8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 19, 2016

CAROLINA FINANCIAL CORPORATION

(Exact Name of Registrant As Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

000-19029	57-1039637
(Commission File Number)	(I.R.S. Employer Identification No.)

288 Meeting Street, Charleston, South Carolina	29401
(Address of Principal Executive Offices)	(Zip Code)

(843) 723-7700

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.       Results of Operations and Financial Condition

On October 19, 2016, Carolina Financial Corporation (the “Company”) issued a news release announcing its results of operations for the three months and nine months ended September 30, 2016. A copy of the news release is attached hereto as Exhibit 99.1. The information included herein, as well as in Exhibit 99.1 referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933, as amended (the “Securities Act”).

Item 7.01.       Regulation FD Disclosure.

The Company will hold an investor conference call to disclose its financial results for the three months and nine months ended September 30, 2016 on October 20, 2016 at 10:00 am Eastern Time. The conference call can be accessed by dialing (855) 218-6998 or (615) 247-5963 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 93428847. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” shortly following the call. A replay of the conference call can be accessed approximately three hours after the call by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 93428847.

A copy of the investor presentation prepared for use by executive management during the investor conference call is furnished as Exhibit 99.2. All of the information in the presentation is presented as of October 20, 2016, and the Company does not assume any obligation to update such information in the future.

The information included in the preceding paragraph, as well as in Exhibit 99.2 referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act nor shall it be deemed incorporated by reference in filings under the Securities Act.

Item 8.01.      Other Events

On October 19, 2016, the Board of Directors of Carolina Financial Corporation declared a quarterly cash dividend of $0.04, payable on January 11, 2017 to stockholders of record as of December 28, 2016.

Item 9.01.       Financial Statements and Exhibits.

(d)       Exhibits

Exhibit    Number	Description
99.1	News Release dated October 19, 2016
99.2	Investor Presentation dated October 20, 2016

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 hereunto duly authorized.

CAROLINA FINANCIAL CORPORATION,
Registrant
By:	/s/ William A. Gehman, III
Name:	William A. Gehman, III
Title:	Chief Financial Officer

Dated: October 19, 2016

EX-99.1

Exhibit 99.1

Carolina Financial Corporation Reports Results for Third Quarter of 2016

NEWS RELEASE – For Release October 19, 2016, 9:00AM

For More Information, Contact:

William A. Gehman III, EVP and CFO, 843.723.7700

Charleston, S.C., October 19, 2016 - Carolina Financial Corporation (NASDAQ: CARO) today announced financial results for the third quarter of 2016. Highlights at and for the three months ended September 30, 2016, include:

· Net income for the third quarter 2016 increased 53.1% to $5.9 million, or $0.47 per diluted share from $3.9 million, or $0.40 per diluted share for the third quarter of 2015.

· Operating earnings for the third quarter of 2016, which excludes certain non-operating income and expenses, increased 45.8% to $5.9 million, or $0.47 per diluted share, from $4.0 million, or $0.42 per diluted share, from the third quarter of 2015.

· Loans receivable, excluding acquired loans, grew at an annualized rate of 19.3% or $133.7 million since December 31, 2015 and 24.7% or $66.0 million since June 30, 2016.

· Nonperforming assets to total assets of 0.42% as of September 30, 2016.

· Core deposits, excluding acquired deposits, increased $150.0 million since December 31, 2015 and $45.3 million since June 30, 2016.

“We are pleased to report an increase in operating earnings of 45.8% for the third quarter of 2016 over the comparable prior quarter. These strong operating earnings are the result of excellent earnings of CresCom Bank combined with improved results of Crescent Mortgage Company. The Company continued to experience exceptional growth in the third quarter with loans receivable growing at an annualized rate of 24.7% and core deposit growth of $45.3 million while maintaining superior asset quality. Finally, we are excited to announce plans to open a second branch in the Wilmington market by year end,” stated Jerry Rexroad, Chief Executive Officer.

Financial Results

Carolina Financial Corporation

n The Company reported net income for the three months ended September 30, 2016 of $5.9 million, or $0.47 per diluted share, as compared to $3.9 million, or $0.40 per diluted share, for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 totaled $12.4 million, or $1.02 per diluted share, compared to net income of $10.8 million, or $1.13 per diluted share. Included in net income for the nine months ended September 30, 2016 were pretax merger related expenses of $3.0 million.

n Operating earnings for the third quarter of 2016 increased 45.8% to $5.9 million, or $0.47 per diluted share, from $4.0 million, or $0.42 per diluted share, from the third quarter of 2015. Operating earnings for the nine months ended September 30, 2016 increased 25.8% to $14.5 million, or $1.18 per diluted share, from $11.5 million, or $1.20 per diluted share, for the nine months ended September 30, 2015.

n The Company’s net interest margin-tax equivalent increased to 3.75% for the third quarter of 2016 compared to 3.66% for the third quarter of 2015.

n The Company reported book value per common share of $13.00 and $11.92 as of September 30, 2016 and December 31, 2015, respectively. Tangible book value per common share was $12.35 and $11.66 as of September 30, 2016 and December 31, 2015, respectively.

n At September 30, 2016, the Company’s regulatory capital ratios exceeded the minimum levels currently required. Stockholders’ equity totaled $160.3 million as of September 30, 2016 compared to $139.9 million at December 31, 2015.

CresCom Bank

n The Bank’s net income (excluding Crescent Mortgage Company) increased 65.9% to $4.7 million for the three months ended September 30, 2016 compared to $2.9 million for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 totaled $10.3 million compared to net income of $8.1 million for the nine months ended September 30, 2015. Included in net income for the nine months ended September 30, 2016 were pretax merger related expense of $ $2.9 million.

n No provision for loan loss was recorded during the three and nine month periods ended September 30, 2016 or 2015. This was primarily due to continued excellent asset quality as well as net recoveries of $199,000 and $854,000 for the nine months ended September 30, 2016 and 2015, respectively.

n The Bank’s non-performing assets were 0.42% and 0.47% of total assets at September 30, 2016 and December 31, 2015, respectively. The Bank added $1.5 million in real estate acquired through foreclosure, net as a result of the merger with Congaree Bancshares, Inc.

n Loans receivable increased to $1.1 billion at September 30, 2016 compared to $922.7 million at December 31, 2015. The increase in loans receivable primarily relates to the completed acquisition of Congaree as well as the Bank’s focus on commercial lending and residential mortgage lending.

n The number of checking accounts increased at an annualized rate of 10.6%, excluding Congaree checking accounts acquired, since December 31, 2015. As of September 30, 2016 and December 31, 2015, core deposits, defined as checking, savings and money market, comprised approximately 61.8% and 56.7%, respectively, of total deposits. Total deposits, excluding acquired deposits, increased $189.5 million since December 31, 2015.

n The Bank’s retail mortgage conforming loan originations increased to $25.6 million for the three months ended September 30, 2016 compared to $17.6 million for the three months ended September 30, 2015. For the nine months ended September 30, 2016, retail mortgage conforming loan originations increased to $68.3 million compared to $50.4 million for the nine months ended September 30, 2015. As a result of the increased originations, retail mortgage banking noninterest income increased to $680,000 and $1.6 million for the three and nine months ended September 30, 2016 compared to $431,000 and $1.2 million for the three and nine months ended September 30, 2015. Mortgage banking income consists primarily of gain on sale of loans and related fees as well as fair value changes in mortgage banking derivatives.

Crescent Mortgage Company

n Net income for Crescent Mortgage Company, a wholly-owned subsidiary of the Bank, was $1.4 million for the three months ended September 30, 2016 compared to $1.3 million for the three months ended September 30, 2015. Net income for the nine months ended September 30, 2016 was $2.7 million compared to $3.3 million for the nine months ended September 30, 2015.

n The increase in net income of Crescent Mortgage Company during third quarter of 2016 is primarily attributable to an increase in margin during the period. Originations for the three months ended September 30, 2016 and 2015 were $253.5 million and $261.9 million, respectively. Originations for the nine months ended September 30, 2016 and 2015 were $645.4 million and $769.7 million, respectively. The percentage of originations attributable to refinances were 35.9% for the third quarter of 2016 compared to 30.3% for the third quarter of 2015.

Conference Call

A conference call will be held at 10:00 a.m., Eastern Time on October 20, 2016. The conference call can be accessed by dialing (855) 218-6998 or (615) 247-5963 and requesting the Carolina Financial Corporation earnings call. The conference ID number is 93428847. Listeners should dial in 10 minutes prior to the start of the call. The live webcast and presentation slides will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations.”

A replay of the webcast will be available on www.haveanicebank.com under Investor Relations, “Investor Presentations” shortly following the call. A replay of the conference call can be accessed approximately three hours after the call by dialing (855) 859-2056 or (404) 537-3406 and requesting conference number 93428847.

About Carolina Financial Corporation

Carolina Financial is the holding company of CresCom Bank, which also owns and operates Atlanta-based Crescent Mortgage Company. Carolina Financial trades on NASDAQ under the symbol CARO. As of September 30, 2016, Carolina Financial had approximately $1.7 billion in total assets and Crescent Mortgage Company originated loans in 45 states and partners with community banks, credit unions and mortgage brokers. In 2016, Carolina Financial was ranked #8 on American Banker’s 2015 list of “Top 200 Community Banks and Thrifts as Ranked by Three-Year Average ROE”, and was added to the Russell 2000 as part of the 2016 Russell indexes reconstitution. In June 2016, Carolina Financial Corporation completed its previously announced merger with Congaree Bancshares, Inc.

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

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

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

Forward-Looking Statements

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

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

###

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2016			December 31, 2015
	(Unaudited)			(Audited)
	(Dollars in thousands)
ASSETS
Cash and due from banks	$	9,110			10,206
Interest-bearing cash		29,211			16,421
Cash and cash equivalents		38,321			26,627
Securities available-for-sale		336,918			306,474
Securities held-to-maturity		—			17,053
Federal Home Loan Bank stock, at cost		7,438			9,919
Other investments		1,801			1,760
Derivative assets		3,168			1,945
Loans held for sale		36,686			41,774
Loans receivable, gross		1,133,229			922,723
Allowance for loan losses		(10,340	)		(10,141	)
Loans receivable, net		1,122,889			912,582
Premises and equipment, net		35,086			32,562
Accrued interest receivable		4,813			4,333
Real estate acquired through foreclosure, net		2,843			2,374
Deferred tax assets, net		8,285			5,273
Mortgage servicing rights		13,556			11,433
Cash value life insurance		28,772			28,082
Core deposit intangible		3,771			2,961
Goodwill		4,266			—
Other assets		5,236			4,517
Total assets	$	1,653,849			1,409,669
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits	$	267,892			163,054
Interest-bearing deposits		1,044,384			868,474
Total deposits		1,312,276			1,031,528
Short-term borrowed funds		87,500			120,000
Long-term debt		68,465			103,465
Derivative liabilities		2,708			306
Drafts outstanding		3,965			2,154
Advances from borrowers for insurance and taxes		2,614			641
Accrued interest payable		346			333
Reserve for mortgage repurchase losses		3,130			3,876
Dividends payable to stockholders		376			361
Accrued expenses and other liabilities		12,138			7,146
Total liabilities		1,493,518			1,269,810
Commitments and contingencies
Stockholders’ equity:
Preferred stock		—			—
Common stock		125			120
Additional paid-in capital		65,862			56,418
Retained earnings		93,819			82,859
Accumulated other comprehensive income, net of tax		525			462
Total stockholders’ equity		160,331			139,859
Total liabilities and stockholders’ equity	$	1,653,849			1,409,669

CAROLINA FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2016			2015			2016			2015
	(In thousands, except share data)
Interest income
Loans	$	13,826			10,345			36,791			30,273
Investment securities		2,264			2,058			6,835			6,031
Dividends from Federal Home Loan Bank stock		83			93			288			238
Federal funds sold		3			—			5			—
Other interest income		32			16			92			60
Total interest income		16,208			12,512			44,011			36,602
Interest expense
Deposits		1,570			1,122			4,449			3,094
Short-term borrowed funds		124			75			320			217
Long-term debt		558			426			1,743			1,391
Total interest expense		2,252			1,623			6,512			4,702
Net interest income		13,956			10,889			37,499			31,900
Provision for loan losses		—			—			—			—
Net interest income after provision for loan losses		13,956			10,889			37,499			31,900
Noninterest income
Mortgage banking income		5,605			4,753			12,967			13,874
Deposit service charges		953			915			2,712			2,638
Net loss on extinguishment of debt		(118	)		—			(174	)		(1,215	)
Net gain on sale of securities		111			1,017			641			1,459
Fair value adjustments on interest rate swaps		99			(1,246	)		(408	)		(1,253	)
Net increase in cash value life insurance		226			172			684			530
Mortgage loan servicing income		1,437			1,330			4,238			3,956
Other		560			381			1,728			1,187
Total noninterest income		8,873			7,322			22,388			21,176
Noninterest expense
Salaries and employee benefits		8,481			7,204			23,306			21,453
Occupancy and equipment		2,067			1,821			5,836			5,332
Marketing and public relations		374			378			1,144			1,147
FDIC insurance		180			190			527			540
Provision for mortgage loan repurchase losses		(250	)		(250	)		(750	)		(750	)
Legal expense		80			97			185			347
Other real estate expense, net		(96	)		4			(37	)		114
Mortgage subservicing expense		462			418			1,353			1,236
Amortization of mortgage servicing rights		586			515			1,659			1,460
Merger related expenses		—			—			2,985			—
Other		2,006			2,004			5,759			6,084
Total noninterest expense		13,890			12,381			41,967			36,963
Income before income taxes		8,939			5,830			17,920			16,113
Income tax expense		2,998			1,949			5,500			5,302
Net income	$	5,941			3,881			12,420			10,811
Earnings per common share:
Basic	$	0.48			0.41			1.04			1.15
Diluted	$	0.47			0.40			1.02			1.13
Weighted average common shares outstanding:
Basic		12,327,921			9,463,722			11,995,477			9,421,042
Diluted		12,535,551			9,674,994			12,201,721			9,595,991

CAROLINA FINANCIAL CORPORATION

(Unaudited)

(Dollars in thousands)

	At or for the Three Months Ended
Selected Financial Data:	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015
Selected Average Balances:
Total assets	$	1,626,717			1,482,963			1,412,778			1,364,772			1,322,382
Investment securities		345,385			335,105			335,929			330,364			312,707
Loans receivable, net		1,093,669			978,337			935,438			876,445			840,414
Loans held for sale		32,196			24,467			25,454			31,212			43,193
Deposits		1,291,567			1,170,860			1,069,451			1,052,192			1,027,771
Stockholders’ equity		157,311			145,656			141,311			111,189			102,326
Performance Ratios (annualized):
Return on average stockholders’ equity (1)		15.11	%		7.79	%		10.31	%		12.98	%		15.17	%
Return on average assets (1)		1.46	%		0.76	%		1.03	%		1.06	%		1.18	%
Average earning assets to average total assets		92.94	%		93.44	%		93.08	%		92.23	%		91.82	%
Average loans receivable to average deposits		84.68	%		83.56	%		87.47	%		83.30	%		81.77	%
Average stockholders’ equity to average assets		9.67	%		9.82	%		10.00	%		8.15	%		7.75	%
Net interest margin-tax equivalent (2)		3.75	%		3.64	%		3.53	%		3.59	%		3.66	%
Net charge-offs  (recovery) to average loans receivable		(0.02	)%		(0.03	)%		(0.04	)%		(0.11	)%		0.06	%
Nonperforming assets to period end loans receivable		0.62	%		0.67	%		0.59	%		0.72	%		0.89	%
Nonperforming assets to total assets		0.42	%		0.45	%		0.39	%		0.47	%		0.57	%
Nonperforming loans to total loans		0.37	%		0.37	%		0.48	%		0.47	%		0.57	%
Allowance for loan losses as a percentage of gross loans receivable (end of period) (3)		0.91	%		0.96	%		1.06	%		1.10	%		1.15	%
Allowance for loan losses as a percentage of nonperforming loans		247.72	%		262.68	%		223.38	%		235.67	%		201.98	%
Nonperforming Assets:
Loans 90 days or more past due and still accruing	$	—			—			—			—			—
Nonaccrual loans		4,174			3,920			4,581			4,303			4,896
Total nonperforming loans		4,174			3,920			4,581			4,303			4,896
Real estate acquired through foreclosure, net (4)		2,843			3,272			1,091			2,374			2,744
Total nonperforming assets	$	7,017			7,192			5,672			6,677			7,640

(1) Included in net income are pretax merger related expenses of approximately $2.8 million for the three months ended June 30, 2016 and $186,000 for the three months ended March 31, 2016.

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

(3) Acquired loans represent 11.4%, 12.2%, 6.4%, 7.0%, and 8.0%, of gross loans receivable at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.

(4) Real estate acquired through foreclosure, net at September 30, 2016 includes $1.5 million related to the Congaree merger.

Segment Information

(Unaudited)

(Dollars in thousands)

	For the Three Months						For the Nine Months						Increase (Decrease)
	Ended September 30,						Ended September 30,						Three		Nine
	2016			2015			2016			2015			Months		Months
Segment net income:
Community banking (1)	$	4,734			2,854			10,309			8,144			1,880		2,165
Wholesale mortgage banking		1,402			1,273			2,722			3,307			129		(585	)
Other (2)		(228	)		(256	)		(669	)		(660	)		28		(9	)
Eliminations		33			10			58			20			23		38
Total net income	$	5,941			3,881			12,420			10,811			2,060		1,609

	For the Three Months Ended
	September 30,     2016			June 30,     2016			March 31,     2016			December 31,     2015			September 30,     2015
Segment net income:
Community banking (1)	$	4,734			2,162			3,413			3,258			2,854
Wholesale mortgage banking		1,402			919			401			525			1,273
Other (2)		(228	)		(253	)		(188	)		(207	)		(256	)
Eliminations		33			8			17			33			10
Total net income	$	5,941			2,836			3,643			3,609			3,881

	For the Three Months Ended September 30,
	Loan Originations				Mortgage Banking Income				Margin
	2016		2015		2016		2015		2016			2015
Additional segment information:
Community banking	$	25,633		17,642		680		431		2.65	%		2.44	%
Wholesale mortgage banking		253,485		261,948		4,925		4,322		1.94	%		1.65	%
Total mortgage banking income	$	279,118		279,590		5,605		4,753		2.01	%		1.70	%

	For the Nine Months Ended September 30,
	Loan Originations				Mortgage Banking Income				Margin
	2016		2015		2016		2015		2016			2015
Additional segment information:
Community banking	$	68,263		50,430		1,586		1,231		2.32	%		2.44	%
Wholesale mortgage banking		645,412		769,679		11,381		12,643		1.76	%		1.64	%
Total mortgage banking income	$	713,675		820,109		12,967		13,874		1.82	%		1.69	%

(1) Included in net income are pretax merger related expenses of approximately $2.7 million for the three months ending June 30, 2016 and $186,000 for the three months ending March 31, 2016, for a total of $2.9 million.

(2) Included in net income are pretax merger related expenses of approximately $102,000 for the three months ending June 30, 2016.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	At September 30,		At December 31,
	2016		2015
Core deposits:
Noninterest-bearing demand accounts	$	267,892		163,054
Interest-bearing demand accounts		195,792		158,581
Savings accounts		47,035		39,147
Money market accounts		299,960		223,906
Total core deposits (Non-GAAP)		810,679		584,688
Certificates of deposit:
Less than $250,000		476,744		428,067
$250,000 or more		24,853		18,773
Total certificates of deposit		501,597		446,840
Total deposits	$	1,312,276		1,031,528

	At September 30,			At December 31,
	2016			2015
Tangible book value per share:
Total stockholders’ equity	$	160,331			139,859
Less intangible assets		(8,037	)		(2,961	)
Tangible common equity (Non-GAAP)	$	152,294			136,898
Issued and outstanding shares		12,546,220			12,023,557
Less nonvested restricted stock awards		(216,828	)		(285,805	)
Period end dilutive shares		12,329,392			11,737,752
Total stockholders’ equity	$	160,331			139,859
Divided by period end dilutive shares		12,329,392			11,737,752
Common book value per share	$	13.00			11.92
Tangible common equity (Non-GAAP)	$	152,294			136,898
Divided by period end dilutive shares		12,329,392			11,737,752
Tangible common book value per share (Non-GAAP)	$	12.35			11.66

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	For the Three Months Ended															For the Nine Months Ended
Operating Earnings:	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			September 30, 2016			September 30, 2015
Income before income taxes	$	8,939			3,700			5,281			5,367			5,830			17,920			16,113
Gain on sale of securities		(111	)		(113	)		(417	)		(34	)		(1,017	)		(641	)		(1,459	)
Net loss on extinguishment of debt		118			47			9			36			—			174			1,215
Fair value adjustments on interest rate swaps		(99	)		226			281			(142	)		1,246			408			1,253
Merger related costs		—			2,799			186			—			—			2,985			—
Operating earnings before income taxes		8,847			6,659			5,340			5,227			6,059			20,846			17,122
Tax expense (1) (2)		2,967			1,555			1,656			1,712			2,026			6,398			5,634
Operating earnings (Non-GAAP)	$	5,880			5,104			3,684			3,515			4,033			14,448			11,488
Average equity		157,311			145,656			141,311			111,189			102,326			148,134			98,805
Average assets		1,626,717			1,482,963			1,412,778			1,364,772			1,322,382			1,500,819			1,283,183
Operating return on average assets (Non-GAAP)		1.45	%		1.38	%		1.04	%		1.03	%		1.22	%		1.28	%		1.19	%
Operating return on average equity (Non-GAAP)		14.95	%		14.02	%		10.43	%		12.64	%		15.77	%		13.00	%		15.50	%
Weighted average common shares outstanding:
Basic		12,327,921			11,908,282			11,746,574			9,888,030			9,463,772			11,995,477			9,421,042
Diluted		12,535,551			12,076,878			11,978,801			10,103,966			9,674,994			12,201,721			9,595,991
Operating earnings per common share:
Basic (Non-GAAP)	$	0.48			0.43			0.31			0.36			0.43			1.20			1.22
Diluted (Non-GAAP)	$	0.47			0.42			0.31			0.35			0.42			1.18			1.20
As Reported:
Income before income taxes	$	8,939			3,700			5,281			5,367			5,830			17,920			16,113
Tax expense		2,998			864			1,638			1,758			1,949			5,500			5,302
Net Income	$	5,941			2,836			3,643			3,609			3,881			12,420			10,811
Average equity		157,311			145,656			141,311			111,189			102,326			148,134			98,805
Average assets		1,626,717			1,482,963			1,412,778			1,364,772			1,322,382			1,500,819			1,283,183
Return on average assets		1.46	%		0.76	%		1.03	%		1.06	%		1.17	%		1.10	%		1.12	%
Return on average equity		15.11	%		7.79	%		10.31	%		12.98	%		15.17	%		11.18	%		14.59	%
Weighted average common shares outstanding:
Basic		12,327,921			11,908,282			11,746,574			9,888,030			9,463,772			11,995,477			9,421,042
Diluted		12,535,551			12,076,878			11,978,801			10,103,966			9,674,994			12,201,721			9,595,991
Earnings per common share:
Basic	$	0.48			0.24			0.31			0.37			0.41			1.04			1.15
Diluted	$	0.47			0.23			0.30			0.36			0.40			1.02			1.13

(1) Tax expense is determined using the effective tax rate reflected in the accompanying income statement for the applicable reporting period.

(2) In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company early adopted the new guidance in the second quarter of 2016. As a result, the Company’s income tax expense was reduced by approximately $399,000, or $0.03 per diluted share, in the second quarter of 2016.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(In thousands, except share data)

	For the Three Months Ended
	September 30, 2016			June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015
Segment net income:
Community banking	$	4,734			2,162			3,413			3,258			2,854
Wholesale mortgage banking		1,402			919			401			525			1,273
Other		(228	)		(253	)		(188	)		(207	)		(256	)
Eliminations		33			8			17			33			10
Total net income	$	5,941			2,836			3,643			3,609			3,881
Community banking segment operating earnings:
Income before income taxes	$	6,975			2,785			4,953			4,842			4,199
Tax expense (1) (3)		2,241			623			1,540			1,584			1,345
Bank segment net income	$	4,734			2,162			3,413			3,258			2,854
Weighted average common shares outstanding:
Basic		12,327,921			11,908,282			11,746,574			9,888,030			9,463,772
Diluted		12,535,551			12,076,878			11,978,801			10,103,966			9,674,994
Earnings per common share:
Basic	$	0.38		$	0.18		$	0.28		$	0.32		$	0.29
Diluted	$	0.38		$	0.18		$	0.28		$	0.32		$	0.29
Bank segment income before taxes	$	6,975			2,785			4,953			4,842			4,199
Gain on sale of securities		(111	)		(113	)		(417	)		(34	)		(1,017	)
Net loss on extinguishment of debt		118			47			9			36			—
Fair value adjustments on interest rate swaps		(99	)		226			281			(142	)		1,246
Merger related costs (2)		—			2,697			186			—			—
Operating earnings before income taxes		6,883			5,642			5,012			4,702			4,428
Tax expense (1) (3)		2,211			1,262			1,558			1,538			1,418
Operating bank segment earnings (Non-GAAP)	$	4,672			4,380			3,454			3,164			3,010
Operating bank segment earnings per common share:
Basic (Non-GAAP)	$	0.38		$	0.37		$	0.29		$	0.32		$	0.32
Diluted (Non-GAAP)	$	0.37		$	0.36		$	0.29		$	0.31		$	0.31

(1) Tax expense is determined using the effective tax rate computed for the applicable business segment.

(2) Remaining merger related costs of $102,000 were incurred within the category “Other” segment earnings for three months ended June 30, 2016.

(3) In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company early adopted the new guidance in the second quarter of 2016. As a result, the Banking segment income tax expense was reduced by approximately $343,000, or $0.03 per diluted share, in the second quarter of 2016.

EX-99.2

Third Quarter 2016 Earnings Release Investor Presentation NASDAQ: CARO October 20, 2016

2 Disclaimer Certain statements in this presentation contain “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 , such as statements relating to future plans and expectations, and are thus prospective . Such forward - looking statements include but are not limited to statements with respect to plans, objectives, expectations, and intentions and other statements that are not historical facts, and other statements identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” and “projects,” as well as similar expressions . Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward - looking statements . Although we believe that the assumptions underlying the forward - looking statements are reasonable, any of the assumptions could prove to be inaccurate . Therefore, we can give no assurance that the results contemplated in the forward - looking statements will be realized . The inclusion of this forward - looking information should not be construed as a representation by Carolina Financial Corporation (“Carolina Financial” or the “Company”) or any person that such future events, plans, or expectations will occur or be achieved . In addition to factors previously disclosed in the reports filed by Carolina Financial with the Securities and Exchange Commission (the “SEC”), additional risks and uncertainties may include, but are not limited to : ( 1 ) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third - party relationships and revenues ; ( 2 ) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the Company’s loan portfolio and allowance for loan losses ; ( 3 ) the rate of delinquencies and amounts of charge - offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk - related losses and expenses ; ( 4 ) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized ; ( 5 ) changes in the U . S . legal and regulatory framework including, but not limited to, the Dodd - Frank Act and regulations adopted thereunder ; ( 6 ) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the Company ; 7 ) the business related to acquisitions may not be integrated successfully or such integration may take longer to accomplish than expected ; ( 8 ) the expected cost savings and any revenue synergies from acquisitions may not be fully realized within expected timeframes ; and ( 9 ) disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers . Additional factors that could cause our results to differ materially from those described in the forward - looking statements can be found in the reports (such as our Annual Report on Form 10 - K, Quarterly Reports on Form 10 - Q and Current Reports on Form 8 - K) filed with the SEC and available at the SEC’s Internet site (http : //www . sec . gov) . All subsequent written and oral forward - looking statements concerning the Company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above . We do not undertake any obligation to update any forward - looking statement to reflect circumstances or events that occur after the date the forward - looking statements are made .

3 Third Quarter Highlights • 2016Q3 net income increased 53.1% to $5.9 million, or $0.47 per diluted share from $3.9 million, or $0.40 per diluted share for the third quarter of 2015. ( 1 ) • 2016Q3 operating earnings (Non - GAAP) increased 45.8% to $5.9 million, or $0.47 per diluted share, from $4.0 million, or $0.42 per diluted share, from the third quarter of 2015. (2) • Tangible book value (Non - GAAP) per share of $12.35 at 9/30/2016 compared to $11.66 at 12/31/2015. • Loans receivable, excluding acquired loans, grew at an annualized rate of 19.3% or $ 133.7 million since December 31, 2015 and 24.7% or $66.0 million since June 30, 2016. • Growth in deposits of $189.5 million since 12/31/2015, excluding acquired deposits, and $45.8 million since June 30, 2016. • Core Deposits (Non - GAAP), excluding acquired deposits , increased $150.0 million since 12/31/2015 and $45.3 million since June 30, 2016. (3) • Nonperforming assets to total assets of 0.42% as of 9/30/2016 as compared to 0.47% as of 12/31/2015. (1) The 9/30/2016 is preliminary and based on Company data available at the time of the presentation. (2) Operating earnings exclude loss on extinguishment of debt, net gain or loss on sale of securities, fair value adjustments on interest rate swaps, and merger expenses, all net of income taxes at the applicable period effective rate. (3) Core deposits are defined as checking, savings and money market accounts.

4 Community Banking Segment Results

5 Strong, Improving Community Banking Segment Results Bank Segment Earnings (1) • Banking segment earnings 2016Q3 net income of $4.7 million, or $0.38 per diluted share, versus $2.9 million for 2015Q3, or $0.29 per diluted share. • Operating Bank segment earnings (Non - GAAP) 2016Q3 of $4.7 million, or $0.37 per diluted share, versus $3.0 million for 2015Q3, or $0.31 per diluted share. (2) • Operating Bank Return on Average Assets (Non - GAAP) increased to 1.15% for 2016Q3 from 0.91% for 2015Q3. ( 2) 2011Y 2012Y ($18.7) (1) Community banking segment earnings as reported in public filings (includes intersegment revenues and expenses and excludes ho ldi ng company expenses). The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (2) Operating earnings exclude loss on extinguishment of debt, net gain or loss on sale of securities, fair value adjustments on interest rate swaps, and merger expenses, all net of effective income tax rate for the applicable business segment. Operating bank segment EPS equals operating bank segment earni ngs divided by weighted average diluted shares.

6 Net Interest Margin (1) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (2) Net interest margin – tax - equivalent. • Net interest margin expanded 11bps for the third quarter of 2016 due to the following: • Accretion income from acquired loans was approximately $390,000, or 10bps of change, for 2016Q3. • Collection of prepayment penalty pretax of $92,000 and $136,000 for 2016Q3 and 2016Q2, respectively. • Improvement due to higher yielding loans from acquired loan. • Cost of funds decreased due to the significant growth in core deposits during 2016Q3 and impact of lower cost deposits acquired in 2016Q2 ( 1 ) Yield on Loans Net Interest Margin (2) Cost of Funds ( 1 )

7 Consistent Core Fee Income Stream • The Bank segment’s core noninterest income is primarily derived from deposit service charges, retail mortgage income and BOLI earnings. Banking Segment Core Noninterest Income ($MM) (1) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (1)

8 Bank Segment Operating Efficiencies • Operating bank s egment n oninterest expenses as a percentage of average consolidated assets of 2.32% in 2016Q3 compared to 2.41% in 2015Q3 • Operating bank segment efficiency ratio improved to 57.6% in 2016Q3 from 65.5% in 2015Q3. Operating Bank Segment Noninterest Expenses/Avg. Assets (%) (1)(2)(3) (1) Bank segment operating figures include intersegment revenues and expense and exclude holding company expenses. (2) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (3) Operating Noninterest expense excludes merger related expenses for the applicable segments presented. ( 2 ) Operating Bank Segment Efficiency Ratio (1)(2)(3)

9 Strong Balance Sheet Growth • Loans held for investment grew at an annualized rate of 24.7% during 2016Q3. • Deposits increased $49.1 million during 2016Q3. Total Deposits ($MM) ( 1 )(2) Total Loans ($MM) (1)(2) Total Assets($MM) ( 1 )(2) (1) Includes assets acquired and liabilities assumed in acquisitions, net of fair value adjustments. (2) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation.

10 Diversified Loan Mix and Solid Asset Quality NPAs/ Assets (%) (1)(2) • We have a diversified loan mix, with a focus on lower risk assets. • Our asset quality has remains favorable, with NPA’s / assets of 0.42% at 9/30/2016. • The Bank added $ 1.5 million in real estate acquired through foreclosure, net as a result of the Congaree merger during the second quarter of 2016. • We have experienced net recoveries for fiscal years 2014 and 2015 and continue to experience net recoveries through 2016Q3. (1) Excludes performing troubled debt restructurings (TDRs ). (2) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. NCOs / Average Loans (%) ( 2) Loan Composition (9/30/2016) (2) 2015Q3 2016Q3 Yield on Loans: 4.93%

11 Improving Deposit Mix Deposit Composition (9/30/16) (1) Checking Accounts (2) • Focus on increasing checking accounts as evidenced by an annualized checking account growth rate of 10.6% since 12/31/2015, excluding acquired checking accounts. 2016 Q3 Cost of Funds: 0.62% (1) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (2) Includes checking accounts from deposits acquired during 2016Q2 acquisition. (1)

12 Attractive Wholesale Mortgage Platform

13 Wholesale Mortgage Platform Strong, Scalable Mortgage Platform (2 ) • Wholesale Mortgage segment earnings of $1.4 million, or $0.11 per diluted share, for 2016Q3 compared to $1.3 million, or $0.10 per diluted share, for 2015Q3. (1) • Increase in margin has resulted in an increase in wholesale mortgage segment earnings reported 2016Q3 from 2015Q3. Mortgage Banking Earnings Contribution (1)(2) (1) Wholesale Mortgage segment earnings include intersegment revenues and expenses and exclude holding company expenses. Wholesale mortgage EPS equals segment earnings divided by weighted average diluted shares. (2) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation.

14 Strategic Opportunity

15 Focus on Shareholder Results • We focus on being a high performing financial institution. • Operating ROAA and Operating ROAE of 1.45% and 14.95%, respectively, for 2016Q3. • We have grown our tangible book value by 15.5% from 2015Q3 to 2016Q3. Consolidated Operating ROAA & Operating ROAE (1 )(2) Tangible Book Value per Share & Operating Earnings per Share (1)(2) (1) The 9/30/2016 information is preliminary and based on Company data available at the time of the presentation. (2) Operating earnings exclude extinguishment of debt, net gain or loss on sale of securities, fair value adjustments on interest rate swaps, and merger expenses, all net of income taxes at the applicable period effective rate.

16 Investment Considerations x Focus on increasing shareholder value over both the short and long term. x Scarcity value – large foothold in the high growth Charleston and Myrtle Beach markets with growing presence in Greenville, SC, Columbia, SC and Wilmington, NC Markets. x Strong markets to support continued loan growth x Experienced, accomplished management team driving results x Profitability increasing in community banking segment x Track - record of improving deposit mix x Demonstrated acquisition experience, success and focus x Scalable mortgage platform provides an opportunity to generate earnings in changing markets