BUSINESS COMBINATIONS

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note D – Business Combinations

On September 30, 2013, the Company executed a merger agreement with Legacy Select, a bank holding company headquartered in Greenville, North Carolina, whose wholly-owned subsidiary, Legacy Select Bank, 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.

As a result of the merger, New Century acquired Legacy Select and Legacy Select Bank and changed its name to Select Bancorp, Inc. New Century Bank changed its name to Select Bank & Trust Company. 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. 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.

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

Each share of Legacy Select’s issued and outstanding preferred stock was exchanged for one newly issued share of the Company’s preferred stock having terms substantially identical to Legacy Select’s preferred stock. All of the issued and outstanding shares of the Company’s preferred stock are held by the Secretary of the United States Treasury and were issued in connection with Legacy Select’s participation in the Small Business Lending Fund. On July 25, 2014, 202,842 Legacy Select stock options were converted to 370,278 Company stock options. At March 31, 2015, 259,299 of these converted options were outstanding and exercisable with an average weighted remaining contractual life of approximately 3.07 years and an aggregate intrinsic value of $759,000. There were no forfeitures and 108,693 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. In addition, $1.6 million of core deposit intangibles and $7.1 million in goodwill were recorded as components of the acquisition.