EXHIBIT 99.1 – PRESS RELEASE	FOR IMMEDIATE RELEASE
October 19, 2017	For more information contact:
First South Bancorp, Inc.	Bruce Elder (CEO)	(252) 940-4936
	Scott McLean (CFO)	(252) 940-5016
	Website: www.firstsouthnc.com

First South Bancorp, Inc. Reports September 30, 2017 Quarterly and Nine Months Operating Results

Washington, North Carolina - First South Bancorp, Inc. (NASDAQ: FSBK) (the “Company”), the parent holding company of First South Bank (the “Bank”), reported net income of $2.9 million or $0.31 of earnings per diluted share (EPS) for the 2017 third quarter, an increase from the $1.9 million of net income and $0.20 of EPS for the 2016 third quarter. Net income for the first nine months of 2017 was $6.8 million and $0.72 of EPS, an increase from the $5.0 million of net income and $0.52 of EPS generated during the first nine months of 2016.

Highlights:

	·	Strong quarterly earnings performance with net income of $2.9 million; diluted EPS of $0.31 per share; return on average assets (ROA) of 1.09%, return on average equity (ROE) of 12.31% and return on average tangible common equity* (ROTCE) of 13.29%.
	·	Pre-tax, pre-provision operating earnings* for the current quarter of $4.5 million, a 51% increase over the $3.0 million reported for the 2016 third quarter.
	·	Continued loan growth as our loans-held-for-investment portfolio increased $80.1 million during the first nine months of 2017.
	·	Total deposits have grown $85.5 million or 9.9% over the last twelve months to $945.3 million.
	·	Strong core deposit growth as demonstrated by an increase in total non-interest bearing deposits of 11.9% to $212.5 million on a year-over-year basis.
	·	Expanded the net interest margin (NIM) to 3.89% versus 3.73% for the third quarter of 2016.
	·	Asset quality metrics continue to improve with lower levels of non-performing assets.

Bruce Elder, President and CEO, commented, “the third quarter financial performance of the Company is a reflection of the strong loan growth experienced over the past year. Pre-tax income of $4.3 million was almost $1.4 million higher than the $2.9 million reported for the second quarter of 2017. The increase was partially due to a $563,000 increase in net interest income driven by a $609,000 increase in interest and fee income from the loan portfolio. Additionally, compared with Q2 2017, non-interest expenses declined by $476,000 and the provision for loan losses decreased by $385,000.”

Mr. Elder also noted that, “the legal merger with Carolina Financial Corporation (CARO) is anticipated to occur in the fourth quarter of 2017. We have a special meeting of shareholders scheduled for October 26, 2017 to formally vote for approval of the merger, and regulatory approval has recently been received. Legacy branches will operate as CresCom Bank doing business as First South Bank until the data system conversion scheduled for the end of the first quarter of 2018, at which time those branches will be rebranded as CresCom Bank. Conversion teams from both organizations are working diligently to ensure a smooth transition.”

Strong loan and deposit growth over the past twelve months, coupled with controlled expenses, has supported the Company’s solid earnings performance for both the current quarter, as well as year-to-date 2017. Since September 30, 2016, the Company’s loans held for investment portfolio has grown $98.2 million. During this same twelve month period the deposit base has expanded by $85.5 million, including a $22.6 million increase in non-interest bearing demand deposits. As a result of this growth, the Company has bolstered its net interest income (NII), net interest margin (NIM), and bottom line net income.

Income Statement: The Company’s NII for the 2017 third quarter grew to $9.6 million compared to $8.3 million for the comparative 2016 third quarter. Our NIM for the third quarter of 2017 expanded 16 basis points to 3.89% versus 3.73% for the same three month period one year ago. NII for first nine months of 2017 grew to $27.4 million, from $24.2 million in the prior year nine month period. The NIM for the nine month period ended September 30, 2017 was 3.81% and compares favorably to the 3.72% posted for the first nine months of 2016.

Total non-interest income was $3.5 million for the current three month period compared to $3.7 million for the prior year three-month period. The decline was primarily a result of lower gains on disposals of OREO properties, a reduction in loan sales for Small Business Administration loans and lower profit margins on the sale of mortgage loans. Total non-interest income for the first nine months of 2017 was $10.4 million compared to $10.8 million for prior year nine month period. Included in non-interest income for the nine month period ended September 30, 2016 is $467,000 of pre-tax gains on the sales of investment securities. These investment securities were sold primarily to fund growth in our loan portfolio.

Non-interest expenses for the third quarter of 2017 were $8.7 million, compared to $8.9 million for the 2016 third quarter. Total non-interest expenses for the current nine month period totaled $27.0 million, compared to $27.1 million for first nine months of 2016. The Company, as a result of prior branch consolidations as well as other cost savings, has been able to control its expenses despite incurring $387,000 in year-to-date merger-related expenses.

Income tax expense was $1.4 million for the 2017 third quarter, compared to $947,000 for the 2016 third quarter. The effective income tax rates were 32.3% and 33.3% for these reporting periods, respectively. For the first nine months of 2017, income tax expense was $3.0 million versus $2.2 million for the comparative period of 2016. The effective income tax rates were 30.8% and 30.6%, respectively for the 2017 and 2016 nine-month periods.

Balance Sheet: Loans and leases held for investment (HFI) totaled $780.7 million at September 30, 2017, increasing $80.1 million, or 11.4%, over the $700.6 million held at December 31, 2016. Loans held for sale totaled $3.8 million at September 30, 2017 versus $5.1 million held at December 31, 2016. Investment securities and interest-bearing deposits at other banks totaled to $228.0 million at September 30, 2017, versus $216.4 million at December 31, 2016, as earnings and cash from robust deposit growth continues to support our strong liquidity position.

Deposits totaled $945.3 million at September 30, 2017, increasing $74.7 million, or 8.6%, from $870.6 million at December 31, 2016. Non-maturity deposits (personal and business checking, money market, and savings accounts) grew by $69.3 million, or 11.3%, to $683.3 million at September 30, 2017, from $614.0 million at December 31, 2016. CDs increased to $261.9 million at September 30, 2017, from $256.6 million at December 31, 2016. CDs represented 27.7% and 29.5% of total deposits at September 30, 2017 and December 31, 2016, respectively.

Stockholders' equity increased by $7.4 million to $94.6 million at September 30, 2017, from $87.2 million at December 31, 2016. This increase primarily reflects the $6.8 million of net income earned for the first nine months of 2017 and a $1.4 million increase in accumulated other comprehensive income resulting from the mark-to-market adjustment of the available-for-sale securities portfolio, and is net of $998,000 of dividends declared and paid to our stockholders.

The tangible equity to assets ratio* was 8.28% at September 30, 2017, compared to 8.21% at December 31, 2016. The tangible book value per common share* increased to $9.36 at September 30, 2017, from $8.57 at December 31, 2016.

Asset Quality: September 30, 2017 strong asset quality metrics continue to reflect the Company’s disciplined credit culture. Non-performing assets (NPAs) declined to $4.5 million at September 30, 2017, or 0.42% of total assets, from $6.3 million, or 0.63% of total assets, at December 31, 2016. NPAs at September 30, 2017 included $2.2 million of other real estate owned (OREO), which has declined by $1.0 million, or 32.4%, from $3.2 million at December 31, 2016. Nonaccrual loans and leases were $2.3 million at September 30, 2017, or 0.30% of loans and leases HFI, and compared favorably to $3.1 million, or 0.44% of loans and leases HFI, at December 31, 2016.

The provision for credit losses in the 2017 third quarter was $100,000, compared to $220,000 for the third quarter of 2016. The provision for credit losses was $850,000 in the first nine months of 2017, compared to $770,000 in the first nine months of 2016. The allowance for loan losses represented 1.22% of loans and leases HFI at September 30, 2017, compared to 1.24% at December 31, 2016.

Regulatory Capital Strength: As of September 30, 2017, reported regulatory capital ratios at the Bank were 12.95% for total risk-based capital, 11.73% for tier 1 risk-based capital and common equity tier 1 risk-based capital and 8.96% for tier 1 leverage, compared to 13.01% for total risk-based capital, 11.80% for tier 1 risk-based capital and common equity tier 1 risk-based capital and 8.89% for tier 1 leverage at December 31, 2016.

Key Performance Ratios: Some of our key performance ratios are ROA, ROE and the efficiency ratio. ROA was 1.09% for the 2017 third quarter, compared with 0.78% for the 2016 third quarter. ROE was 12.31% for the 2017 third quarter, compared with 8.52% for the 2016 third quarter. The Company’s efficiency ratio for the 2017 third quarter improved to 65.53%, from 73.84% for the comparative 2016 third quarter. The efficiency ratio for the first nine months of 2017 improved to 70.55%, from 77.31% for first nine months of 2016.

Corporate and Investor Information: The Bank has been serving the citizens of eastern and central North Carolina since 1902 and offers a variety of financial products and services to business and individual customers. The Bank operates through its main office headquartered in Washington, North Carolina, and has 28 full service branch offices located throughout eastern and central North Carolina. The Bank also provides a full menu of leasing services through its wholly-owned subsidiary, First South Leasing, LLC. In addition, under its First South Wealth Management division, the Bank makes securities brokerage services available through an affiliation with an independent broker/dealer.

Additional investor information for the Company and the Bank may be accessed on our website at www.firstsouthnc.com.

The Company’s common stock symbol as traded on the NASDAQ Global Select Market is “FSBK”.

Forward-Looking Statements: Statements contained in this release, which are not historical facts, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include: failure to meet the closing conditions contained in the Agreement and Plan of Merger and Reorganization, dated as of June 9, 2017, by and between Carolina Financial Corporation (“CARO”) and the Company (the “CARO Merger”), including approval by the stockholders of CARO and the Company, respectively, on the expected terms and time schedule; delay in closing the CARO Merger; difficulties and delays in integrating CARO’s and the Company’s businesses or fully realizing cost savings and other benefits; business disruption as a result of the CARO Merger; customer acceptance of CARO products and services; potential difficulties encountered in expanding into a new market following the CARO Merger; the effects of future economic conditions; governmental fiscal and monetary policies; legislative and regulatory changes; the risks of changes in interest rates; the effects of competition; and including without limitation other factors that could cause actual results to differ materially as discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

*Non-GAAP Financial Measures: Important disclosures about and reconciliations of non-GAAP measures to the corresponding GAAP measures, are provided below and attached to this press release.

This press release and the accompanying Supplemental Financial Data contain financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP) in the United States. Management uses these "non-GAAP" measures in their analysis of the Company's performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures are provided within the accompanying tables to this press release.

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

	September 30,			December 31,			September 30,
	2017			2016			2016
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	19,923,410		$	22,854,712		$	19,272,704
Interest-bearing deposits with banks		36,903,842			23,320,968			37,936,276
Investment securities available for sale, at fair value		190,573,089			192,606,119			193,255,580
Investment securities held to maturity		506,223			509,617			509,328
Mortgage loans held for sale		3,814,715			5,098,518			7,312,568

Loans and leases held for investment		780,713,736			700,642,291			682,465,668
Allowance for loan and lease losses		(9,561,535	)		(8,673,172	)		(8,498,061	)
Net loans and leases held for investment		771,152,201			691,969,119			673,967,607

Premises and equipment, net		10,799,043			11,291,596			11,608,966
Assets held for sale		185,906			192,720			192,720
Other real estate owned		2,183,970			3,229,423			4,810,434
Federal Home Loan Bank stock, at cost		1,592,700			1,573,700			1,701,200
Accrued interest receivable		3,595,669			3,525,684			3,118,482
Goodwill		4,218,576			4,218,576			4,218,576
Mortgage servicing rights		2,170,658			2,148,905			2,090,680
Identifiable intangible assets		1,429,929			1,611,187			1,682,269
Bank-owned life insurance		18,483,438			18,080,183			17,937,292
Prepaid expenses and other assets		5,947,067			8,470,887			6,180,717

Total assets	$	1,073,480,436		$	990,701,914		$	985,795,399

Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing demand	$	212,521,157		$	196,917,165		$	189,872,662
Interest bearing demand		323,893,958			272,098,903			264,114,729
Savings		146,933,193			145,031,981			141,701,335
Large denomination certificates of deposit		136,211,749			122,819,510			124,416,507
Other time		125,727,563			133,732,804			139,725,846
Total deposits		945,287,620			870,600,363			859,831,079

Borrowed money		16,500,000			17,000,000			20,000,000
Junior subordinated debentures		10,310,000			10,310,000			10,310,000
Other liabilities		6,775,248			5,607,832			7,360,372
Total liabilities		978,872,868			903,518,195			897,501,451

Common stock, $.01 par value, 25,000,000 shares authorized; 9,504,991; 9,494,935; and 9,494,935 shares outstanding, respectively		95,050			94,949			94,949
Additional paid-in capital		36,191,713			36,018,743			35,998,472
Retained earnings		55,405,706			49,560,595			47,851,299
Accumulated other comprehensive income		2,915,099			1,509,432			4,349,228
Total stockholders' equity		94,607,568			87,183,719			88,293,948

Total liabilities and stockholders' equity	$	1,073,480,436		$	990,701,914		$	985,795,399

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

Interest income:
Interest and fees on loans	$	9,316,002	$	7,915,133	$	26,229,824	$	22,748,826
Interest on investments and deposits		1,360,943		1,295,051		4,143,972		4,131,333
Total interest income		10,676,945		9,210,184		30,373,796		26,880,159

Interest expense:
Interest on deposits		841,961		728,106		2,426,143		2,094,809
Interest on borrowings		70,093		55,886		192,521		187,683
Interest on junior subordinated notes		127,011		127,011		378,272		408,628
Total interest expense		1,039,065		911,003		2,996,936		2,691,120

Net interest income		9,637,880		8,299,181		27,376,860		24,189,039
Provision for credit losses		100,000		220,000		850,000		770,000
Net interest income after provision for credit losses		9,537,880		8,079,181		26,526,860		23,419,039

Non-interest income:
Deposit fees and service charges		1,902,246		1,907,878		5,723,130		5,746,336
Loan fees and charges		88,799		72,578		267,566		268,212
Mortgage loan servicing fees		356,823		343,081		995,650		850,770
Gain on sale and other fees on mortgage loans		709,554		812,754		1,837,133		1,795,017
Gain (loss) on sale of other real estate, net		14,343		77,416		69,843		50,932
Gain on sale of investment securities		-		-		-		467,470
Other income		435,418		477,343		1,469,882		1,636,428
Total non-interest income		3,507,183		3,691,050		10,363,204		10,815,165

Non-interest expense:
Compensation and fringe benefits		5,130,718		4,970,846		15,245,172		14,955,785
Federal deposit insurance premiums		156,054		157,142		460,546		479,276
Premises and equipment		1,293,477		1,349,243		4,026,693		4,103,726
Marketing		96,646		151,304		279,435		568,556
Data processing		799,650		757,200		2,400,740		2,303,418
Amortization of intangible assets		152,816		136,882		453,282		401,981
Other real estate owned expense		2,483		119,065		272,342		425,622
Other		1,105,912		1,286,741		3,860,278		3,842,879
Total non-interest expense		8,737,756		8,928,423		26,998,488		27,081,243

Income before income tax expense		4,307,307		2,841,808		9,891,576		7,152,961
Income tax expense		1,391,805		947,496		3,048,960		2,185,841

NET INCOME	$	2,915,502	$	1,894,312	$	6,842,616	$	4,967,120

Per share data:
Basic earnings per share	$	0.31	$	0.20	$	0.72	$	0.52
Diluted earnings per share	$	0.31	$	0.20	$	0.72	$	0.52
Dividends per share	$	0.035	$	0.030	$	0.105	$	0.085
Average basic shares outstanding		9,503,800		9,494,861		9,500,809		9,493,285
Average diluted shares outstanding		9,567,989		9,525,302		9,556,254		9,520,216

First South Bancorp, Inc.	Supplemental Financial Data (Unaudited)

	Quarter to Date															Year to Date
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
	(dollars in thousands except per share data)
Consolidated balance sheet data:
Total assets	$	1,073,480		$	1,061,379		$	1,039,424		$	990,702		$	985,795		$	1,073,480		$	985,795

Loans held for sale:	$	3,815		$	6,381		$	2,507		$	5,099		$	7,313		$	3,815		$	7,313

Loans and leases held for investment (HFI):
Mortgage	$	77,199		$	76,249		$	73,107		$	74,905		$	74,710		$	77,199		$	74,710
Commercial		594,957			593,732			558,578			535,047			518,265			594,957			518,265
Consumer		85,247			83,730			73,188			69,454			69,039			85,247			69,039
Leases		23,311			22,945			22,270			21,236			20,452			23,311			20,452
Total loans and leases HFI		780,714			776,656			727,143			700,642			682,466			780,714			682,466
Allowance for loan and lease losses		(9,562	)		(9,367	)		(8,941	)		(8,673	)		(8,498	)		(9,562	)		(8,498	)
Net loans and leases HFI	$	771,152		$	767,289		$	718,202		$	691,969		$	673,968		$	771,152		$	673,968

Cash & interest bearing deposits	$	56,827		$	40,072		$	70,713		$	46,176		$	57,209		$	56,827		$	57,209
Investment securities		191,079			195,908			195,048			193,116			193,765			191,079			193,765
Bank-owned life insurance		18,483			18,351			18,219			18,080			17,937			18,483			17,937
Premises and equipment		10,799			11,152			11,572			11,292			11,609			10,799			11,609
Goodwill		4,219			4,219			4,219			4,219			4,219			4,219			4,219
Mortgage servicing rights		2,171			2,134			2,140			2,149			2,091			2,171			2,091
Identifiable intangible assets		1,430			1,490			1,551			1,611			1,682			1,430			1,682

Deposits:
Non-interest checking	$	212,521		$	208,672		$	204,576		$	196,917		$	189,873		$	212,521		$	189,873
Interest checking		230,084			222,267			212,386			189,401			176,034			230,084			176,034
Money market		93,810			86,533			86,598			82,698			88,081			93,810			88,081
Savings		146,933			149,721			147,718			145,032			141,701			146,933			141,701
Certificates		261,940			264,341			268,588			256,552			264,142			261,940			264,142
Total deposits	$	945,288		$	931,534		$	919,866		$	870,600		$	859,831		$	945,288		$	859,831

Borrowings	$	16,500		$	22,500		$	15,000		$	17,000		$	20,000		$	16,500		$	20,000
Junior subordinated debentures		10,310			10,310			10,310			10,310			10,310			10,310			10,310
Stockholders' equity		94,608			91,896			89,282			87,184			88,294			94,608			88,294

Consolidated earnings summary:
Interest income	$	10,677		$	10,093		$	9,604		$	9,336		$	9,210		$	30,374		$	26,880
Interest expense		1,039			1,018			940			920			911			2,997			2,691
Net interest income		9,638			9,075			8,664			8,416			8,299			27,377			24,189
Provision for credit losses		100			485			265			200			220			850			770
Noninterest income		3,507			3,558			3,298			3,372			3,691			10,363			10,815
Noninterest expense		8,737			9,214			9,047			8,819			8,929			26,998			27,081
Income before taxes		4,308			2,934			2,650			2,769			2,841			9,892			7,153
Income tax expense		1,392			879			778			775			947			3,049			2,186
Net income	$	2,916		$	2,055		$	1,872		$	1,994		$	1,894		$	6,843		$	4,967

Per Share Data:
Basic earnings per share	$	0.31		$	0.22		$	0.20		$	0.21		$	0.20		$	0.72		$	0.52
Diluted earnings per share	$	0.31		$	0.22		$	0.20		$	0.21		$	0.20		$	0.72		$	0.52
Dividends per share	$	0.035		$	0.035		$	0.035		$	0.030		$	0.030		$	0.105		$	0.085
Book value per share	$	9.95		$	9.67		$	9.40		$	9.18		$	9.30		$	9.95		$	9.30

Shares outstanding		9,504,991			9,502,520			9,500,266			9,494,935			9,494,935			9,504,991			9,494,935
Average basic shares		9,503,800			9,500,958			9,497,601			9,494,935			9,494,861			9,500,809			9,493,285
Average diluted shares		9,567,989			9,554,420			9,541,548			9,529,753			9,525,302			9,556,254			9,520,216

Performance ratios (tax equivalent):
Yield on average earning assets		4.30	%		4.19	%		4.15	%		4.07	%		4.13	%		4.22	%		4.12	%
Cost of interest bearing liabilities		0.55	%		0.55	%		0.52	%		0.52	%		0.52	%		0.54	%		0.52	%
Net interest spread		3.75	%		3.65	%		3.62	%		3.55	%		3.61	%		3.68	%		3.60	%
Net interest margin		3.89	%		3.78	%		3.74	%		3.68	%		3.73	%		3.81	%		3.72	%
Average earning assets to total average assets		93.85	%		93.61	%		93.32	%		92.92	%		92.42	%		93.58	%		92.33	%

Return on average assets (annualized)		1.09	%		0.79	%		0.75	%		0.80	%		0.78	%		0.88	%		0.70	%
Return on average equity (annualized)		12.31	%		9.01	%		8.52	%		8.94	%		8.52	%		10.00	%		7.69	%
Efficiency ratio		65.53	%		71.65	%		74.92	%		74.16	%		73.84	%		70.55	%		77.31	%

Average assets	$	1,062,250		$	1,041,823		$	1,014,310		$	992,192		$	968,729		$	1,039,637		$	951,731
Average earning assets	$	996,923		$	975,211		$	946,578		$	921,984		$	895,290		$	972,903		$	878,761
Average equity	$	93,984		$	91,452		$	89,143		$	88,694		$	88,481		$	91,544		$	86,225

Equity/Assets		8.81	%		8.66	%		8.59	%		8.80	%		8.96	%		8.81	%		8.96	%

First South Bancorp, Inc.	Supplemental Financial Data (Unaudited)

	Quarter to Date															Year to Date
	9/30/2017			6/30/2017			3/31/2017			12/31/2016			9/30/2016			9/30/2017			9/30/2016
	(dollars in thousands except per share data)
Asset quality data and ratios:
Nonaccrual loans and leases:
Non-TDR nonaccrual loans and leases
Earning	$	811		$	495		$	576		$	410		$	569		$	811		$	569
Non-Earning		1,105			1,489			1,479			1,257			1,289			1,105			1,289
Total Non-TDR nonaccrual loans and leases	$	1,916		$	1,984		$	2,055		$	1,667		$	1,858		$	1,916		$	1,858
TDR nonaccrual loans and leases
Current TDRs	$	389		$	549		$	720		$	422		$	792		$	389		$	792
Past Due TDRs		0			0			0			962			248			0			248
Total TDR nonaccrual loans and leases	$	389		$	549		$	720		$	1,384		$	1,040		$	389		$	1,040
Total nonaccrual loans and leases	$	2,305		$	2,533		$	2,775		$	3,051		$	2,898		$	2,305		$	2,898
Loans and leases >90 days past due, still accruing		0			0			0			0			0			0			0
Other real estate owned (OREO)		2,184			2,438			3,115			3,229			4,810			2,184			4,810
Total nonperforming assets	$	4,489		$	4,971		$	5,890		$	6,280		$	7,708		$	4,489		$	7,708

Allowance for loan and lease losses to loans and leases HFI		1.22	%		1.21	%		1.23	%		1.24	%		1.25	%		1.22	%		1.25	%

Net charge-offs (recoveries)	$	(95	)	$	59		$	(3	)	$	25		$	60		$	(38	)	$	138
Net charge-offs (recoveries) to total loans and leases		-0.01	%		0.01	%		0.00	%		0.00	%		0.01	%		0.00	%		0.02	%
Total nonaccrual loans and leases to total loans and leases HFI		0.30	%		0.33	%		0.38	%		0.44	%		0.42	%		0.30	%		0.42	%
Total nonperforming assets to total assets		0.42	%		0.47	%		0.57	%		0.63	%		0.78	%		0.42	%		0.78	%
Total loans and leases to total deposits		82.99	%		84.06	%		79.32	%		81.06	%		80.22	%		82.99	%		80.22	%
Total loans and leases to total assets		73.08	%		73.78	%		70.20	%		71.24	%		69.97	%		73.08	%		69.97	%
Loans serviced for others	$	366,810		$	363,489		$	368,617		$	371,956		$	370,606		$	366,810		$	370,606

Reconciliation of Non-GAAP Measures:
Pre-tax pre-provision operating earnings (non-GAAP):
Income before taxes (GAAP)	$	4,308		$	2,934		$	2,650		$	2,769		$	2,841		$	9,892		$	7,153
Provision for credit losses		100			485			265			200			220			850			770
Pre-tax pre-provision net income		4,408			3,419			2,915			2,969			3,061			10,742			7,923
Securities (gains) losses, net		0			0			0			0			0			0			(467	)
Merger related expenses		109			278			0			0			0			387			0
OREO valuations		15			58			119			140			0			192			110
OREO (gains) losses, (net)		(14	)		26			(82	)		(80	)		(77	)		(70	)		(51	)
Pre-tax pre-provision operating earnings (non-GAAP)	$	4,518		$	3,781		$	2,952		$	3,029		$	2,984		$	11,251		$	7,515

Total core non-interest income (non-GAAP):
Non-interest income (GAAP)	$	3,507		$	3,558		$	3,298		$	3,372		$	3,691		$	10,363		$	10,815
Securities (gains) losses, net		0			0			0			0			0			0			(467	)
OREO (gains) losses, (net)		(14	)		26			(82	)		(80	)		(77	)		(70	)		(51	)
Total core non-interest income (non-GAAP)	$	3,493		$	3,584		$	3,216		$	3,292		$	3,614		$	10,293		$	10,297

Tangible equity (non-GAAP):
Total equity (GAAP)	$	94,608		$	91,896		$	89,282		$	87,184		$	88,294		$	94,608		$	88,294
Intangible assets (a)		5,649			5,709			5,770			5,830			5,901			5,649			5,901
Tangible equity (non-GAAP)	$	88,959		$	86,187		$	83,512		$	81,354		$	82,393		$	88,959		$	82,393
Tangible Equity/Assets (non-GAAP)		8.29	%		8.12	%		8.03	%		8.21	%		8.36	%		8.29	%		8.36	%
Tangible book value per share (non-GAAP)	$	9.36		$	9.07		$	8.79		$	8.57		$	8.68		$	9.36		$	8.68

Return on average tangible common equity (non-GAAP):
Net income (GAAP)	$	2,916		$	2,055		$	1,872		$	1,994		$	1,894		$	6,843		$	4,967
Amortization of intangibles, net of tax		41			42			43			51			47			125			148
Tangible net income available to shareholders (non-GAAP)	$	2,957		$	2,097		$	1,915		$	2,045		$	1,941		$	6,968		$	5,115

Average equity		93,984			91,452			89,143			88,694			88,481			91,544			86,225
Average intangible assets (a)		5,687			5,748			5,809			5,876			5,946			5,748			6,017
Average tangible common equity (non-GAAP)	$	88,297		$	85,704		$	83,334		$	82,818		$	82,535		$	85,796		$	80,208
Return on average tangible common equity (non-GAAP)		13.29	%		9.82	%		9.32	%		9.82	%		9.36	%		10.86	%		8.50	%

(a) Excludes mortgage servicing rights

Average Balances – Yield/Cost Analysis	Three Months Ended September 30,
	2017							2016
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Interest earning assets:
Loans receivable	$	782,465	$	9,316		4.68	%	$	685,441	$	7,915		4.54	%
Investments and deposits		214,458		1,361		2.91	(1)		209,849		1,295		2.81	(1)
Total earning assets		996,923		10,677		4.30	(1)		895,290		9,210		4.13	(1)
Nonearning assets		65,327							73,439
Total assets	$	1,062,250						$	968,729

Interest bearing liabilities:
Deposits	$	723,960		842		0.46		$	663,983		728		0.44
Borrowings		18,288		70		1.53			18,506		56		1.18
Junior subordinated debentures		10,310		127		4.82			10,310		127		4.82
Total interest bearing liabilities		752,558		1,039		0.55			692,799		911		0.52
Noninterest bearing demand deposits		209,192		-		-			181,000		-		-
Total sources of funds		961,750		1,039		0.43			873,799		911		0.41
Other liabilities		6,516							6,449
Stockholders’ equity		93,984							88,481
Total liabilities and equity	$	1,062,250						$	968,729

Net interest income			$	9,638						$	8,299

Interest rate spread (1)(2)						3.75	%						3.61	%
Net interest margin (1)(3)						3.89	%						3.73	%
Ratio of earning assets to interest bearing liabilities						132.47	%						129.23	%

	Nine Months Ended September 30,
	2017							2016
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Interest earning assets:
Loans receivable	$	747,165	$	26,230		4.64	%	$	654,696	$	22,749		4.59	%
Investments and deposits		225,738		4,144		2.80	(1)		224,065		4,131		2.78	(1)
Total earning assets		972,903		30,374		4.22	(1)		878,761		26,880		4.12	(1)
Nonearning assets		66,734							72,970
Total assets	$	1,039,637						$	951,731

Interest bearing liabilities:
Deposits	$	710,313		2,426		0.46		$	653,116		2,095		0.43
Borrowings		19,493		193		1.32			24,450		187		1.01
Junior subordinated debentures		10,310		378		4.84			10,310		409		5.21
Total interest bearing liabilities		740,116		2,997		0.54			687,876		2,691		0.52
Noninterest bearing demand deposits		201,947		-		-			171,504		-		-
Total sources of funds		942,063		2,997		0.42			859,380		2,691		0.42
Other liabilities		6,030							6,126
Stockholders’ equity		91,544							86,225
Total liabilities and equity	$	1,039,637						$	951,731

Net interest income			$	27,377						$	24,189

Interest rate spread (1)(2)						3.68	%						3.60	%
Net interest margin (1)(3)						3.81	%						3.72	%
Ratio of earning assets to interest bearing liabilities						131.45	%						127.75	%

	(1)	Shown as a tax-adjusted yield.
	(2)	Represents the difference between the average yield on earning assets and the average cost of funds.
	(3)	Represents net interest income divided by average earning assets.

FIRST SOUTH BANCORP INC /VA/ 8-K