BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note C – Business Combinations

On September 30, 2013, the Company executed a merger agreement with Legacy Select Bancorp, Inc. (“Select”), 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 as of the merger date July 25, 2014. The merger expanded the Bank’s North Carolina presence with six branches in Greenville (two), Elizabeth City, Washington, Gibsonville and Burlington.

On July 25, 2014, New Century acquired Legacy Select, and its wholly-owned subsidiary, Select Bank & Trust Company, and assumed the name, Select Bancorp, Inc. Under the acquisition method, the assets and liabilities of Legacy Select, as of the effective date of the acquisition, are recorded at their respective fair values. For the acquisition of Legacy Select, 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. Management has substantially completed its valuation of Legacy Select’s assets and liabilities, but may refine those valuations for up to one year following closing of the transaction.

Under the terms of the agreement, shareholders of Select common stock received 1.8264 shares of New Century common stock for each share of Select common stock, for a value of approximately $31.1 million in the aggregate, based on 2,418,347 shares of Select common stock outstanding and the $6.76 per share closing price of New Century common stock on July 25, 2014, valuing each share of Select common stock at $12.35.

Each share of Select’s issued and outstanding preferred stock was exchanged for one share of newly issued New Century preferred stock having terms substantially identical to Select’s preferred stock. All of the issued and outstanding shares of Select’s preferred stock are held by the Secretary of the United States Treasury and were issued in connection with Select’s participation in the Small Business Lending Fund.

Any changes resulting from the evaluation of these or other estimates as of the acquisition date may change the amount of the preliminary fair values recorded.

The following table provides the carrying value of acquired assets and assumed liabilities, as recorded by the Company, the fair value adjustments calculated at the time of the merger and the resulting fair value recorded by the Company.

	July 25, 2014
	As recorded by		Fair Value		As recorded by
	Legacy Select		adjustments		the Company
(Dollars in thousands)
Assets
Cash and cash equivalents	$	15,406	$	-	$	15,406
Investment securities		28,264		(284)		27,980
Loans		223,131		(5,541)		217,590
Less: allowance for loan losses		(3,389)		3,389		-
Premises and equipment		6,380		332		6,712
Accrued interest receivable		864		(132)		732
Other real estate owned		71		-		71
Bank owned life insurance		2,234		-		2,234
Goodwill		1,488		(1,488)		-
Core deposit intangible		234		1,556		1,790
Other assets		2,507		1,915		4,422
Total assets acquired	$	277,190	$	(253)	$	276,937
Liabilities
Deposits:
Noninterest-bearing	$	42,507	$	-	$	42,507
Interest-bearing		177,525		2,175		179,700
Total deposits		220,032		2,175		222,207
Borrowings		22,198		908		23,106
Other liabilities		565		-		565
Total liabilities assumed	$	242,795	$	3,083	$	245,878
Fair value of net assets assumed						31,059
Value of preferred shares issued to Legacy Select shareholders						7,645
Value of common shares issued to Legacy Select shareholders						29,857
Additional consideration ensuing from stock options issued to Legacy Select shareholders						634
Goodwill recorded for Legacy Select					$	7,077

Goodwill recorded for Legacy Select represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations.

On July 25, 2014, 202,842 Legacy Select stock options were converted to 370,278 Company stock options. At December 31, 2014, 339,380 of these converted options were outstanding and exercisable with an average weighted remaining contractual life of approximately 3.46 years and an aggregate intrinsic value of $1.1 million. There were no forfeitures and 28,612 options were exercised since the merger related to Legacy Select stock options.

In determining the acquisition date fair value of purchased credit-impaired (“PCI”) loans, and in subsequent accounting, the Company generally aggregates loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are referred to as the “accretable yield” and recorded as interest income prospectively.

PCI loans acquired totaled $28.6 million at estimated value and acquired performing loans totaling $189.0 million at estimated fair value. 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 the closing date of the merger were:

(Dollars in thousands)	July 25, 2014
Contractually required payments	$	34,329
Nonaccretable difference		1,402
Cash flows expected to be collected		32,927
Accretable yield		4,360
Fair value at acquisition date	$	28,567

The following tables reflect the pro forma total net interest income, noninterest income and net income for the twelve months ended December 31, 2014 and 2013 as though the acquisition of Legacy Select had taken place on January 1, 2013. 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, 2013, nor of future results of operations.

	Twelve Months Ended December 31
	2014		2013
	(Dollars in thousands, except per share)
Net interest income	$	27,845	$	29,855
Non-interest income		3,623		3,809
Net income available to common shareholders		3,039		7,015
Earnings per share, basic	$	0.27	$	0.62
Earnings per share, diluted	$	0.26	$	0.62
Weighted average common shares outstanding, basic		11,375,803		11,274,332
Weighted average common shares outstanding, diluted		11,475,865		11,405,950

Merger-related expense in 2014 and 2013 totaled $1.9 million and $428,000,   respectively. These costs were recorded as noninterest expense as incurred. There were no merger-related expenses in 2012.