect these amendments to have a material effect on its 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.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE D - FAIR VALUE MEASUREMENTS

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:

Fair Value Hierarchy

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:

 Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

 Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

 Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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 (“AFS”)

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 entities, and municipal bonds. There have been no changes in valuation techniques for the three and six months ended June 30, 2018. 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 June 30, 2018 and December 31, 2017 (in thousands):

Investment securities ‎ available for sale ‎June 30, 2018	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 – GSE's	$	11,259	$	-	$	11,259	$	-
Mortgage-backed securities - GSE’s		24,778		-		24,778		-
Corporate Bonds		1,792		-		1,792		-
Municipal bonds		17,904		-		17,904		-
Total investment held for sale	$	55,733	$	-	$	55,733	$	-

Investment securities ‎available for sale December 31, 2017	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 – GSE's	$	13,364	$	-	$	13,364	$	-
Mortgage-backed securities - GSE’s		29,684		-		29,684		-
Corporate Bonds		1,888		-		1,888		-
Municipal bonds		18,838		-		18,838		-
Total investment held for sale	$	63,774	$	-	$	63,774	$	-

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

Impaired Loans

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”. 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 June 30, 2018 and December 31, 2017, 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 June 30, 2018, the discounts to appraised value used are weighted between 3% and 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 June 30, 2018.

Foreclosed Real Estate

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 June 30, 2018, the discounts used ranged between 6% and 10%. There have been no changes in valuation techniques for the three months ended June 30, 2018.

Assets held for sale

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 and selling costs ranged between 1% and 25 % at June 30, 2018. There have been no changes in the valuation techniques for the three months ended June 30, 2018.

Loans held for sale

The Company originated fixed and variable rate residential mortgage loans on a service release 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 is classified within Level 2 of the hierarchy. 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.

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 June 30, 2018 and December 31, 2017 (in thousands):

Asset Category ‎June 30, 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	$	2,139	$	-	$	-	$	2,139
Loans held for sale		349		-		349		-
Assets held for sale		796		-		-		796
Foreclosed real estate		1,497		-		-		1,497
Total	$	4,781	$	-	$	349	$	4,432

Asset Category ‎December 31, 2017	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	$	899	$	-	$	-	$	899
Loans held for sale		98		-		98		-
Assets held for sale		846		-		-		846
Foreclosed real estate		1,258		-		-		1,258
Total	$	3,101	$	-	$	98	$	3,003

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

	June 30, 2018
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	20,997	$	20,997	$	20,997	$	-	$	-
Certificates of deposit		1,000		1,000		1,000		-		-
Interest-earning deposits in other banks		62,498		62,498		62,498		-		-
Investment securities available for sale		55,733		55,733		-		55,733		-
Loans held for sale		349		349				349		-
Loans, net		983,357		965,859		-		-		965,859
Accrued interest receivable		3,888		3,888		-		3,888		-
Stock in FHLB		3,882		3,882		-		-		3,882
Other non-marketable securities		876		876		-		-		876
Assets held for sale		796		796		-		-		796
Financial liabilities:
Deposits	$	993,484	$	993,467	$	-	$	993,467	$	-
Short-term debt		21,071		21,071		-		21,071		-
Long-term debt		57,372		54,862		-		54,862		-
Accrued interest payable		528		528		-		528		-

	December 31, 2017
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,554	$	16,554	$	16,554	$	-	$	-
Certificates of deposits		1,500		1,500		1,500		-		-
Interest-earning deposits in other banks		37,996		37,996		37,996		-		-
Federal funds sold		6,645		6,645		6,645		-		-
Investment securities available for sale		63,774		63,774		-		63,774		-
Loans held for sale		98		98		-		98		-
Loans, net		973,791		972,475		-		-		972,475
Accrued interest receivable		3,997		3,997		-		3,997		-
Stock in the FHLB		2,490		2,490		-		-		2,490
Other non-marketable securities		1,019		1,019		-		-		1,019
Assets held for sale		846		846		-		-		846
Financial liabilities:
Deposits	$	995,044	$	991,977	$	-	$	991,977	$	-
Short-term debt		28,279		28,279		-		28,279		-
Long-term debt		19,372		14,640		-		14,640		-
Accrued interest payable		427		427		-		427		-

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INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE E - INVESTMENT SECURITIES

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	11,384	$	19	$	(144	)	$	11,259
Mortgage-backed securities – GSE’s		25,069		81		(372	)		24,778
Corporate bonds		1,776		24		(8	)		1,792
Municipal bonds		17,790		135		(21	)		17,904
	$	56,019	$	259	$	(545	)	$	55,733

As of June 30, 2018 accumulated other comprehensive income included net unrealized losses totaling $286,000. Deferred tax assets resulting from these net unrealized losses totaled $66,000.

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

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	13,241	$	148	$	(25	)	$	13,364
Mortgage-backed securities – GSE’s		29,571		213		(100	)		29,684
Corporate bonds		1,858		44		(14	)		1,888
Municipal bonds		18,583		255		-			18,838
	$	63,253	$	660	$	(139	)	$	63,774

As of December 31, 2017, accumulated other comprehensive income included net unrealized gains totaling $521,000. Deferred tax liabilities resulting from these net unrealized gains totaled $123,000.

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	2,337	$	21	$	-		$	2,358
After 1 year but within 5 years		37,703		118		(466	)		37,355
After 5 years but within 10 years		7,004		47		(60	)		6,991
After 10 years		8,975		73		(19	)		9,029
	$	56,019	$	259	$	(545	)	$	55,733

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	975	$	5	$	-		$	980
After 1 year but within 5 years		45,418		406		(125	)		45,699
After 5 years but within 10 years		7,823		81		(14	)		7,890
After 10 years		9,037		168		-			9,205
	$	63,253	$	660	$	(139	)	$	63,774

Securities with a carrying value of $12.0 million and $7.5 million at June 30, 2018 and December 31, 2017, 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. 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 June 30, 2018 and December 31, 2017. The Company has not had any securities sales for the first six months of 2018 or 2017.

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

	June 30, 2018
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies-GSE’s	$	6,662	$	(97	)	$	1,265	$	(47	)	$	7,927	$	(144	)
Mortgage-backed securities-GSE’s		17,693		(310	)		2,425		(62	)		20,118		(372	)
Corporate bonds		754		(8	)		-		-			754		(8	)
Municipal bonds		3,763		(21	)		-		-			3,763		(21	)
Total temporarily impaired securities	$	28,872	$	(436	)	$	3,690	$	(109	)	$	32,562	$	(545	)

At June 30, 2018, the Company had three securities with an unrealized loss for more than twelve months of $109,000. Eleven U.S. government agency GSE’s and twenty-seven mortgage-backed GSE’s, one corporate bond and eight municipal bonds had unrealized losses for less than twelve months totaling $436,000 at June 30, 2018. All unrealized losses are attributable to the general trend of interest rates. There were no sales of investment securities during the first half of 2018.

	December 31, 2017
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	1,651	$	(9	)	$	1,415	$	(16	)	$	3,066	$	(25	)
Mortgage-backed securities - GSE’s		8,137		(55	)		2,449		(45	)		10,586		(100	)
Corporate bonds		1,752		(14	)		-		-			1,752		(14	)
Municipal bonds		1,101		-			-		-			1,101		-
Total temporarily impaired securities	$	12,641	$	(78	)	$	3,864	$	(61	)	$	16,505	$	(139	)

At December 31, 2017, the Company had two mortgage-backed GSE’s and two U.S Government agencies – GSE’s with an aggregate unrealized loss for twelve or more consecutive months of $61,000. The Company had 16 securities with a loss for twelve months or less. Two U.S. government agency GSE’s, three municipals, two corporates and nine mortgage-backed GSE’s had unrealized losses for less than twelve months totaling $78,000 at December 31, 2017. 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 securities sold during 2017.

XML

LOANS

6 Months Ended

Jun. 30, 2018

Loans and Leases Receivable Disclosure [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE F - LOANS

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

	June 30,						December 31,
	2018						2017
				Percent						Percent
	Amount			of total			Amount			of total
	(dollars in thousands)
Real estate loans:
1-to-4 family residential	$	158,453			15.96	%	$	156,901			15.97	%
Commercial real estate		428,900			43.20	%		403,100			41.02	%
Multi-family residential		63,002			6.34	%		76,983			7.83	%
Construction		178,098			17.94	%		177,933			18.11	%
Home equity lines of credit (“HELOC”)		51,149			5.15	%		52,606			5.35	%
Total real estate loans		879,602			88.59	%		867,523			88.28	%
Other loans:
Commercial and industrial		102,237			10.30	%		106,164			10.80	%
Loans to individuals		12,551			1.26	%		10,097			1.04	%
Overdrafts		91			0.01	%		147			0.01	%
Total other loans		114,879			11.57	%		116,408			11.85	%
Gross loans		994,481						983,931
Less deferred loan origination fees, net		(1,596	)		(0.16	)%		(1,305	)		(0.13	)%
Total loans		992,885			100.00	%		982,626			100.00	%
Allowance for loan losses		(9,528	)					(8,835	)
Total loans, net	$	983,357					$	973,791

For PCI loans acquired from Legacy Select, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of June 30, 2018 and December 31, 2017 were:

(dollars in thousands)	June 30, 2018		December 31, 2017
Contractually required payments	$	27,355	$	29,285
Nonaccretable difference		2,493		2,717
Cash flows expected to be collected		24,862		26,568
Accretable yield		3,102		3,307
Carrying value	$	21,760	$	23,261

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 June 30, 2018, the Company had pre-approved but unused lines of credit for customers totaling $172.9 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 $138.0 million of loans was pledged to the FHLB to secure borrowings at June 30, 2018.

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

	June 30, 2018
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	1,527	$	814	$	2,289	$	4,630	$	97,607	$	102,237
Construction		233		373		401		1,007		177,091		178,098
Multi-family residential		-		-		-		-		63,002		63,002
Commercial real estate		1,804		-		986		2,790		426,110		428,900
Loans to individuals & overdrafts		28		-		4		32		12,610		12,642
1-to-4 family residential		1,441		707		355		2,503		155,950		158,453
HELOC		70		-		522		592		50,557		51,149
Deferred loan (fees) cost, net		-		-		-		-		-		(1,596	)
	$	5,103	$	1,894	$	4,557	$	11,554	$	982,927	$	992,885

	December 31, 2017
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	215	$	396	$	96	$	707	$	105,457	$	106,164
Construction		27		359		384		770		177,163		177,933
Multi-family residential		30		-		-		30		76,953		76,983
Commercial real estate		1,464		-		528		1,992		401,108		403,100
Loans to individuals & overdrafts		22		-		7		29		10,215		10,244
1-to-4 family residential		2,824		721		771		4,316		152,585		156,901
HELOC		103		-		329		432		52,174		52,606
Deferred loan (fees) cost, net		-		-		-		-		-		(1,305	)
	$	4,685	$	1,476	$	2,115	$	8,276	$	975,655	$	982,626

Impaired Loans

The following tables present information on loans, excluding PCI loans and loans evaluated collectively as a homogeneous group that were considered to be impaired as of June 30, 2018 and December 31, 2017:

							Three months ended					Six months ended
	As of June 30, 2018						June 30, 2018					June 30, 2018
			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	$	2,462	$	3,835	$	-	$	3,031	$	57		$	2,447	$	130
Construction		375		481		-		377		1			380		2
Commercial real estate		5,571		6,774		-		5,226		94			4,999		155
Loans to individuals & overdrafts		-		-		-		-		-			-		-
Multi-family residential		225		225		-		228		3			230		6
1-to-4 family residential		693		1,066		-		806		(16	)		989		25
HELOC		577		965		-		870		12			800		31
Subtotal:		9,903		13,346		-		10,538		151			9,845		349
With an allowance recorded:
Commercial and industrial		140		140		47		141		1			141		1
Construction		26		26		14		26		-			13		-
Commercial real estate		-		-		-		-		-			-		-
Loans to individuals & overdrafts		4		4		4		2		-			2		-
Multi-family residential		-		-		-		-		-			-		-
1-to-4 family residential		148		155		12		149		2			175		7
HELOC		70		70		21		35		1			52		1
Subtotal:		388		395		98		353		4			383		9
Totals:
Commercial		8,799		11,481		61		9,029		156			8,210		294
Consumer		4		4		4		2		-			2		-
Residential		1,488		2,256		33		1,860		(1	)		2,016		64
Grand Total:	$	10,291	$	13,741	$	98	$	10,891	$	155		$	10,228	$	358

Impaired loans at June 30, 2018 were approximately $10.3 million and were composed of $4.6 million in nonaccrual loans and $5.7 million in loans that were still accruing interest. Recorded investment represents the current principal balance of the loan. Approximately $388,000 in impaired loans had specific allowances provided for them while the remaining $9.9 million had no specific allowances recorded at June 30, 2018. Of the $9.9 million with no allowance recorded, $642,000 of those loans have had partial charge-offs recorded.

							Three months ended				Six months ended
	As of December 31, 2017						June 30, 2017				June 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	$	940	$	1,234	$	-	$	1,077	$	21	$	1,119	$	40
Construction		385		490		-		169		1		198		5
Commercial real estate		4,428		5,606		-		3,958		54		4,019		113
Loans to individuals & overdrafts		1		1		-		-		-		-		-
Multi-family residential		234		234		-		48		-		197		-
1-to-4 family residential		1,077		1,209		-		1,022		20		1,111		33
HELOC		602		926		-		654		12		844		22
Subtotal:		7,667		9,700		-		6,928		108		7,488		213
With an allowance recorded:
Commercial and industrial		142		142		50		-		-		1		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		1,429		10		1,563		20
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		-		-		-		-
1-to-4 family residential		-		-		-		302		5		298		11
HELOC		202		202		11		16		-		33		-
Subtotal:		344		344		61		1,747		15		1,895		31
Totals:
Commercial		6,129		7,706		50		6,681		86		7,097		178
Consumer		1		1		-		-		-		-		-
Residential		1,881		2,337		11		1,994		37		2,286		66
Grand Total:	$	8,011	$	10,044	$	61	$	8,675	$	123	$	9,383	$	244

Impaired loans at December 31, 2017 were approximately $8.0 million and consisted of $2.1 million in non-accrual loans and $5.9 million in loans still in accruing status. Recorded investment represents the current principal balance for the loan. Approximately $344,000 of the $8.0 million in impaired loans at December 31, 2017 had specific allowances aggregating $61,000 while the remaining $7.7 million had no specific allowances recorded. Of the $7.7 million with no allowance recorded, partial charge-offs to date amounted to $2.0 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.

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 six months ended June 30, 2018 and 2017:

	Three months ended June 30, 2018						Six months ended June 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	$	408	$	403		1	$	408	$	403
Commercial real estate		2		892		817		2		892		817
Commercial & industrial		2		533		510		6		1,579		1,555
Total		5	$	1,833	$	1,730		9	$	2,879	$	2,775

	Three months ended June 30, 2017						Six months ended June 30, 2017
			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	$	17		1	$	17	$	17
Commercial & industrial		1		44		44		1		44		44
Total		2	$	61	$	61		2	$	61	$	61

Loans may be considered troubled debt restructurings for reasons other than below market interest rates, extended payment terms or forgiveness of principal.

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 period ended June 30, 2018 and 2017:

	Twelve months ended				Twelve months ended
	June 30, 2018				June 30, 2017
	Number		Recorded		Number		Recorded
	of loans		investment		of loans		investment
			(Dollars in thousands)
Extended payment terms:
Commercial & industrial		6	$	1,544		2	$	927
Commercial real estate		1		384		-		-
1-to-4 family residential		2		470		1		77
Total		9	$	2,398		3	$	1,004

At June 30, 2018, the Bank had forty-three loans with an aggregate balance of $8.3 million that were considered to be troubled debt restructurings. Of those TDRs, twenty-six loans with a balance totaling $5.6 million were still accruing as of June 30, 2018. The remaining TDRs with balances totaling $2.7 million as of June 30, 2018 were in non-accrual status.

At June 30, 2017, the Bank had thirty-two loans with an aggregate balance of $4.7 million that were considered to be troubled debt restructurings. Of those TDRs, seventeen loans with a balance totaling $3.2 million were still accruing as of June 30, 2017. The remaining TDRs with balances totaling $1.5 million as of June 30, 2017 were in non-accrual status.

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

Total loans:

June 30, 2018
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
			(dollars in thousands)
Superior	$	1,347	$	-	$	-	$	-
Very good		1,657		138		1,227		-
Good		13,772		11,840		57,922		5,475
Acceptable		38,592		43,219		246,499		38,768
Acceptable with care		38,502		121,370		115,438		18,218
Special mention		2,413		757		4,365		316
Substandard		5,954		774		3,449		225
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	102,237	$	178,098	$	428,900	$	63,002

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	152,353	$	49,918
Special mention		2,381		247
Substandard		3,719		984
	$	158,453	$	51,149

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	12,521
Non –pass		121
	$	12,642

Total Loans:

December 31, 2017
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
	(dollars in thousands)
Superior	$	1,207	$	-	$	-	$	-
Very good		2,454		111		420		-
Good		13,161		11,343		46,790		11,394
Acceptable		44,968		40,558		249,988		46,246
Acceptable with care		38,631		124,593		97,798		18,787
Special mention		3,172		583		3,771		322
Substandard		2,571		745		4,333		234
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	106,164	$	177,933	$	403,100	$	76,983

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	149,767	$	51,326
Special mention		3,270		253
Substandard		3,864		1,027
	$	156,901	$	52,606

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	10,233
Non-pass		11
	$	10,244

Determining the fair value of Purchased Credit Impaired (“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 companies.

The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2018 and 2017:

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2018			2017			2018			2017
	(dollars in thousands)
Accretable yield, beginning of period	$	3,040		$	2,465		$	3,307		$	2,626
Accretion		(348	)		(260	)		(702	)		(520	)
Reclassification from (to) nonaccretable difference		78			72			63			79
Other changes, net		332			3			434			95
Accretable yield, end of period	$	3,102		$	2,280		$	3,102		$	2,280

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

	Three months ended June 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	$	729		$	1,686	$	3,590		$	1,275	$	645		$	125		$	697		$	8,747
Provision for loan losses		37			82		330			137		(16	)		200			(109	)		661
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	781		$	1,768	$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	144		$	-	$	66		$	-	$	-		$	-		$	-		$	210
Provision for loan losses		(90	)		-		(14	)		-		-			-			-			(104	)
Loans charged-off		-			-		-			-		-			-			-			-
Recoveries		-			-		-			-		-			-			-			-
Balance, end of period	$	54		$	-	$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	873		$	1,686	$	3,656		$	1,275	$	645		$	125		$	697		$	8,957
Provision for loan losses		(53	)		82		316			137		(16	)		200			(109	)		557
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	835		$	1,768	$	3,978		$	1,421	$	618		$	320		$	588		$	9,528
Ending Balance: individually evaluated for impairment	$	47		$	14	$	-		$	12	$	21		$	4		$	-		$	98
Ending Balance: collectively evaluated for impairment	$	788		$	1,754	$	3,978		$	1,409	$	597		$	316		$	588		$	9,430
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	98,078		$	176,956	$	414,666		$	149,664	$	50,452		$	12,576		$	61,753		$	964,145
Ending Balance: collectively evaluated for impairment PCI loans	$	1,557		$	741	$	8,663		$	7,948	$	50		$	62		$	1,024		$	20,045
Ending Balance: individually evaluated for impairment	$	2,602		$	401	$	5,571		$	841	$	647		$	4		$	225		$	10,291
Ending Balance	$	102,237		$	178,098	$	428,900		$	158,453	$	51,149		$	12,642		$	63,002		$	994,481

	Six months ended June 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		27			(193	)		612			345		109			26			(203	)		723
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	781		$	1,768		$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	65		$	-		$	66		$	-	$	-		$	-		$	-		$	131
Provision for loan losses		(11	)		-			(14	)		-		-			-			-			(25	)
Loans charged-off		-			-			-			-		-			-			-			-
Recoveries		-			-			-			-		-			-			-			-
Balance, end of period	$	54		$	-		$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	807		$	1,955		$	3,370		$	1,058	$	549		$	305		$	791		$	8,835
Provision for loan losses		16			(193	)		598			345		109			26			(203	)		698
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	835		$	1,768		$	3,978		$	1,421	$	618		$	320		$	588		$	9,528

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

	Three months ended June 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	$	958		$	1,177	$	3,169		$	770	$	589		$	465		$	583	$	7,711
Provision for loan losses		(119	)		111		1,110			143		(28	)		(294	)		149		1,072
Loans charged-off		(35	)		-		(373	)		-		-			(34	)		-		(442	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	5		$	-	$	294		$	-	$	12		$	-		$	-	$	311
Provision for loan losses		(5	)		-		12			16		(12	)		-			-		11
Loans charged-off		-			-		(294	)		-		-			-			-		(294	)
Recoveries		-			-		-			-		-			-			-		-
Balance, end of period	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	963		$	1,177	$	3,463		$	770	$	601		$	465		$	583	$	8,022
Provision for loan losses		(124	)		111		1,122			159		(40	)		(294	)		149		1,083
Loans charged-off		(35	)		-		(667	)		-		-			(34	)		-		(736	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,925		$	939	$	563		$	142		$	732	$	8,488
Ending Balance: individually evaluated for impairment	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Ending Balance: collectively evaluated for impairment	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	87,122		$	125,207	$	285,314		$	95,242	$	41,431		$	10,315		$	70,268	$	714,899
Ending Balance: collectively evaluated for impairment PCI loans	$	31		$	894	$	7,788		$	6,880	$	193		$	107		$	750	$	16,643
Ending Balance: individually evaluated for impairment	$	1,053		$	164	$	4,304		$	1,522	$	681		$	-		$	48	$	7,772
Ending Balance	$	88,206		$	126,265	$	297,406		$	103,644	$	42,305		$	10,422		$	71,066	$	739,314

	Six months ended June 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		(466	)		(18	)		1,081			58		(2	)		(139	)		102		616
Loans charged-off		(37	)		-			(623	)		-		(69	)		(50	)		-		(779	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	37		$	-		$	-		$	-	$	12		$	-		$	-	$	49
Provision for loan losses		(37	)		-			306			16		(12	)		-			-		273
Loans charged-off		-			-			(294	)		-		-			-			-		(294	)
Recoveries		-			-			-			-		-			-			-		-
Balance, end of period	$	-		$	-		$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	1,248		$	1,301		$	3,448		$	846	$	623		$	317		$	628	$	8,411
Provision for loan losses		(503	)		(18	)		1,387			74		(14	)		(139	)		102		889
Loans charged-off		(37	)		-			(917	)		-		(69	)		(50	)		-		(1,073	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,925		$	939	$	563		$	142		$	732	$	8,488

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LOANS HELD FOR SALE

6 Months Ended

Jun. 30, 2018

Loans Receivable Held-for-sale, Net, Not Part of Disposal Group [Abstract]

Loans Held For Sale [Text Block]

NOTE G – LOANS HELD FOR SALE

We originate fixed and variable rate residential mortgage loans on a service release 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.

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REVENUE RECOGNITION

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

NOTE H – REVENUE RECOGNITION

On January 1, 2018, the Company adopted ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified Topic 606. As stated in Note C Recent Accounting Pronouncements, 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.

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 safety 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 presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2018 and 2017.

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
	(dollars in thousands)
Service Charges on Deposit Accounts	$	245	$	216	$	521	$	413
Other		364		343		771		609
Noninterest Income (in-scope of Topic 606)		609		559		1,292		1,040
Noninterest Income (out-of-scope of Topic 606)		617		219		1,099		468
Total Non-interest Income	$	1,226	$	778	$	2,391	$	1,508

Contract Balances

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 transfer a service to a customer for which the 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 therefore, does not experience significant contract balances. As of June 30, 2018 and December 31, 2017, the Company did not have any significant contract balances.

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.

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OTHER REAL ESTATE OWNED

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Real Estate Owned [Text Block]

NOTE I – OTHER REAL ESTATE OWNED

The following table explains changes in other real estate owned during the six months ended June 30, 2018 and 2017 (dollars in thousands):

	Six Months			Six Months
	Ended June 30,			Ended June 30,
	2018			2017
	(dollars in thousands)
Beginning balance January 1	$	1,258		$	599
Sales		(86	)		(384	)
Write-downs and gains/(losses) on sales		(53	)		61
Transfers		378			2,426
Ending balance	$	1,497		$	2,702

At June 30, 2018 and December 31, 2017, the Company had $1.5 million and $1.3 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 $135,000 at June 30, 2018. At December 31, 2017, the Company had no such loans.

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BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note J – Business Combinations

On July 20, 2017, the Company executed a merger agreement with Premara Financial, Inc. (“Premara”), a bank holding company headquartered in Charlotte, North Carolina, whose wholly owned subsidiary, Carolina Premier Bank, was a North Carolina state-chartered commercial bank. On December 15, 2017, the Company completed its previously announced acquisition of Premara and pursuant to the terms of the merger agreement, Premara was merged with and into the Company, followed immediately by the merger of Carolina Premier Bank with and into the Bank. Carolina Premier had approximately $279.6 million in assets as of the merger date, December 15, 2017. The merger expanded the Bank’s North Carolina presence with a branch in Charlotte and marked the Bank’s initial entry into South Carolina with the acquisition of branches in Rock Hill, Blacksburg and Six Mile, South Carolina.

Premara had 3,179,808 shares of common stock outstanding as of the merger closing date. Under the terms of the merger agreement, 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) were converted to the $12.65 per share cash merger consideration, for aggregate cash consideration of $11,993,212 (exclusive of cash paid-in-lieu of fractional shares) which was paid out subsequent to December 31, 2017. Pursuant to the merger agreement, each warrant or stock option to acquire shares of Premara common stock issued and outstanding as of the effective time of the merger was converted into the right to receive from the Company a cash payment equal to $12.65 less the exercise price of such warrant or option, as applicable and paid out prior to year-end. The remaining 2,231,728 Premara common shares were converted into stock consideration at the merger exchange ratio of 1.0463 shares of Company common stock for each share of Premara common stock, resulting in the issuance of 2,334,999 new shares of Company common stock. The transaction was valued at approximately $40.6 million in the aggregate based on 3,179,808 shares of Premara common stock outstanding on December 15, 2017. The shares of Premara common stock converted to the Company’s common stock are valued at $12.14 per share, the low price of Select common stock on December 15, 2017.

The merger with Premara was accounted for under the acquisition method of accounting with the Company as the legal and accounting acquirer and Premara as the legal and accounting acquiree. The assets and liabilities of Premara, as of the effective date of the acquisition, are recorded at their respective fair values. For the acquisition of Premara, estimated fair values of assets acquired and liabilities assumed are based on the information that is available, and the Company believes this information provides a reasonable basis for determining fair values.

Goodwill recorded for Premara represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations. During the first quarter of 2018, goodwill decreased by $325,000 due to adjustments to liabilities assumed and the tax re-measurement associated with the completion of the final short-year tax return. Merger-related expenses in the first quarter of 2018 totaled $1.8 million which were recorded as noninterest expense as incurred.

The following tables reflect the pro forma total net interest income, noninterest income and net income for the six months ended June 30, 2017 as though the acquisition of Premara had taken place on January 1, 2017 and actual amounts for the six months ended June 30, 2018. The pro forma results have not been adjusted to remove non-recurring acquisition-related expenses, and are not necessarily indicative of the results of operations that would have occurred had the acquisition actually taken place on January 1, 2017, nor of future results of operations.

	Six Months Ended June 30
	2018		2017
	(dollars in thousands, except per share)
Net interest income	$	23,633	$	22,422
Non-interest income		2,391		2,358
Net income available to common shareholders		5,007		4,728
Earnings per share, basic	$	0.36	$	0.34
Earnings per share, diluted	$	0.36	$	0.34
Weighted average common shares outstanding, basic		14,015,511		13,992,390
Weighted average common shares outstanding, diluted		14,084,226		14,055,840

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE K – SUBSEQUENT EVENTS

The Company has evaluated for subsequent events through the date and time the financial statements were issued and has determined there are no reportable subsequent events.

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PER SHARE RESULTS (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

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 June 30, 2018 and 2017 there were 121,300 and 23,300 anti-dilutive options outstanding, respectively.         

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Weighted average shares used for basic net income available to common shareholders		14,019,273		11,662,117		14,015,511		11,657,391
Effect of dilutive stock options		67,398		64,993		68,777		63,450
Weighted average shares used for diluted net income available to common shareholders		14,086,671		11,727,110		14,084,288		11,720,841

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

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 June 30, 2018 and December 31, 2017 (in thousands):

Investment securities ‎ available for sale ‎June 30, 2018	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 – GSE's	$	11,259	$	-	$	11,259	$	-
Mortgage-backed securities - GSE’s		24,778		-		24,778		-
Corporate Bonds		1,792		-		1,792		-
Municipal bonds		17,904		-		17,904		-
Total investment held for sale	$	55,733	$	-	$	55,733	$	-

Investment securities ‎available for sale December 31, 2017	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 – GSE's	$	13,364	$	-	$	13,364	$	-
Mortgage-backed securities - GSE’s		29,684		-		29,684		-
Corporate Bonds		1,888		-		1,888		-
Municipal bonds		18,838		-		18,838		-
Total investment held for sale	$	63,774	$	-	$	63,774	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

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 June 30, 2018 and December 31, 2017 (in thousands):

Asset Category ‎June 30, 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	$	2,139	$	-	$	-	$	2,139
Loans held for sale		349		-		349		-
Assets held for sale		796		-		-		796
Foreclosed real estate		1,497		-		-		1,497
Total	$	4,781	$	-	$	349	$	4,432

Asset Category ‎December 31, 2017	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	$	899	$	-	$	-	$	899
Loans held for sale		98		-		98		-
Assets held for sale		846		-		-		846
Foreclosed real estate		1,258		-		-		1,258
Total	$	3,101	$	-	$	98	$	3,003

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

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

	June 30, 2018
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	20,997	$	20,997	$	20,997	$	-	$	-
Certificates of deposit		1,000		1,000		1,000		-		-
Interest-earning deposits in other banks		62,498		62,498		62,498		-		-
Investment securities available for sale		55,733		55,733		-		55,733		-
Loans held for sale		349		349				349		-
Loans, net		983,357		965,859		-		-		965,859
Accrued interest receivable		3,888		3,888		-		3,888		-
Stock in FHLB		3,882		3,882		-		-		3,882
Other non-marketable securities		876		876		-		-		876
Assets held for sale		796		796		-		-		796
Financial liabilities:
Deposits	$	993,484	$	993,467	$	-	$	993,467	$	-
Short-term debt		21,071		21,071		-		21,071		-
Long-term debt		57,372		54,862		-		54,862		-
Accrued interest payable		528		528		-		528		-

	December 31, 2017
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets:
Cash and due from banks	$	16,554	$	16,554	$	16,554	$	-	$	-
Certificates of deposits		1,500		1,500		1,500		-		-
Interest-earning deposits in other banks		37,996		37,996		37,996		-		-
Federal funds sold		6,645		6,645		6,645		-		-
Investment securities available for sale		63,774		63,774		-		63,774		-
Loans held for sale		98		98		-		98		-
Loans, net		973,791		972,475		-		-		972,475
Accrued interest receivable		3,997		3,997		-		3,997		-
Stock in the FHLB		2,490		2,490		-		-		2,490
Other non-marketable securities		1,019		1,019		-		-		1,019
Assets held for sale		846		846		-		-		846
Financial liabilities:
Deposits	$	995,044	$	991,977	$	-	$	991,977	$	-
Short-term debt		28,279		28,279		-		28,279		-
Long-term debt		19,372		14,640		-		14,640		-
Accrued interest payable		427		427		-		427		-

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INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	11,384	$	19	$	(144	)	$	11,259
Mortgage-backed securities – GSE’s		25,069		81		(372	)		24,778
Corporate bonds		1,776		24		(8	)		1,792
Municipal bonds		17,790		135		(21	)		17,904
	$	56,019	$	259	$	(545	)	$	55,733

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

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	13,241	$	148	$	(25	)	$	13,364
Mortgage-backed securities – GSE’s		29,571		213		(100	)		29,684
Corporate bonds		1,858		44		(14	)		1,888
Municipal bonds		18,583		255		-			18,838
	$	63,253	$	660	$	(139	)	$	63,774

Investments Classified by Contractual Maturity Date [Table Text Block]

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

	June 30, 2018
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	2,337	$	21	$	-		$	2,358
After 1 year but within 5 years		37,703		118		(466	)		37,355
After 5 years but within 10 years		7,004		47		(60	)		6,991
After 10 years		8,975		73		(19	)		9,029
	$	56,019	$	259	$	(545	)	$	55,733

	December 31, 2017
			Gross		Gross
	Amortized		unrealized		unrealized			Fair
	cost		gains		losses			value
	(dollars in thousands)
Securities available for sale:
Within 1 year	$	975	$	5	$	-		$	980
After 1 year but within 5 years		45,418		406		(125	)		45,699
After 5 years but within 10 years		7,823		81		(14	)		7,890
After 10 years		9,037		168		-			9,205
	$	63,253	$	660	$	(139	)	$	63,774

Schedule of Unrealized Loss on Investments [Table Text Block]

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

	June 30, 2018
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies-GSE’s	$	6,662	$	(97	)	$	1,265	$	(47	)	$	7,927	$	(144	)
Mortgage-backed securities-GSE’s		17,693		(310	)		2,425		(62	)		20,118		(372	)
Corporate bonds		754		(8	)		-		-			754		(8	)
Municipal bonds		3,763		(21	)		-		-			3,763		(21	)
Total temporarily impaired securities	$	28,872	$	(436	)	$	3,690	$	(109	)	$	32,562	$	(545	)

	December 31, 2017
	Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		losses			value		losses			value		losses
	(dollars in thousands)
Securities available for sale:
U.S. government agencies – GSE’s	$	1,651	$	(9	)	$	1,415	$	(16	)	$	3,066	$	(25	)
Mortgage-backed securities - GSE’s		8,137		(55	)		2,449		(45	)		10,586		(100	)
Corporate bonds		1,752		(14	)		-		-			1,752		(14	)
Municipal bonds		1,101		-			-		-			1,101		-
Total temporarily impaired securities	$	12,641	$	(78	)	$	3,864	$	(61	)	$	16,505	$	(139	)

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LOANS (Tables)

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

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

	June 30,						December 31,
	2018						2017
				Percent						Percent
	Amount			of total			Amount			of total
	(dollars in thousands)
Real estate loans:
1-to-4 family residential	$	158,453			15.96	%	$	156,901			15.97	%
Commercial real estate		428,900			43.20	%		403,100			41.02	%
Multi-family residential		63,002			6.34	%		76,983			7.83	%
Construction		178,098			17.94	%		177,933			18.11	%
Home equity lines of credit (“HELOC”)		51,149			5.15	%		52,606			5.35	%
Total real estate loans		879,602			88.59	%		867,523			88.28	%
Other loans:
Commercial and industrial		102,237			10.30	%		106,164			10.80	%
Loans to individuals		12,551			1.26	%		10,097			1.04	%
Overdrafts		91			0.01	%		147			0.01	%
Total other loans		114,879			11.57	%		116,408			11.85	%
Gross loans		994,481						983,931
Less deferred loan origination fees, net		(1,596	)		(0.16	)%		(1,305	)		(0.13	)%
Total loans		992,885			100.00	%		982,626			100.00	%
Allowance for loan losses		(9,528	)					(8,835	)
Total loans, net	$	983,357					$	973,791

Schedule Of Fair Values Of Expected Cash flows And Loan Related Payments To Acquired Company At Time Of Merger [Table Text Block]

For PCI loans acquired from Legacy Select, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of June 30, 2018 and December 31, 2017 were:

(dollars in thousands)	June 30, 2018		December 31, 2017
Contractually required payments	$	27,355	$	29,285
Nonaccretable difference		2,493		2,717
Cash flows expected to be collected		24,862		26,568
Accretable yield		3,102		3,307
Carrying value	$	21,760	$	23,261

Past Due Financing Receivables [Table Text Block]

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

	June 30, 2018
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	1,527	$	814	$	2,289	$	4,630	$	97,607	$	102,237
Construction		233		373		401		1,007		177,091		178,098
Multi-family residential		-		-		-		-		63,002		63,002
Commercial real estate		1,804		-		986		2,790		426,110		428,900
Loans to individuals & overdrafts		28		-		4		32		12,610		12,642
1-to-4 family residential		1,441		707		355		2,503		155,950		158,453
HELOC		70		-		522		592		50,557		51,149
Deferred loan (fees) cost, net		-		-		-		-		-		(1,596	)
	$	5,103	$	1,894	$	4,557	$	11,554	$	982,927	$	992,885

	December 31, 2017
	30+		90+		Non-		Total
	Days		Days		Accrual		Past				Total
	Past Due		Accruing		Loans		Due		Current		Loans
	(dollars in thousands)
Commercial and industrial	$	215	$	396	$	96	$	707	$	105,457	$	106,164
Construction		27		359		384		770		177,163		177,933
Multi-family residential		30		-		-		30		76,953		76,983
Commercial real estate		1,464		-		528		1,992		401,108		403,100
Loans to individuals & overdrafts		22		-		7		29		10,215		10,244
1-to-4 family residential		2,824		721		771		4,316		152,585		156,901
HELOC		103		-		329		432		52,174		52,606
Deferred loan (fees) cost, net		-		-		-		-		-		(1,305	)
	$	4,685	$	1,476	$	2,115	$	8,276	$	975,655	$	982,626

Impaired Financing Receivables [Table Text Block]

The following tables present information on loans, excluding PCI loans and loans evaluated collectively as a homogeneous group that were considered to be impaired as of June 30, 2018 and December 31, 2017:

							Three months ended					Six months ended
	As of June 30, 2018						June 30, 2018					June 30, 2018
			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	$	2,462	$	3,835	$	-	$	3,031	$	57		$	2,447	$	130
Construction		375		481		-		377		1			380		2
Commercial real estate		5,571		6,774		-		5,226		94			4,999		155
Loans to individuals & overdrafts		-		-		-		-		-			-		-
Multi-family residential		225		225		-		228		3			230		6
1-to-4 family residential		693		1,066		-		806		(16	)		989		25
HELOC		577		965		-		870		12			800		31
Subtotal:		9,903		13,346		-		10,538		151			9,845		349
With an allowance recorded:
Commercial and industrial		140		140		47		141		1			141		1
Construction		26		26		14		26		-			13		-
Commercial real estate		-		-		-		-		-			-		-
Loans to individuals & overdrafts		4		4		4		2		-			2		-
Multi-family residential		-		-		-		-		-			-		-
1-to-4 family residential		148		155		12		149		2			175		7
HELOC		70		70		21		35		1			52		1
Subtotal:		388		395		98		353		4			383		9
Totals:
Commercial		8,799		11,481		61		9,029		156			8,210		294
Consumer		4		4		4		2		-			2		-
Residential		1,488		2,256		33		1,860		(1	)		2,016		64
Grand Total:	$	10,291	$	13,741	$	98	$	10,891	$	155		$	10,228	$	358

							Three months ended				Six months ended
	As of December 31, 2017						June 30, 2017				June 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	$	940	$	1,234	$	-	$	1,077	$	21	$	1,119	$	40
Construction		385		490		-		169		1		198		5
Commercial real estate		4,428		5,606		-		3,958		54		4,019		113
Loans to individuals & overdrafts		1		1		-		-		-		-		-
Multi-family residential		234		234		-		48		-		197		-
1-to-4 family residential		1,077		1,209		-		1,022		20		1,111		33
HELOC		602		926		-		654		12		844		22
Subtotal:		7,667		9,700		-		6,928		108		7,488		213
With an allowance recorded:
Commercial and industrial		142		142		50		-		-		1		-
Construction		-		-		-		-		-		-		-
Commercial real estate		-		-		-		1,429		10		1,563		20
Loans to individuals & overdrafts		-		-		-		-		-		-		-
Multi-family residential		-		-		-		-		-		-		-
1-to-4 family residential		-		-		-		302		5		298		11
HELOC		202		202		11		16		-		33		-
Subtotal:		344		344		61		1,747		15		1,895		31
Totals:
Commercial		6,129		7,706		50		6,681		86		7,097		178
Consumer		1		1		-		-		-		-		-
Residential		1,881		2,337		11		1,994		37		2,286		66
Grand Total:	$	8,011	$	10,044	$	61	$	8,675	$	123	$	9,383	$	244

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

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 six months ended June 30, 2018 and 2017:

	Three months ended June 30, 2018						Six months ended June 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	$	408	$	403		1	$	408	$	403
Commercial real estate		2		892		817		2		892		817
Commercial & industrial		2		533		510		6		1,579		1,555
Total		5	$	1,833	$	1,730		9	$	2,879	$	2,775

	Three months ended June 30, 2017						Six months ended June 30, 2017
			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	$	17		1	$	17	$	17
Commercial & industrial		1		44		44		1		44		44
Total		2	$	61	$	61		2	$	61	$	61

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 period ended June 30, 2018 and 2017:

	Twelve months ended				Twelve months ended
	June 30, 2018				June 30, 2017
	Number		Recorded		Number		Recorded
	of loans		investment		of loans		investment
			(Dollars in thousands)
Extended payment terms:
Commercial & industrial		6	$	1,544		2	$	927
Commercial real estate		1		384		-		-
1-to-4 family residential		2		470		1		77
Total		9	$	2,398		3	$	1,004

Financing Receivable Credit Quality Indicators [Table Text Block]

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

Total loans:

June 30, 2018
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
			(dollars in thousands)
Superior	$	1,347	$	-	$	-	$	-
Very good		1,657		138		1,227		-
Good		13,772		11,840		57,922		5,475
Acceptable		38,592		43,219		246,499		38,768
Acceptable with care		38,502		121,370		115,438		18,218
Special mention		2,413		757		4,365		316
Substandard		5,954		774		3,449		225
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	102,237	$	178,098	$	428,900	$	63,002

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	152,353	$	49,918
Special mention		2,381		247
Substandard		3,719		984
	$	158,453	$	51,149

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	12,521
Non –pass		121
	$	12,642

Total Loans:

December 31, 2017
Commercial
Credit
Exposure By	Commercial				Commercial
Internally	and				real		Multi-family
Assigned Grade	industrial		Construction		estate		residential
	(dollars in thousands)
Superior	$	1,207	$	-	$	-	$	-
Very good		2,454		111		420		-
Good		13,161		11,343		46,790		11,394
Acceptable		44,968		40,558		249,988		46,246
Acceptable with care		38,631		124,593		97,798		18,787
Special mention		3,172		583		3,771		322
Substandard		2,571		745		4,333		234
Doubtful		-		-		-		-
Loss		-		-		-		-
	$	106,164	$	177,933	$	403,100	$	76,983

Consumer Credit
Exposure By
Internally	1-to-4 family
Assigned Grade	residential		HELOC
Pass	$	149,767	$	51,326
Special mention		3,270		253
Substandard		3,864		1,027
	$	156,901	$	52,606

Consumer Credit
Exposure Based	Loans to
On Payment	individuals &
Activity	overdrafts
Pass	$	10,233
Non-pass		11
	$	10,244

Schedule Of Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield [Table Text Block]

The following table documents changes to the amount of the accretable yield on PCI loans for the three and six months ended June 30, 2018 and 2017:

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2018			2017			2018			2017
	(dollars in thousands)
Accretable yield, beginning of period	$	3,040		$	2,465		$	3,307		$	2,626
Accretion		(348	)		(260	)		(702	)		(520	)
Reclassification from (to) nonaccretable difference		78			72			63			79
Other changes, net		332			3			434			95
Accretable yield, end of period	$	3,102		$	2,280		$	3,102		$	2,280

Allowance for Credit Losses on Financing Receivables [Table Text Block]

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

	Three months ended June 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	$	729		$	1,686	$	3,590		$	1,275	$	645		$	125		$	697		$	8,747
Provision for loan losses		37			82		330			137		(16	)		200			(109	)		661
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	781		$	1,768	$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	144		$	-	$	66		$	-	$	-		$	-		$	-		$	210
Provision for loan losses		(90	)		-		(14	)		-		-			-			-			(104	)
Loans charged-off		-			-		-			-		-			-			-			-
Recoveries		-			-		-			-		-			-			-			-
Balance, end of period	$	54		$	-	$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	873		$	1,686	$	3,656		$	1,275	$	645		$	125		$	697		$	8,957
Provision for loan losses		(53	)		82		316			137		(16	)		200			(109	)		557
Loans charged-off		-			-		-			-		(13	)		(13	)		-			(26	)
Recoveries		15			-		6			9		2			8			-			40
Balance, end of period	$	835		$	1,768	$	3,978		$	1,421	$	618		$	320		$	588		$	9,528
Ending Balance: individually evaluated for impairment	$	47		$	14	$	-		$	12	$	21		$	4		$	-		$	98
Ending Balance: collectively evaluated for impairment	$	788		$	1,754	$	3,978		$	1,409	$	597		$	316		$	588		$	9,430
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	98,078		$	176,956	$	414,666		$	149,664	$	50,452		$	12,576		$	61,753		$	964,145
Ending Balance: collectively evaluated for impairment PCI loans	$	1,557		$	741	$	8,663		$	7,948	$	50		$	62		$	1,024		$	20,045
Ending Balance: individually evaluated for impairment	$	2,602		$	401	$	5,571		$	841	$	647		$	4		$	225		$	10,291
Ending Balance	$	102,237		$	178,098	$	428,900		$	158,453	$	51,149		$	12,642		$	63,002		$	994,481

	Six months ended June 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		27			(193	)		612			345		109			26			(203	)		723
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	781		$	1,768		$	3,926		$	1,421	$	618		$	320		$	588		$	9,422
PCI Loans
Balance, beginning of period	$	65		$	-		$	66		$	-	$	-		$	-		$	-		$	131
Provision for loan losses		(11	)		-			(14	)		-		-			-			-			(25	)
Loans charged-off		-			-			-			-		-			-			-			-
Recoveries		-			-			-			-		-			-			-			-
Balance, end of period	$	54		$	-		$	52		$	-	$	-		$	-		$	-		$	106
Total Loans
Balance, beginning of period	$	807		$	1,955		$	3,370		$	1,058	$	549		$	305		$	791		$	8,835
Provision for loan losses		16			(193	)		598			345		109			26			(203	)		698
Loans charged-off		(9	)		-			-			-		(48	)		(28	)		-			(85	)
Recoveries		21			6			10			18		8			17			-			80
Balance, end of period	$	835		$	1,768		$	3,978		$	1,421	$	618		$	320		$	588		$	9,528

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

	Three months ended June 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	$	958		$	1,177	$	3,169		$	770	$	589		$	465		$	583	$	7,711
Provision for loan losses		(119	)		111		1,110			143		(28	)		(294	)		149		1,072
Loans charged-off		(35	)		-		(373	)		-		-			(34	)		-		(442	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	5		$	-	$	294		$	-	$	12		$	-		$	-	$	311
Provision for loan losses		(5	)		-		12			16		(12	)		-			-		11
Loans charged-off		-			-		(294	)		-		-			-			-		(294	)
Recoveries		-			-		-			-		-			-			-		-
Balance, end of period	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	963		$	1,177	$	3,463		$	770	$	601		$	465		$	583	$	8,022
Provision for loan losses		(124	)		111		1,122			159		(40	)		(294	)		149		1,083
Loans charged-off		(35	)		-		(667	)		-		-			(34	)		-		(736	)
Recoveries		91			4		7			10		2			5			-		119
Balance, end of period	$	895		$	1,292	$	3,925		$	939	$	563		$	142		$	732	$	8,488
Ending Balance: individually evaluated for impairment	$	-		$	-	$	12		$	16	$	-		$	-		$	-	$	28
Ending Balance: collectively evaluated for impairment	$	895		$	1,292	$	3,913		$	923	$	563		$	142		$	732	$	8,460
Loans:
Ending Balance: collectively evaluated for impairment non PCI loans	$	87,122		$	125,207	$	285,314		$	95,242	$	41,431		$	10,315		$	70,268	$	714,899
Ending Balance: collectively evaluated for impairment PCI loans	$	31		$	894	$	7,788		$	6,880	$	193		$	107		$	750	$	16,643
Ending Balance: individually evaluated for impairment	$	1,053		$	164	$	4,304		$	1,522	$	681		$	-		$	48	$	7,772
Ending Balance	$	88,206		$	126,265	$	297,406		$	103,644	$	42,305		$	10,422		$	71,066	$	739,314

	Six months ended June 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		(466	)		(18	)		1,081			58		(2	)		(139	)		102		616
Loans charged-off		(37	)		-			(623	)		-		(69	)		(50	)		-		(779	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,913		$	923	$	563		$	142		$	732	$	8,460
PCI Loans
Balance, beginning of period	$	37		$	-		$	-		$	-	$	12		$	-		$	-	$	49
Provision for loan losses		(37	)		-			306			16		(12	)		-			-		273
Loans charged-off		-			-			(294	)		-		-			-			-		(294	)
Recoveries		-			-			-			-		-			-			-		-
Balance, end of period	$	-		$	-		$	12		$	16	$	-		$	-		$	-	$	28
Total Loans
Balance, beginning of period	$	1,248		$	1,301		$	3,448		$	846	$	623		$	317		$	628	$	8,411
Provision for loan losses		(503	)		(18	)		1,387			74		(14	)		(139	)		102		889
Loans charged-off		(37	)		-			(917	)		-		(69	)		(50	)		-		(1,073	)
Recoveries		187			9			7			19		23			14			2		261
Balance, end of period	$	895		$	1,292		$	3,925		$	939	$	563		$	142		$	732	$	8,488

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REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue [Table Text Block]

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2018 and 2017.

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	June 30,		June 30,		June 30,		June 30,
	2018		2017		2018		2017
	(dollars in thousands)
Service Charges on Deposit Accounts	$	245	$	216	$	521	$	413
Other		364		343		771		609
Noninterest Income (in-scope of Topic 606)		609		559		1,292		1,040
Noninterest Income (out-of-scope of Topic 606)		617		219		1,099		468
Total Non-interest Income	$	1,226	$	778	$	2,391	$	1,508

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OTHER REAL ESTATE OWNED (Tables)

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Schedule Of Real Estate Owned Properties [Table Text Block]

The following table explains changes in other real estate owned during the six months ended June 30, 2018 and 2017 (dollars in thousands):

	Six Months			Six Months
	Ended June 30,			Ended June 30,
	2018			2017
	(dollars in thousands)
Beginning balance January 1	$	1,258		$	599
Sales		(86	)		(384	)
Write-downs and gains/(losses) on sales		(53	)		61
Transfers		378			2,426
Ending balance	$	1,497		$	2,702

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BUSINESS COMBINATIONS (Tables)

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Business Acquisition, Pro Forma Information [Table Text Block]

The following tables reflect the pro forma total net interest income, noninterest income and net income for the six months ended June 30, 2017 as though the acquisition of Premara had taken place on January 1, 2017 and actual amounts for the six months ended June 30, 2018. The pro forma results have not been adjusted to remove non-recurring acquisition-related expenses, and are not necessarily indicative of the results of operations that would have occurred had the acquisition actually taken place on January 1, 2017, nor of future results of operations.

	Six Months Ended June 30
	2018		2017
	(dollars in thousands, except per share)
Net interest income	$	23,633	$	22,422
Non-interest income		2,391		2,358
Net income available to common shareholders		5,007		4,728
Earnings per share, basic	$	0.36	$	0.34
Earnings per share, diluted	$	0.36	$	0.34
Weighted average common shares outstanding, basic		14,015,511		13,992,390
Weighted average common shares outstanding, diluted		14,084,226		14,055,840

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PER SHARE RESULTS (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Weighted average shares used for basic net income available to common shareholders	14,019,273	11,662,117	14,015,511	11,657,391
Effect of dilutive stock options	67,398	64,993	68,777	63,450
Weighted average shares used for diluted net income available to common shareholders	14,086,671	11,727,110	14,084,288	11,720,841

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PER SHARE RESULTS (Details Textual) - shares	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	121,300	23,300

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RECENT ACCOUNTING PRONOUNCEMENTS (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%
New Accounting Pronouncement or Change in Accounting Principle, Effect of Change on Net Income			$ 67,000
Scenario, Plan [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		21.00%

XML

FAIR VALUE MEASUREMENTS (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets, Fair Value Disclosure	$ 55,733	$ 63,774
U.S. government agencies [Member]
Assets, Fair Value Disclosure	11,259	13,364
Mortgage-backed securities [Member]
Assets, Fair Value Disclosure	24,778	29,684
Municipal Bonds [Member]
Assets, Fair Value Disclosure	17,904	18,838
Corporate Bond Securities [Member]
Assets, Fair Value Disclosure	1,792	1,888
Fair Value, Inputs, Level 1 [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | U.S. government agencies [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed securities [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Municipal Bonds [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Corporate Bond Securities [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Assets, Fair Value Disclosure	55,733	63,774
Fair Value, Inputs, Level 2 [Member] | U.S. government agencies [Member]
Assets, Fair Value Disclosure	11,259	13,364
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed securities [Member]
Assets, Fair Value Disclosure	24,778	29,684
Fair Value, Inputs, Level 2 [Member] | Municipal Bonds [Member]
Assets, Fair Value Disclosure	17,904	18,838
Fair Value, Inputs, Level 2 [Member] | Corporate Bond Securities [Member]
Assets, Fair Value Disclosure	1,792	1,888
Fair Value, Inputs, Level 3 [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | U.S. government agencies [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed securities [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Municipal Bonds [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Corporate Bond Securities [Member]
Assets, Fair Value Disclosure	$ 0	$ 0

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FAIR VALUE MEASUREMENTS (Details 1) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets, Fair Value Disclosure	$ 4,781	$ 3,101
Impaired Loans [Member]
Assets, Fair Value Disclosure	2,139	899
Loans held for sale [Member]
Assets, Fair Value Disclosure	349	98
Assets held for sale [Member]
Assets, Fair Value Disclosure	796	846
Foreclosed Real Estate [Member]
Assets, Fair Value Disclosure	1,497	1,258
Fair Value, Inputs, Level 1 [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Impaired Loans [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Loans held for sale [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Assets held for sale [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Foreclosed Real Estate [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Assets, Fair Value Disclosure	349	98
Fair Value, Inputs, Level 2 [Member] | Impaired Loans [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Loans held for sale [Member]
Assets, Fair Value Disclosure	349	98
Fair Value, Inputs, Level 2 [Member] | Assets held for sale [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Foreclosed Real Estate [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member]
Assets, Fair Value Disclosure	4,432	3,003
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member]
Assets, Fair Value Disclosure	2,139	899
Fair Value, Inputs, Level 3 [Member] | Loans held for sale [Member]
Assets, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Assets held for sale [Member]
Assets, Fair Value Disclosure	796	846
Fair Value, Inputs, Level 3 [Member] | Foreclosed Real Estate [Member]
Assets, Fair Value Disclosure	$ 1,497	$ 1,258

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FAIR VALUE MEASUREMENTS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Financial assets:
Cash and due from banks	$ 20,997	$ 16,554	[1]
Certificates of deposit	1,000	1,500
Interest-earning deposits in other banks	62,498	37,996
Federal funds sold	0	6,645	[1]
Investment securities available for sale	55,733	63,774
Loans held for sale	349	98	[1]
Loans, net	983,357	973,791
Accrued interest receivable	3,888	3,997	[1]
Stock in FHLB	3,882	2,490	[1]
Other non-marketable securities	876	1,019
Assets held for sale	796	846
Financial liabilities:
Deposits	993,484	995,044	[1]
Short-term debt	21,071	28,279	[1]
Long-term debt	57,372	19,372	[1]
Accrued interest payable	528	427	[1]
Estimate of Fair Value Measurement [Member]
Financial assets:
Cash and due from banks	20,997	16,554
Certificates of deposit	1,000	1,500
Interest-earning deposits in other banks	62,498	37,996
Federal funds sold		6,645
Investment securities available for sale	55,733	63,774
Loans held for sale	349	98
Loans, net	965,859	972,475
Accrued interest receivable	3,888	3,997
Stock in FHLB	3,882	2,490
Other non-marketable securities	876	1,019
Assets held for sale	796	846
Financial liabilities:
Deposits	993,467	991,977
Short-term debt	21,071	28,279
Long-term debt	54,862	14,640
Accrued interest payable	528	427
Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and due from banks	20,997	16,554
Certificates of deposit	1,000	1,500
Interest-earning deposits in other banks	62,498	37,996
Federal funds sold		6,645
Investment securities available for sale	0	0
Loans held for sale		0
Loans, net	0	0
Accrued interest receivable	0	0
Stock in FHLB	0	0
Other non-marketable securities	0	0
Assets held for sale	0	0
Financial liabilities:
Deposits	0	0
Short-term debt	0	0
Long-term debt	0	0
Accrued interest payable	0	0
Fair Value, Inputs, Level 2 [Member]
Financial assets:
Cash and due from banks	0	0
Certificates of deposit	0	0
Interest-earning deposits in other banks	0	0
Federal funds sold		0
Investment securities available for sale	55,733	63,774
Loans held for sale	349	98
Loans, net	0	0
Accrued interest receivable	3,888	3,997
Stock in FHLB	0	0
Other non-marketable securities	0	0
Assets held for sale	0	0
Financial liabilities:
Deposits	993,467	991,977
Short-term debt	21,071	28,279
Long-term debt	54,862	14,640
Accrued interest payable	528	427
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Cash and due from banks	0	0
Certificates of deposit	0	0
Interest-earning deposits in other banks	0	0
Federal funds sold		0
Investment securities available for sale	0	0
Loans held for sale	0	0
Loans, net	965,859	972,475
Accrued interest receivable	0	0
Stock in FHLB	3,882	2,490
Other non-marketable securities	876	1,019
Assets held for sale	796	846
Financial liabilities:
Deposits	0	0
Short-term debt	0	0
Long-term debt	0	0
Accrued interest payable	$ 0	$ 0

[1] Derived from audited consolidated financial statements.

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FAIR VALUE MEASUREMENTS (Details Textual)	Jun. 30, 2018
Minimum [Member]
Percentage Of Discount From Impaired Loans	3.00%
Percentage Of Discount From Assets held for sale	1.00%
Minimum [Member] | Fair Value, Measurements, Nonrecurring [Member]
Percentage Of Discount From Foreclosed Real Estate	6.00%
Maximum [Member]
Percentage Of Discount From Impaired Loans	50.00%
Percentage Of Discount From Assets held for sale	25.00%
Maximum [Member] | Fair Value, Measurements, Nonrecurring [Member]
Percentage Of Discount From Foreclosed Real Estate	10.00%

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INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Securities available for sale:
Amortized cost	$ 56,019	$ 63,253
Gross unrealized gains	259	660
Gross unrealized Losses	(545)	(139)
Fair value	55,733	63,774	[1]
U.S. government agencies - GSE's [Member]
Securities available for sale:
Amortized cost	11,384	13,241
Gross unrealized gains	19	148
Gross unrealized Losses	(144)	(25)
Fair value	11,259	13,364
Mortgage-backed securities - GSE's [Member]
Securities available for sale:
Amortized cost	25,069	29,571
Gross unrealized gains	81	213
Gross unrealized Losses	(372)	(100)
Fair value	24,778	29,684
Municipal bonds [Member]
Securities available for sale:
Amortized cost	17,790	18,583
Gross unrealized gains	135	255
Gross unrealized Losses	(21)	0
Fair value	17,904	18,838
Corporate Bonds [Member]
Securities available for sale:
Amortized cost	1,776	1,858
Gross unrealized gains	24	44
Gross unrealized Losses	(8)	(14)
Fair value	$ 1,792	$ 1,888

[1] Derived from audited consolidated financial statements.

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INVESTMENT SECURITIES (Details 1) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Amortized cost, Due within one year	$ 2,337	$ 975
Fair value, Due within one year	2,358	980
Amortized cost, Due after one but within five years	37,703	45,418
Fair value, Due after one but within five years	37,355	45,699
Amortized cost, Due after five but within ten years	7,004	7,823
Fair value, Due after five but within ten years	6,991	7,890
Amortized cost, Due after ten years	8,975	9,037
Fair value, Due after ten years	9,029	9,205
Available-for-sale securities, Amortized cost Total	56,019	63,253
Available-for-sale securities, Fair value Total	55,733	63,774	[1]
Gross unrealized gains, Due within one year	21	5
Gross unrealized losses, Due within one year	0	0
Gross unrealized gains, Due after one but within five years	118	406
Gross unrealized losses, Due after one but within five years	(466)	(125)
Gross unrealized gains, Due after five but within ten years	47	81
Gross unrealized losses, Due after five but within ten years	(60)	(14)
Gross unrealized gains, Due after ten years	73	168
Gross unrealized losses, Due after ten years	(19)	0
Available-for-sale securities, Gross unrealized gain Total	259	660
Available-for-sale securities, Gross unrealized loss Total	$ (545)	$ (139)

[1] Derived from audited consolidated financial statements.

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INVESTMENT SECURITIES (Details 2) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
U.S. government agencies - GSE's [Member]
Securities available for sale:
Less Than 12 Months Fair value	$ 6,662,000	$ 1,651,000
Less Than 12 Months Unrealized losses	(97,000)	(9,000)
12 Months or More Fair value	1,265,000	1,415,000
12 Months or More Unrealized losses	(47,000)	(16,000)
Total Fair value	7,927,000	3,066,000
Total Unrealized losses	(144,000)	(25,000)
Mortgage-backed securities - GSE's [Member]
Securities available for sale:
Less Than 12 Months Fair value	17,693,000	8,137,000
Less Than 12 Months Unrealized losses	(310,000)	(55,000)
12 Months or More Fair value	2,425,000	2,449,000
12 Months or More Unrealized losses	(62,000)	(45,000)
Total Fair value	20,118,000	10,586,000
Total Unrealized losses	(372,000)	(100,000)
Corporate Bond Securities [Member]
Securities available for sale:
Less Than 12 Months Fair value	754,000	1,752,000
Less Than 12 Months Unrealized losses	(8,000)	(14,000)
12 Months or More Fair value	0	0
12 Months or More Unrealized losses	0	0
Total Fair value	754,000	1,752,000
Total Unrealized losses	(8,000)	(14,000)
Municipal bonds [Member]
Securities available for sale:
Less Than 12 Months Fair value	3,763,000	1,101,000
Less Than 12 Months Unrealized losses	(21,000)	0
12 Months or More Fair value	0	0
12 Months or More Unrealized losses	0	0
Total Fair value	3,763,000	1,101,000
Total Unrealized losses	(21,000)	0
Total temporarily impaired securities [Member]
Securities available for sale:
Less Than 12 Months Fair value	28,872,000	12,641,000
Less Than 12 Months Unrealized losses	(436,000)	(78,000)
12 Months or More Fair value	3,690,000	3,864,000
12 Months or More Unrealized losses	(109,000)	(61,000)
Total Fair value	32,562,000	16,505,000
Total Unrealized losses	$ (545,000)	$ (139,000)

XML

INVESTMENT SECURITIES (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross Unrealized Gain (Loss)	$ (286,000)	$ 521,000
Deferred Income Taxes and Other Liabilities, Noncurrent	66,000	123,000
US Government Securities, at Carrying Value	12,000,000	7,500,000
Temporarily Impaired Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	109,000	61,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	$ 436,000	$ 78,000

XML

LOANS (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017		Jun. 30, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 994,481	$ 983,931
Less deferred loan origination fees, net	(1,596)	(1,305)		$ (1,305)
Total loans	992,885	982,626	[1]	739,314
Allowance for loan losses	(9,528)	(8,835)	[1]
Total loans, net	$ 983,357	$ 973,791	[1]
Less Percentage of deferred loan origination fees, net	(0.16%)	(0.13%)
Percent of total	100.00%	100.00%
1- to- 4 family residential Real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 158,453	$ 156,901		103,644
Percent of total	15.96%	15.97%
Commercial Real Estates [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 428,900	$ 403,100
Percent of total	43.20%	41.02%
Multi-family residential Real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 63,002	$ 76,983		71,066
Percent of total	6.34%	7.83%
Construction Real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 178,098	$ 177,933		126,265
Percent of total	17.94%	18.11%
Home Equity Line of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 51,149	$ 52,606
Percent of total	5.15%	5.35%
Total real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 879,602	$ 867,523
Percent of total	88.59%	88.28%
Commercial and industrial Other loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 102,237	$ 106,164		$ 88,206
Percent of total	10.30%	10.80%
Loans to individuals Other loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 12,551	$ 10,097
Percent of total	1.26%	1.04%
Overdrafts Other loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 91	$ 147
Percent of total	0.01%	0.01%
Total other loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 114,879	$ 116,408
Percent of total	11.57%	11.85%

[1] Derived from audited consolidated financial statements.

XML

LOANS (Details 1) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Contractually required payments	$ 27,355	$ 29,285
Nonaccretable difference	2,493	2,717
Cash flows expected to be collected	24,862	26,568
Accretable yield	3,102	3,307
Carrying value	$ 21,760	$ 23,261

XML

LOANS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017		Jun. 30, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	$ 4,557	$ 2,115
Total Past Due	11,554	8,276
Current	982,927	975,655
Deferred loan (fees) cost, net	(1,596)	(1,305)		$ (1,305)
Total Loans	992,885	982,626	[1]	739,314
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	5,103	4,685
Deferred loan (fees) cost, net	0
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,894	1,476
Deferred loan (fees) cost, net	0
Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Deferred loan (fees) cost, net	(1,596)	0
Total Loans [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Deferred loan (fees) cost, net		0
Total Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Deferred loan (fees) cost, net		0
Total Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Deferred loan (fees) cost, net	0	0
Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Deferred loan (fees) cost, net	0	0
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	2,289	96
Total Past Due	4,630	707
Current	97,607	105,457
Total Loans	102,237	106,164		88,206
Commercial and Industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,527	215
Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	814	396
Commercial and Industrial [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	102,237	106,164
Construction Loans Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	401	384
Total Past Due	1,007	770
Current	177,091	177,163
Total Loans	178,098	177,933		126,265
Construction Loans Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	233	27
Construction Loans Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	373	359
Construction Loans Real Estate [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	178,098	177,933
Multi Family Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	0	0
Total Past Due	0	30
Current	63,002	76,953
Total Loans	63,002	76,983		71,066
Multi Family Residential Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	30
Multi Family Residential Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Multi Family Residential Real Estate [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	63,002	76,983
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	986	528
Total Past Due	2,790	1,992
Current	426,110	401,108
Total Loans	428,900	403,100		297,406
Commercial Real Estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,804	1,464
Commercial Real Estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Commercial Real Estate [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	428,900	403,100
Loans to Individuals and Overdrafts [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	4	7
Total Past Due	32	29
Current	12,610	10,215
Total Loans	12,642	10,244		10,422
Loans to Individuals and Overdrafts [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	28	22
Loans to Individuals and Overdrafts [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Loans to Individuals and Overdrafts [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	12,642	10,244
Family Residential Real Estate 1 to 4 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	355	771
Total Past Due	2,503	4,316
Current	155,950	152,585
Total Loans	158,453	156,901		103,644
Family Residential Real Estate 1 to 4 [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,441	2,824
Family Residential Real Estate 1 to 4 [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	707	721
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	158,453	156,901
Home Equity Line of Credit [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Non-Accrual Loans	522	329
Total Past Due	592	432
Current	50,557	52,174
Total Loans	51,149	52,606		$ 42,305
Home Equity Line of Credit [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	70	103
Home Equity Line of Credit [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Home Equity Line of Credit [Member] | Total Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Loans	$ 51,149	$ 52,606

[1] Derived from audited consolidated financial statements.

XML

LOANS (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	$ 9,903	$ 7,667	$ 9,903	$ 7,667	$ 7,700
With no related allowance, Contractual Unpaid Principal Balance	13,346	9,700	13,346	9,700
With no related allowance, Average Recorded Investment	10,538	6,928	9,845	7,488
With no related allowance, Interest Income Recognized on Impaired Loans	151	108	349	213
With an related allowance, Recorded Investment	388	344	388	344
With an related allowance, Contractual Unpaid Principal Balance	395	344	395	344
Related Allowance	98	61	98	61
With an related allowance, Average Recorded Investment	353	1,747	383	1,895
With an related allowance, Interest Income Recognized on Impaired Loans	4	15	9	31
Recorded Investment Total	10,291		10,291		8,011
Contractual Unpaid Principal Balance Total	13,741		13,741		10,044
Average Recorded Investment Total	10,891	8,675	10,228	9,383
Interest Income Recognized on impaired Loans Total	155	123	358	244
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Related Allowance	33		33		11
Recorded Investment Total	1,488		1,488		1,881
Contractual Unpaid Principal Balance Total	2,256		2,256		2,337
Average Recorded Investment Total	1,860	1,994	2,016	2,286
Interest Income Recognized on impaired Loans Total	(1)	37	64	66
Commercial Loan [Member]
Financing Receivable, Impaired [Line Items]
Related Allowance	61		61		50
Recorded Investment Total	8,799		8,799		6,129
Contractual Unpaid Principal Balance Total	11,481		11,481		7,706
Average Recorded Investment Total	9,029	6,681	8,210	7,097
Interest Income Recognized on impaired Loans Total	156	86	294	178
Consumer Loan [Member]
Financing Receivable, Impaired [Line Items]
Related Allowance	4		4		0
Recorded Investment Total	4		4		1
Contractual Unpaid Principal Balance Total	4		4		$ 1
Average Recorded Investment Total	2	0	2	0
Interest Income Recognized on impaired Loans Total	0	0	0	0
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	2,462	940	2,462	940
With no related allowance, Contractual Unpaid Principal Balance	3,835	1,234	3,835	1,234
With no related allowance, Average Recorded Investment	3,031	1,077	2,447	1,119
With no related allowance, Interest Income Recognized on Impaired Loans	57	21	130	40
With an related allowance, Recorded Investment	140	142	140	142
With an related allowance, Contractual Unpaid Principal Balance	140	142	140	142
Related Allowance	47	50	47	50
With an related allowance, Average Recorded Investment	141	0	141	1
With an related allowance, Interest Income Recognized on Impaired Loans	1	0	1	0
Construction Loans Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	375	385	375	385
With no related allowance, Contractual Unpaid Principal Balance	481	490	481	490
With no related allowance, Average Recorded Investment	377	169	380	198
With no related allowance, Interest Income Recognized on Impaired Loans	1	1	2	5
With an related allowance, Recorded Investment	26	0	26	0
With an related allowance, Contractual Unpaid Principal Balance	26	0	26	0
Related Allowance	14	0	14	0
With an related allowance, Average Recorded Investment	26	0	13	0
With an related allowance, Interest Income Recognized on Impaired Loans	0	0	0	0
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	5,571	4,428	5,571	4,428
With no related allowance, Contractual Unpaid Principal Balance	6,774	5,606	6,774	5,606
With no related allowance, Average Recorded Investment	5,226	3,958	4,999	4,019
With no related allowance, Interest Income Recognized on Impaired Loans	94	54	155	113
With an related allowance, Recorded Investment	0	0	0	0
With an related allowance, Contractual Unpaid Principal Balance	0	0	0	0
Related Allowance	0	0	0	0
With an related allowance, Average Recorded Investment	0	1,429	0	1,563
With an related allowance, Interest Income Recognized on Impaired Loans	0	10	0	20
Loans to Individuals and Overdrafts [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	0	1	0	1
With no related allowance, Contractual Unpaid Principal Balance	0	1	0	1
With no related allowance, Average Recorded Investment	0	0	0	0
With no related allowance, Interest Income Recognized on Impaired Loans	0	0	0	0
With an related allowance, Recorded Investment	4	0	4	0
With an related allowance, Contractual Unpaid Principal Balance	4	0	4	0
Related Allowance	4	0	4	0
With an related allowance, Average Recorded Investment	2	0	2	0
With an related allowance, Interest Income Recognized on Impaired Loans	0	0	0	0
Multi Family Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	225	234	225	234
With no related allowance, Contractual Unpaid Principal Balance	225	234	225	234
With no related allowance, Average Recorded Investment	228	48	230	197
With no related allowance, Interest Income Recognized on Impaired Loans	3	0	6	0
With an related allowance, Recorded Investment	0	0	0	0
With an related allowance, Contractual Unpaid Principal Balance	0	0	0	0
Related Allowance	0	0	0	0
With an related allowance, Average Recorded Investment	0	0	0	0
With an related allowance, Interest Income Recognized on Impaired Loans	0	0	0	0
Home Equity Line of Credit [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	577	602	577	602
With no related allowance, Contractual Unpaid Principal Balance	965	926	965	926
With no related allowance, Average Recorded Investment	870	654	800	844
With no related allowance, Interest Income Recognized on Impaired Loans	12	12	31	22
With an related allowance, Recorded Investment	70	202	70	202
With an related allowance, Contractual Unpaid Principal Balance	70	202	70	202
Related Allowance	21	11	21	11
With an related allowance, Average Recorded Investment	35	16	52	33
With an related allowance, Interest Income Recognized on Impaired Loans	1	0	1	0
Family Residential Real Estate 1 to 4 [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance, Recorded Investment	693	1,077	693	1,077
With no related allowance, Contractual Unpaid Principal Balance	1,066	1,209	1,066	1,209
With no related allowance, Average Recorded Investment	806	1,022	989	1,111
With no related allowance, Interest Income Recognized on Impaired Loans	(16)	20	25	33
With an related allowance, Recorded Investment	148	0	148	0
With an related allowance, Contractual Unpaid Principal Balance	155	0	155	0
Related Allowance	12	0	12	0
With an related allowance, Average Recorded Investment	149	302	175	298
With an related allowance, Interest Income Recognized on Impaired Loans	$ 2	$ 5	$ 7	$ 11

XML

LOANS (Details 4) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Financing Receivable, Modifications [Line Items]
Number of loans	5	2	9	2	9	3
Pre-Modification Outstanding Recorded Investment	$ 1,833	$ 61	$ 2,879	$ 61
Post-Modification Outstanding Recorded Investment	$ 1,730	$ 61	$ 2,775	$ 61
Recorded investment					$ 2,398	$ 1,004
Commercial and Industrial Other [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	2	1	6	1	6	2
Pre-Modification Outstanding Recorded Investment	$ 533	$ 44	$ 1,579	$ 44
Post-Modification Outstanding Recorded Investment	$ 510	$ 44	$ 1,555	$ 44
Recorded investment					$ 1,544	$ 927
Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	2		2		1	0
Pre-Modification Outstanding Recorded Investment	$ 892		$ 892
Post-Modification Outstanding Recorded Investment	$ 817		$ 817
Recorded investment					$ 384	$ 0
Residential 1 to 4 Family Other [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1	1	1	1	2	1
Pre-Modification Outstanding Recorded Investment	$ 408	$ 17	$ 408	$ 17
Post-Modification Outstanding Recorded Investment	$ 403	$ 17	$ 403	$ 17
Recorded investment					$ 470	$ 77

XML

LOANS (Details 5) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017		Jun. 30, 2017
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 992,885	$ 982,626	[1]	$ 739,314
Commercial and Industrial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	102,237	106,164		88,206
Commercial and Industrial [Member] | Superior [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,347	1,207
Commercial and Industrial [Member] | Very Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,657	2,454
Commercial and Industrial [Member] | Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	13,772	13,161
Commercial and Industrial [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	38,592	44,968
Commercial and Industrial [Member] | Acceptable With Care [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	38,502	38,631
Commercial and Industrial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,413	3,172
Commercial and Industrial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,954	2,571
Commercial and Industrial [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial and Industrial [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	178,098	177,933
Construction [Member] | Superior [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Construction [Member] | Very Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	138	111
Construction [Member] | Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	11,840	11,343
Construction [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	43,219	40,558
Construction [Member] | Acceptable With Care [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	121,370	124,593
Construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	757	583
Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	774	745
Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Construction [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	428,900	403,100		297,406
Commercial Real Estate [Member] | Superior [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate [Member] | Very Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,227	420
Commercial Real Estate [Member] | Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	57,922	46,790
Commercial Real Estate [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	246,499	249,988
Commercial Real Estate [Member] | Acceptable With Care [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	115,438	97,798
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	4,365	3,771
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,449	4,333
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multi Family Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	63,002	76,983		71,066
Multi Family Residential Real Estate [Member] | Superior [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multi Family Residential Real Estate [Member] | Very Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multi Family Residential Real Estate [Member] | Good [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,475	11,394
Multi Family Residential Real Estate [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	38,768	46,246
Multi Family Residential Real Estate [Member] | Acceptable With Care [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	18,218	18,787
Multi Family Residential Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	316	322
Multi Family Residential Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	225	234
Multi Family Residential Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multi Family Residential Real Estate [Member] | Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Family Residential Real Estate 1 to 4 [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	158,453	156,901		103,644
Family Residential Real Estate 1 to 4 [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	152,353	149,767
Family Residential Real Estate 1 to 4 [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,381	3,270
Family Residential Real Estate 1 to 4 [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,719	3,864
Home Equity Line Of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	51,149	52,606		42,305
Home Equity Line Of Credit [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	49,918	51,326
Home Equity Line Of Credit [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	247	253
Home Equity Line Of Credit [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	984	1,027
Loans to Individuals and Overdrafts [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	12,642	10,244		$ 10,422
Loans to Individuals and Overdrafts [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	12,521	10,233
Loans to Individuals and Overdrafts [Member] | Non-Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 121	$ 11

[1] Derived from audited consolidated financial statements.

XML

LOANS (Details 6) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Schedule Of Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield [Line Items]
Accretable yield, beginning of period	$ 3,040	$ 2,465	$ 3,307	$ 2,626
Accretion	(348)	(260)	(702)	(520)
Reclassification from (to) nonaccretable difference	78	72	63	79
Other changes, net	332	3	434	95
Accretable yield, end of period	$ 3,102	$ 2,280	$ 3,102	$ 2,280

XML

LOANS (Details 7) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period	[1]			$ 8,835
Allowance for loan losses, Balance, end of period		$ 9,528		9,528
Ending Balance: individually evaluated for impairment		98	$ 28	98	$ 28
Ending Balance: collectively evaluated for impairment		9,430	8,460	9,430	8,460
Loans
Ending balance: individually evaluated for impairment		10,291	7,772	10,291	7,772
Ending balance		992,885	739,314	992,885	739,314	$ 982,626	[1]
Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		8,747	7,711	8,704	8,362
Provision for (recovery of) loan losses		661	1,072	723	616
Loans charged-off		(26)	(442)	(85)	(779)
Recoveries		40	119	80	261
Allowance for loan losses, Balance, end of period		9,422	8,460	9,422	8,460
Loans
Ending balance: collectively evaluated for impairment		964,145	714,899	964,145	714,899
Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		210	311	131	49
Provision for (recovery of) loan losses		(104)	11	(25)	273
Loans charged-off		0	(294)	0	(294)
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		106	28	106	28
Loans
Ending balance: collectively evaluated for impairment		20,045	16,643	20,045	16,643
Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		8,957	8,022	8,835	8,411
Provision for (recovery of) loan losses		557	1,083	698	889
Loans charged-off		(26)	(736)	(85)	(1,073)
Recoveries		40	119	80	261
Allowance for loan losses, Balance, end of period		9,528	8,488	9,528	8,488
Commercial and Industrial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		47	0	47	0
Ending Balance: collectively evaluated for impairment		788	895	788	895
Loans
Ending balance: individually evaluated for impairment		2,602	1,053	2,602	1,053
Ending balance		102,237	88,206	102,237	88,206	106,164
Commercial and Industrial [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		729	958	742	1,211
Provision for (recovery of) loan losses		37	(119)	27	(466)
Loans charged-off		0	(35)	(9)	(37)
Recoveries		15	91	21	187
Allowance for loan losses, Balance, end of period		781	895	781	895
Loans
Ending balance: collectively evaluated for impairment		98,078	87,122	98,078	87,122
Commercial and Industrial [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		144	5	65	37
Provision for (recovery of) loan losses		(90)	(5)	(11)	(37)
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		54	0	54	0
Loans
Ending balance: collectively evaluated for impairment		1,557	31	1,557	31
Commercial and Industrial [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		873	963	807	1,248
Provision for (recovery of) loan losses		(53)	(124)	16	(503)
Loans charged-off		0	(35)	(9)	(37)
Recoveries		15	91	21	187
Allowance for loan losses, Balance, end of period		835	895	835	895
Loans
Ending balance		102,237		102,237		106,164
Construction Loans Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		14	0	14	0
Ending Balance: collectively evaluated for impairment		1,754	1,292	1,754	1,292
Loans
Ending balance: individually evaluated for impairment		401	164	401	164
Ending balance		178,098	126,265	178,098	126,265	177,933
Construction Loans Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		1,686	1,177	1,955	1,301
Provision for (recovery of) loan losses		82	111	(193)	(18)
Loans charged-off		0	0	0	0
Recoveries		0	4	6	9
Allowance for loan losses, Balance, end of period		1,768	1,292	1,768	1,292
Loans
Ending balance: collectively evaluated for impairment		176,956	125,207	176,956	125,207
Construction Loans Real Estate [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		0	0	0	0
Provision for (recovery of) loan losses		0	0	0	0
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		0	0	0	0
Loans
Ending balance: collectively evaluated for impairment		741	894	741	894
Construction Loans Real Estate [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		1,686	1,177	1,955	1,301
Provision for (recovery of) loan losses		82	111	(193)	(18)
Loans charged-off		0	0	0	0
Recoveries		0	4	6	9
Allowance for loan losses, Balance, end of period		1,768	1,292	1,768	1,292
Loans
Ending balance		178,098		178,098		177,933
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		0	12	0	12
Ending Balance: collectively evaluated for impairment		3,978	3,913	3,978	3,913
Loans
Ending balance: individually evaluated for impairment		5,571	4,304	5,571	4,304
Ending balance		428,900	297,406	428,900	297,406	403,100
Commercial Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		3,590	3,169	3,304	3,448
Provision for (recovery of) loan losses		330	1,110	612	1,081
Loans charged-off		0	(373)	0	(623)
Recoveries		6	7	10	7
Allowance for loan losses, Balance, end of period		3,926	3,913	3,926	3,913
Loans
Ending balance: collectively evaluated for impairment		414,666	285,314	414,666	285,314
Commercial Real Estate [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		66	294	66	0
Provision for (recovery of) loan losses		(14)	12	(14)	306
Loans charged-off		0	(294)	0	(294)
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		52	12	52	12
Loans
Ending balance: collectively evaluated for impairment		8,663	7,788	8,663	7,788
Commercial Real Estate [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		3,656	3,463	3,370	3,448
Provision for (recovery of) loan losses		316	1,122	598	1,387
Loans charged-off		0	(667)	0	(917)
Recoveries		6	7	10	7
Allowance for loan losses, Balance, end of period		3,978	3,925	3,978	3,925
Loans
Ending balance		428,900		428,900		403,100
Family Residential Real Estate 1 to 4 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		12	16	12	16
Ending Balance: collectively evaluated for impairment		1,409	923	1,409	923
Loans
Ending balance: individually evaluated for impairment		841	1,522	841	1,522
Ending balance		158,453	103,644	158,453	103,644	156,901
Family Residential Real Estate 1 to 4 [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		1,275	770	1,058	846
Provision for (recovery of) loan losses		137	143	345	58
Loans charged-off		0	0	0	0
Recoveries		9	10	18	19
Allowance for loan losses, Balance, end of period		1,421	923	1,421	923
Loans
Ending balance: collectively evaluated for impairment		149,664	95,242	149,664	95,242
Family Residential Real Estate 1 to 4 [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		0	0	0	0
Provision for (recovery of) loan losses		0	16	0	16
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		0	16	0	16
Loans
Ending balance: collectively evaluated for impairment		7,948	6,880	7,948	6,880
Family Residential Real Estate 1 to 4 [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		1,275	770	1,058	846
Provision for (recovery of) loan losses		137	159	345	74
Loans charged-off		0	0	0	0
Recoveries		9	10	18	19
Allowance for loan losses, Balance, end of period		1,421	939	1,421	939
Loans
Ending balance		158,453		158,453		156,901
Home Equity Line of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		21	0	21	0
Ending Balance: collectively evaluated for impairment		597	563	597	563
Loans
Ending balance: individually evaluated for impairment		647	681	647	681
Ending balance		51,149	42,305	51,149	42,305	52,606
Home Equity Line of Credit [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		645	589	549	611
Provision for (recovery of) loan losses		(16)	(28)	109	(2)
Loans charged-off		(13)	0	(48)	(69)
Recoveries		2	2	8	23
Allowance for loan losses, Balance, end of period		618	563	618	563
Loans
Ending balance: collectively evaluated for impairment		50,452	41,431	50,452	41,431
Home Equity Line of Credit [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		0	12	0	12
Provision for (recovery of) loan losses		0	(12)	0	(12)
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		0	0	0	0
Loans
Ending balance: collectively evaluated for impairment		50	193	50	193
Home Equity Line of Credit [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		645	601	549	623
Provision for (recovery of) loan losses		(16)	(40)	109	(14)
Loans charged-off		(13)	0	(48)	(69)
Recoveries		2	2	8	23
Allowance for loan losses, Balance, end of period		618	563	618	563
Loans
Ending balance		51,149		51,149		52,606
Loans to Individuals and Overdrafts [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		4	0	4	0
Ending Balance: collectively evaluated for impairment		316	142	316	142
Loans
Ending balance: individually evaluated for impairment		4	0	4	0
Ending balance		12,642	10,422	12,642	10,422	10,244
Loans to Individuals and Overdrafts [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		125	465	305	317
Provision for (recovery of) loan losses		200	(294)	26	(139)
Loans charged-off		(13)	(34)	(28)	(50)
Recoveries		8	5	17	14
Allowance for loan losses, Balance, end of period		320	142	320	142
Loans
Ending balance: collectively evaluated for impairment		12,576	10,315	12,576	10,315
Loans to Individuals and Overdrafts [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		0	0	0	0
Provision for (recovery of) loan losses		0	0	0	0
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		0	0	0	0
Loans
Ending balance: collectively evaluated for impairment		62	107	62	107
Loans to Individuals and Overdrafts [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		125	465	305	317
Provision for (recovery of) loan losses		200	(294)	26	(139)
Loans charged-off		(13)	(34)	(28)	(50)
Recoveries		8	5	17	14
Allowance for loan losses, Balance, end of period		320	142	320	142
Loans
Ending balance		12,642		12,642		10,244
Multi Family Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending Balance: individually evaluated for impairment		0	0	0	0
Ending Balance: collectively evaluated for impairment		588	732	588	732
Loans
Ending balance: individually evaluated for impairment		225	48	225	48
Ending balance		63,002	71,066	63,002	71,066	76,983
Multi Family Residential Real Estate [Member] | Excluding Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		697	583	791	628
Provision for (recovery of) loan losses		(109)	149	(203)	102
Loans charged-off		0	0	0	0
Recoveries		0	0	0	2
Allowance for loan losses, Balance, end of period		588	732	588	732
Loans
Ending balance: collectively evaluated for impairment		61,753	70,268	61,753	70,268
Multi Family Residential Real Estate [Member] | Purchase Credit Impairment Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		0	0	0	0
Provision for (recovery of) loan losses		0	0	0	0
Loans charged-off		0	0	0	0
Recoveries		0	0	0	0
Allowance for loan losses, Balance, end of period		0	0	0	0
Loans
Ending balance: collectively evaluated for impairment		1,024	750	1,024	750
Multi Family Residential Real Estate [Member] | Total Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, Balance, beginning of period		697	583	791	628
Provision for (recovery of) loan losses		(109)	149	(203)	102
Loans charged-off		0	0	0	0
Recoveries		0	0	0	2
Allowance for loan losses, Balance, end of period		588	$ 732	588	$ 732
Loans
Ending balance		$ 63,002		$ 63,002		$ 76,983

[1] Derived from audited consolidated financial statements.

XML

LOANS (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 10,291,000	$ 8,011,000
Impaired Loans Required for Specific Reserves	388,000	344,000
With no related allowance, Recorded Investment	9,903,000	7,700,000	$ 7,667,000
Allowance for Loan and Lease Losses Write-offs, Net	642,000	2,000,000
Aggregate Impaired Loans Required For Specific Reserves		61,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	138,000,000
Nonaccrual Impaired Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	4,600,000	2,100,000
Accrual Impaired Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	5,700,000	$ 5,900,000
Troubled Debt Restructurings [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	8,300,000		4,700,000
Troubled Debt Restructuring Accrual Status [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	5,600,000		3,200,000
Troubled Debt Restructuring Nonaccrual Status [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired Financing Receivable, Recorded Investment	2,700,000		$ 1,500,000
Unused Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Line of Credit Facility, Maximum Amount Outstanding During Period	$ 172,900,000

XML

REVENUE RECOGNITION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Noninterest Income, Total	$ 1,226	$ 778	$ 2,391	$ 1,508
Service Charges on Deposit Accounts [Member]
Disaggregation of Revenue [Line Items]
Noninterest Income, Total	245	216	521	413
Other [Member]
Disaggregation of Revenue [Line Items]
Noninterest Income, Total	364	343	771	609
Noninterest Income (in-scope of Topic 606) [Member]
Disaggregation of Revenue [Line Items]
Noninterest Income, Total	609	559	1,292	1,040
Noninterest Income (out-of-scope of Topic 606) [Member]
Disaggregation of Revenue [Line Items]
Noninterest Income, Total	$ 617	$ 219	$ 1,099	$ 468

XML

OTHER REAL ESTATE OWNED (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018		Jun. 30, 2017
Schedule Of Real Estate Owned Properties [Line Items]
Beginning balance January 1	$ 1,258	[1]	$ 599
Sales	(86)		(384)
Write-downs and gains/(losses) on sales	(53)		61
Transfers	378		2,426
Ending balance	$ 1,497		$ 2,702

[1] Derived from audited consolidated financial statements.

XML

OTHER REAL ESTATE OWNED (Details Textual) - USD ($)	Jun. 30, 2018	Dec. 31, 2017	[1]	Jun. 30, 2017	Dec. 31, 2016
Schedule Of Real Estate Owned Properties [Line Items]
Real Estate Acquired Through Foreclosure	$ 1,497,000	$ 1,258,000		$ 2,702,000	$ 599,000
Mortgage Loans in Process of Foreclosure, Amount	$ 135,000

[1] Derived from audited consolidated financial statements.

XML

BUSINESS COMBINATIONS (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Business Acquisition [Line Items]
Net interest income	$ 23,633	$ 22,422
Non-interest income	2,391	2,358
Net income available to common shareholders	$ 5,007	$ 4,728
Earnings per share, basic	$ 0.36	$ 0.34
Earnings per share, diluted	$ 0.36	$ 0.34
Weighted average common shares outstanding, basic	14,015,511	13,992,390
Weighted average common shares outstanding, diluted	14,084,226	14,055,840

XML

BUSINESS COMBINATIONS (Details Textual) - USD ($)	1 Months Ended	6 Months Ended
	Jul. 20, 2017	Jun. 30, 2018	Dec. 15, 2017
Business Acquisition [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	948,080	1.0463
Business Acquisition, Share Price			$ 12.14
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 12.65
Payments to Acquire Businesses, Gross		$ 11,993,212
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination		2,231,728
Business Combination, Consideration Transferred		40,600,000
Goodwill, Period Increase (Decrease)		$ 325,000
Carolina Premier [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Total			$ 279,600,000
Common Stock [Member]
Business Acquisition [Line Items]
Stock Issued During Period, Shares, New Issues		2,334,999
Common Stock [Member] | Premara Financial, Inc [Member]
Business Acquisition [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	3,179,808
Business Acquisition, Percentage of Voting Interests Acquired	30.00%
Legacy Select [Member]
Business Acquisition [Line Items]
Business Combination, Acquisition Related Costs		$ 1,800,000