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Carter Bank & Trust Announces Second Quarter 2020 Financial Results

Thursday, 23 July 2020 08:00 AM

Carter Bank & Trust

Topic:
Earnings

MARTINSVILLE, VA / ACCESSWIRE / July 23, 2020 / Carter Bank & Trust (the "Bank") (NASDAQ:CARE) today announced net income of $4.5 million, or $0.17 diluted earnings per share, for the second quarter of 2020, as compared to net income of $4.4 million, or $0.17 diluted earnings per share, in the first quarter of 2020 and net income of $7.8 million, or $0.30 diluted earnings per share, for the second quarter of 2019. Pre-tax pre-provision earnings1 were $9.4 million, $9.5 million and $9.7 million for the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

For the six months ended June 30, 2020, net income was $8.9 million, or $0.34 diluted earnings per share, as compared to net income of $15.4 million, or $0.58 diluted earnings per share in the first six months of 2019. Pre-tax pre-provision earnings were $18.9 million and $19.3 million for the six months ended June 30, 2020 and 2019, respectively.

Second Quarter 2020 Financial Highlights

  • Net interest income declined $1.0 million, or 3.7%, to $26.3 million as compared to the linked quarter primarily due to balance sheet repricing driven by the impact of the lower interest rate environment, offset by a 17 basis point decrease in funding costs compared to the first quarter of 2020, and decreased $1.7 million, or 6.1%, over the same quarter in 2019;
  • Net interest margin, on a fully taxable equivalent basis, declined 18 basis points to 2.79% over the linked quarter and decreased 23 basis points over the same quarter last year;
  • Portfolio loan growth of $17.4 million, or 2.4% on an annualized basis, as compared to the linked quarter, and growth of $91.9 million, or 3.2%, as compared to June 30, 2019;
  • Total deposits increased $133.7 million, or 15.4% on an annualized basis, to $3.6 billion as of June 30, 2020 as compared to the linked quarter. Noninterest-bearing and interest bearing demand deposits, money market accounts and savings, increased by $195.6 million, or 12.3%, as compared to linked quarter;
  • The provision for loan losses totaled $5.5 million for the quarter ended June 30, 2020, $4.8 million for the quarter ending March 31, 2020 and $1.4 million for the same quarter of 2019. Included is the impact of a reserve build of $3.4 million, or $(0.10) per share, and $2.6 million, or $(0.08) per share, driven by economic and market conditions as a result of COVID-19 for the second and first quarters of 2020, respectively;
  • Nonperforming loans declined $1.5 million, or 3.6% as compared to December 31, 2019 and decreased $4.3 million, or 9.6%, from June 30, 2019. Nonperforming loans as a percentage of total portfolio loans were 1.37%, 1.38% and 1.57% as of June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

"Our financial results this quarter continue to reflect the impact from the unusual economic and social environment we are experiencing as a result of COVID-19." stated Litz H. Van Dyke, Chief Executive Officer. "As a community bank, we are committed to support the communities in which we do business, including direct financial assistance to local relief programs, and providing financial flexibility to our individual and business customers to help them deal with the challenges from this crisis. We have also taken unprecedented measures to assure we provide a safe environment for both our employees and customers as we continue to be operational while trying to minimize the disruption to our Bank."

Van Dyke continued, "I would like to commend our many associates whose resilience and commitment during these very difficult circumstances has been nothing short of amazing. We continue to open accounts, make loans, and process transactions. We experienced loan growth as well as growth in lower cost deposits for the quarter. While there still remains tremendous uncertainty as to the longer term impact that this crisis will have on our markets and customers, we are confident that our strong capital and liquidity position, combined with our robust technology capabilities and risk management infrastructure, we are well prepared to navigate these uncertain times."

Operating Highlights

Net interest income decreased $2.3 million, or 4.2%, to $53.5 million during the first six months of 2020 as compared to the same period of 2019. The net interest margin, on a fully taxable equivalent basis, decreased 18 basis points to 2.88% over the past twelve months. The decreases in short-term interest rates had a negative impact on both net interest income and net interest margin, but are offset by a lower cost of funds. The yield on interest-earning assets decreased 35 basis points, offset by an 18 basis point decline in funding costs as compared to the same period of 2019.

The provision for loan losses totaled $10.3 million for the six month period ended June 30, 2020 and $3.0 million for the same period of 2019. The Bank was subject to the adoption of the Current Expected Credit Losses ("CECL") accounting method under Financial Accounting Standards Board ("FASB") Accounting Standards Update 2016-03 and related amendments, Financial Instruments - Credit Losses (Topic 326). However, the Bank elected under the Coronavirus, Aid, Relief, and Economic Security ("CARES") Act to defer the implementation of CECL until the earlier of when the national emergency related to the outbreak of COVID-19 ends or December 31, 2020. Included in the provision expense for the six months ended June 30, 2020 is the impact of a reserve build of $6.0 million, or $(0.18) per share, driven by economic and market conditions as a result of COVID-19. This represents a 243% increase in the provision expense as compared to the same period of 2019. The Bank adjusted qualitative risk factors under its incurred loss model for economic conditions, changes in payment deferral procedures, expected changes in collateral values due to reduced cash flows and external factors such as government actions. Management believes the uncertainty regarding customers' ability to repay loans could be adversely impacted by the COVID-19 pandemic given higher unemployment rates, requests for payment deferrals, temporary business shutdowns and reduced consumer and business spending.

At June 30, 2020, nonperforming loans were $40.6 million, a decrease of $1.5 million, or 3.6% as compared to December 31, 2019. Net charge-offs were $1.6 million in the first six months of 2020 as compared to $2.2 million in the same period of 2019. As a percentage of total portfolio loans, on an annualized basis, net charge-offs were 0.11% and 0.15% for the periods ending June 30, 2020 and 2019, respectively. Nonperforming loans as a percentage of total portfolio loans were 1.37%, 1.38% and 1.57% as of June 30, 2020, March 31, 2020 and June 30, 2019, respectively.

Noninterest income at June 30, 2020, excluding net securities gains, increased $2.2 million, or 30.4%, for the six months ending June 30, 2020 as compared to the same period of 2019. The increase was primarily due to $1.5 million of commercial loan swap fee income due to the high demand for this product in the current rate environment, $1.0 million of higher insurance commissions, related to the adoption of ASU 2014-09, Topic 606 by our provider, $0.2 million of higher debit card interchange fees, which were offset by lower service charges on deposit accounts of $0.3 million due to COVID-19 fee waivers. Other Real Estate Owned ("OREO") income declined $0.3 million due to the sale of several large commercial properties over the last 12 months that generated income. Securities gains of $3.5 million and $0.9 million were realized during the first six months of 2020 and 2019, respectively, to take advantage of market opportunities and reposition and diversify holdings in the securities portfolio.

Total noninterest expense increased $2.9 million, or 6.4%, to $47.6 million for the six months ending June 30, 2020 as compared to the same period of 2019. The increase was primarily driven by salaries and employee benefits and occupancy expenses. The increase of $1.2 million in salaries and benefits were primarily attributable to a $0.8 million increase of normal merit increases and a $0.4 million decrease in salary deferrals on new loan originations in the first six months of 2020. There have not been any permanent or temporary reductions in employees as a result of COVID-19. The $1.0 million increase in occupancy expense is a result of higher depreciation for software and equipment for ancillary products and services. The $0.5 million increase in advertising is related to our deposit acquisition strategy. The $0.4 million increase in the unfunded loan commitment reserve was due to several new commitments approved during the first quarter of 2020 and increased commitments on existing lines of credit. Offsetting these increases were decreases of $0.5 million in debit card expenses and data processing.

Financial Condition

Total assets were $4.2 billion at June 30, 2020 and $4.0 billion at December 31, 2019. Total portfolio loans increased $72.6 million, or 5.0% on an annualized basis, to $3.0 billion as of June 30, 2020 as compared to December 31, 2019. Nonperforming loans decreased $1.5 million to $40.6 million, or 3.6% as of June 30, 2020 as compared to $42.1 million at December 31, 2019. OREO decreased $1.1 million at June 30, 2020 as compared to December 31, 2019. Closed retail bank offices carrying values declined $0.5 million from December 31, 2019 and have a remaining book value of $2.5 million at June 30, 2020.

Federal Reserve Bank excess reserves increased $96.0 million at June 30, 2020 as compared to December 31, 2019 due to maintaining higher liquidity levels as a result of COVID-19.

The securities portfolio increased $6.4 million and is currently 18.0% of total assets at June 30, 2020 as compared to 18.5% of total assets at December 31, 2019. The increase is a result of active balance sheet management. We have further diversified the securities portfolio as to bond types, maturities and interest rate structures.

Total deposits increased $102.5 million to $3.6 billion as of June 30, 2020 as compared to December 31, 2019. Core deposits, including noninterest-bearing and interest-bearing demand deposits, money market accounts and savings, increased by $237.1 million, or 15.4%, as compared to December 31, 2019. Offsetting these increases was the intentional runoff of $134.6 million of higher cost certificates of deposits. Noninterest-bearing deposits comprised 18.4% and 15.8% of total deposits at June 30, 2020 and December 31, 2019, respectively.

The allowance for loan losses was 1.60%, 1.46% and 1.34% of total portfolio loans as of June 30, 2020, March 31, 2020 and December 31, 2019, respectively. General reserves as a percentage of total portfolio loans were 1.33%, 1.22% and 1.13% at June 30, 2020, March 31, 2020 and December 31, 2019, respectively. Included in the allowance is a reserve build of $6.0 million, or $(0.18) per share, driven by economic and market conditions as a result of COVID-19. The allowance for loan losses was 116.8% of nonperforming loans as of June 30, 2020 as compared to 92.0% of nonperforming loans as of December 31, 2019. In the view of management, the allowance for loan losses is adequate to absorb probable losses inherent in the loan portfolio. For further information regarding the Bank's decision to defer CECL under Section 4014 of the CARES Act, as well as further detail on the increase in provision during the first six months of 2020, please see the discussion above under Provision for Loan Losses.

The Bank is providing deferrals to customers under Section 4013 of the CARES Act and regulatory interagency statements on loan modifications. These deferrals typically provide deferrals of both principal and interest for up to 180 days. At the end of the deferral period, for term loans, payments will be applied to accrued interest first and will resume principal payments once accrued interest is current. Deferred principal will be due at maturity. For interest only loans, such as lines of credit, deferred interest will be due at maturity. As of June 30, 2020, we have had 958 commercial loans opt for deferrals with an aggregate principal balance of $1.2 billion. Approximately $462.5 million of these modifications were in the hospitality industry comprised of deferrals on 85 loans. The average deferment period for these customers has been 3.9 months. The request for loan deferrals has generally stabilized at June 30, 2020. We have participated in the Paycheck Protection Program ("PPP") passed by Congress. As of June 30, 2020, we had 970 PPP loans approved totaling $55.8 million. These PPP loans generated $1.5 million in fees which will be recognized in income when the loan is forgiven or over the remaining life of the loan.

The Bank remains well capitalized. The Bank's Tier 1 Capital ratio decreased to 13.32% as of June 30, 2020 as compared to 13.58% as of December 31, 2019. The Bank's leverage ratio was 10.30% at June 30, 2020 as compared to 10.33% as of December 31, 2019. The Bank's Total Risk-Based Capital ratio was 14.57% at June 30, 2020 as compared to 14.83% at December 31, 2019.

Total capital of $489.1 million at June 30, 2020, reflects an increase of $15.9 million as compared to December 31, 2019. The increase in equity during the first six months of 2020 is due to net income of $8.9 million and a $10.2 million increase in other comprehensive income due to changes in fair value of investment securities. These increases were offset by the $3.7 million special dividend paid in March of 2020. The remaining difference of $0.5 million is related to restricted stock activity during the first six months.

At June 30, 2020, funding sources accessible to the Bank include borrowing availability at the Federal Home Loan Bank ("FHLB"), equal to 25% of the Bank's assets approximating $1.0 billion, subject to the amount of eligible collateral pledged, federal funds unsecured lines with six other correspondent financial institutions in the amount of $115.0 million and access to the institutional CD market through brokered CDs and QwickRate. In addition to the above resources, the Bank also has $624.5 million of unpledged available-for-sale investment securities as an additional source of liquidity.

Based on continued market volatility, consensus forecasts for a prolonged low interest rate environment, and the drop in price of the Banks's common stock during the quarter, the Bank is currently analyzing the value of goodwill related to its prior acquisitions. Based on our preliminary analysis, we do not believe that our goodwill is impaired. Any potential goodwill impairment could be material to reported earnings, but would be a non-cash charge and have no effect on the Bank's cash balances, liquidity or tangible equity. In addition, because goodwill and other intangible assets are not included in the calculation of regulatory capital, the Bank's well-capitalized regulatory capital ratios would not be affected by this potential non-cash expense. The Bank anticipates the analysis will be completed prior to filing the Quarterly Report on Form 10-Q with the Federal Deposit Insurance Corporation in August 2020.

About Carter Bank & Trust

Headquartered in Martinsville, VA, Carter Bank & Trust is a state-chartered community bank in Virginia and trades on the Nasdaq Global Select Market under the symbol CARE. The Bank has $4.2 billion in assets and 99 branches in Virginia and North Carolina. For more information visit www.CBTCares.com.

Important Note Regarding Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables in our definitions and reconciliations of GAAP to non-GAAP financial measures. This press release and the accompanying tables discuss financial measures, such as adjusted noninterest expense, adjusted efficiency ratio, and net interest income on a fully taxable equivalent basis, which are all 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 Bank'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, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors should consider the Bank's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Bank. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Bank's results or financial condition as reported under GAAP.

Important Note Regarding Forward-Looking Statements

This information contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting Carter Bank & Trust and its future business and operations, and specifically including information related to the pending appraisal of collateral for one impaired loan relationship and potential impacts on the Bank's financial results. Forward looking statements are typically identified by words or phrases such as "will likely result," "expect," "anticipate," "estimate," "forecast," "project," "intend," " believe," "assume," "strategy," "trend," "plan," "outlook," "outcome," "continue," "remain," "potential," "opportunity," "believe," "comfortable," "current," "position," "maintain," "sustain," "seek," "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses; cyber-security concerns; rapid technological developments and changes; the Bank's liquidity and capital positions; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as the current COVID-19 pandemic), and of governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Bank's borrowers to satisfy their obligations to the Bank, on the value of collateral securing loans, on the demand for the Bank's loans or its other products and services, on incidents of cyberattack and fraud, on the Bank's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Bank's business operations and on financial markets and economic growth; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; regulatory supervision and oversight; legislation affecting the financial services industry as a whole, and Carter Bank & Trust, in particular; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or more costly than anticipated; containing costs and expenses; reliance on significant customer relationships; general economic or business conditions; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses. Many of these factors, as well as other factors, are described in our filings with the FDIC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
BALANCE SHEETS
(Unaudited)

                   
(Dollars in Thousands, except per share data)
  June 30,     December 31,     June 30,  
 
  2020     2019     2019  
ASSETS
                 
Cash and Due From Banks
  47,175     41,386     47,071  
Interest-Bearing Deposits in Other Financial Institutions
    6,846       45,156       55,138  
Federal Reserve Bank Excess Reserves
    135,237       39,270       36,806  
Total Cash and Cash Equivalents
    189,258       125,812       139,015  
 
                       
Securities, Available-for-Sale, at Fair Value
    749,029       742,617       803,673  
Loans Held-for-Sale
    9,345       19,714       9,841  
Portfolio Loans
    2,957,344       2,884,766       2,865,461  
Allowance for Loan Losses
    (47,405 )     (38,762 )     (40,008 )
Portfolio Loans, net
    2,909,939       2,846,004       2,825,453  
 
                       
Bank Premises and Equipment, net
    89,493       85,942       85,641  
Other Real Estate Owned, net
    17,245       18,324       24,622  
Goodwill
    62,192       62,192       62,192  
Federal Home Loan Bank Stock, at Cost
    5,093       4,113       3,688  
Bank Owned Life Insurance
    53,300       52,597       51,878  
Other Assets
    66,839       48,793       56,905  
TOTAL ASSETS
  4,151,733     4,006,108     4,062,908  
 
                       
 
                       
LIABILITIES
                       
Deposits:
                       
Noninterest-Bearing Demand
  662,639     554,875     571,421  
Interest-Bearing Demand
    318,903       286,561       234,953  
Money Market
    190,664       140,589       132,297  
Savings
    608,716       561,814       576,145  
Certificates of Deposits
    1,825,785       1,960,406       2,062,664  
Total Deposits
    3,606,707       3,504,245       3,577,480  
FHLB Borrowings
    35,000       10,000       -  
Other Liabilities
    20,967       18,752       21,195  
TOTAL LIABILITIES
    3,662,674       3,532,997       3,598,675  
 
                       
 
                       
SHAREHOLDERS' EQUITY
                       
Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares;
                       
26,384,801 outstanding at June 30, 2020,
                       
26,334,229 outstanding at December 31, 2019 and 26,333,929 at June 30, 2019
    26,385       26,334       26,334  
Additional Paid-in-Capital
    143,016       142,492       142,268  
Retained Earnings
    309,347       304,158       292,951  
Accumulated Other Comprehensive Income
    10,311       127       2,680  
TOTAL SHAREHOLDERS' EQUITY
    489,059       473,111       464,233  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  4,151,733     4,006,108     4,062,908  
 
                       
PROFITABILITY RATIOS (ANNUALIZED)
                       
Return on Average Assets
    0.44 %     0.65 %     0.76 %
Return on Average Shareholders' Equity
    3.70 %     5.76 %     6.87 %
Portfolio Loan to Deposit Ratio
    82.00 %     82.32 %     80.10 %
Allowance to Total Portfolio Loans
    1.60 %     1.34 %     1.40 %
 
                       
CAPITALIZATION RATIOS
                       
Shareholders' Equity to Assets
    11.78 %     11.81 %     11.43 %
Tier 1 Leverage Ratio
    10.30 %     10.33 %     9.78 %
Risk-Based Capital - Tier 1
    13.32 %     13.58 %     13.23 %
Risk-Based Capital - Total
    14.57 %     14.83 %     14.48 %
                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
INCOME STATEMENTS
(Unaudited)

             
(Dollars in Thousands, except per share data)
  Quarter-to-Date     Year-to-Date  
 
  June 30,     March 31,     June 30,     June 30,     June 30,  
 
  2020     2020     2019     2020     2019  
Interest Income
  35,617     37,836     40,068     73,453     79,207  
Interest Expense
    9,355       10,572       12,113       19,927       23,356  
NET INTEREST INCOME
    26,262       27,264       27,955       53,526       55,851  
 
                                       
Provision for Loan Losses
    5,473       4,798       1,369       10,271       2,996  
NET INTEREST INCOME AFTER
    20,789       22,466       26,586       43,255       52,855  
PROVISION FOR LOAN LOSSES
                                       
 
                                       
NONINTEREST INCOME
                                       
Gains on Sales of Securities, net
    2,321       1,214       909       3,535       940  
Service Charges, Commissions and Fees
    190       1,650       892       1,840       2,118  
Debit Card Interchange Fees
    1,468       1,243       1,320       2,711       2,494  
Insurance
    332       1,309       369       1,641       643  
Bank Owned Life Insurance Income
    350       353       356       703       717  
Gains on Sales of Other Real Estate Owned, net
    137       -       -       -       -  
Gains on Sales of Bank Premises, net
    -       -       178       -       8  
Other Real Estate Owned Income
    82       139       231       221       521  
Commercial Loan Swap Fee Income
    1,125       423       -       1,548       -  
Other
    196       621       324       817       772  
TOTAL NONINTEREST INCOME
    6,201       6,952       4,579       13,016       8,213  
 
                                       
NONINTEREST EXPENSE
                                       
Salaries and Employee Benefits
    12,489       13,581       12,809       26,070       24,844  
Occupancy Expense, net
    3,415       3,249       2,836       6,664       5,663  
FDIC Insurance Expense
    537       544       433       1,081       1,147  
Other Taxes
    788       746       711       1,534       1,354  
Advertising Expense
    400       606       326       1,006       497  
Telephone Expense
    573       574       562       1,147       1,067  
Professional and Legal Fees
    1,399       437       980       1,836       1,629  
Data Processing
    595       486       469       1,081       1,219  
Losses on Sales and Write-downs of Other Real Estate Owned, net
    -       189       88       52       276  
Losses on Sales and Write-downs of Bank Premises, net
    59       12       -       71       -  
Debit Card Expense
    671       554       830       1,225       1,540  
Tax Credit Amortization
    272       272       563       544       1,126  
Unfunded Loan Commitment Expense
    (383 )     982       173       599       218  
Other Real Estate Owned Expense
    177       140       (31 )     317       66  
Other
    2,031       2,376       2,085       4,407       4,128  
TOTAL NONINTEREST EXPENSE
    23,023       24,748       22,834       47,634       44,774  
 
                                       
INCOME BEFORE INCOME TAXES
    3,967       4,670       8,331       8,637       16,294  
Income Tax (Benefit) Provision
    (488 )     247       504       (241 )     926  
NET INCOME
  4,455     4,423     7,827     8,878     15,368  
 
                                       
Shares Outstanding, at End of Period
    26,384,801       26,385,185       26,333,929       26,384,801       26,333,929  
Average Shares Outstanding-Basic
    26,384,957       26,362,649       26,333,929       26,373,803       26,313,631  
Average Shares Outstanding-Diluted
    26,384,957       26,368,365       26,347,635       26,373,803       26,320,530  
 
                                       
PER SHARE DATA
                                       
Basic Earnings Per Common Share
  0.17     0.17     0.30     0.34     0.58  
Diluted Earnings Per Common Share
  0.17     0.17     0.30     0.34     0.58  
Book Value
  18.54     18.00     17.63     18.54     17.63  
Tangible Book Value2
  16.18     15.64     15.27     16.18     15.27  
Market Value
  8.07     9.18     19.75     8.07     19.75  
 
                                       
PROFITABILITY RATIOS (non-GAAP)
                                       
Net Interest Margin (FTE)3
    2.79 %     2.97 %     3.02 %     2.88 %     3.06 %
Core Efficiency Ratio4
    75.00 %     74.00 %     71.59 %     74.48 %     69.29 %
                                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
NET INTEREST MARGIN (FTE) (QTD AVERAGES)

(Unaudited)

                   
(Dollars in Thousands)
  June 30, 2020     March 31, 2020     June 30, 2019  
ASSETS
  Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate  
Interest-Bearing Deposits with Banks
  106,710     26       0.10%     62,960     210       1.32%     127,377     763       2.40%  
Tax-Free Investment Securities
    49,633       416       3.35%       21,452       204       3.80%       91,148       795       3.50%  
Taxable Investment Securities
    685,468       3,594       2.09%       712,104       4,502       2.52%       737,949       4,283       2.33%  
Tax-Free Loans
    322,739       2,563       3.17%       337,857       2,660       3.15%       387,053       3,088       3.20%  
Taxable Loans
    2,651,873       29,577       4.44%       2,584,917       30,797       4.74%       2,473,376       31,929       5.18%  
Federal Home Loan Bank Stock
    5,093       67       5.23%       4,418       64       5.85%       1,581       26       6.60%  
Total Interest-Earning Assets
  3,821,516     36,243       3.77%     3,723,708     38,437       4.11%     3,818,484     40,884       4.29%  
                                                                         
LIABILITIES
                                                                       
Deposits:
                                                                       
Interest-Bearing Demand
  297,815     242       0.33%     297,395     446       0.60%     257,754     595       0.93%  
Money Market
    183,542       211       0.46%       154,564       271       0.71%       136,271       517       1.52%  
Savings
    592,193       157       0.11%       562,712       145       0.10%       586,923       498       0.34%  
Certificates of Deposit
    1,845,294       8,627       1.88%       1,918,841       9,633       2.02%       2,075,899       10,483       2.03%  
Total Interest-Bearing Deposits
  2,918,844     9,237       1.27%     2,933,512     10,495       1.44%     3,056,847     12,093       1.59%  
Borrowings:
                                                                       
FED Funds Purchased
    -       -       -       220       1       1.59%       -       -       -  
FHLB Borrowings
    35,000       100       1.13%       17,418       58       1.33%       -       -       -  
Other Borrowings
    1,245       18       5.58%       1,481       18       4.81%       1,029       20       7.80%  
Total Borrowings
    36,245       118       1.28%       19,119       77       1.62%       1,029       20       7.80%  
Total Interest-Bearing Liabilities
  $ 2,955,089     9,355       1.27%       $  2,952,631     10,572        1.44%     $ 3,057,876     12,113       1.59%  
Net Interest Income
          26,888                     27,865                     28,771          
Net Interest Margin
                    2.79%                       2.97%                       3.02%  
                                                                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA

NET INTEREST MARGIN (FTE) (YTD AVERAGES)
(Unaudited)

             
(Dollars in Thousands)
  June 30, 2020     June 30, 2019  
ASSETS
  Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate  
Interest-Bearing Deposits with Banks
  84,836     236       0.55%     149,643     1,784       2.40%  
Tax-Free Investment Securities
    35,543       620       3.49%       100,997       1,813       3.62%  
Taxable Investment Securities
    698,786       8,096       2.31%       719,770       8,405       2.35%  
Tax-Free Loans
    330,298       5,223       3.16%       394,021       6,402       3.28%  
Taxable Loans
    2,618,395       60,374       4.58%       2,434,977       62,503       5.18%  
Federal Home Loan Bank Stock
    4,755       131       5.52%       795       26       6.60%  
Total Interest-Earning Assets
  3,772,613     74,680       3.94%     3,800,203     80,933       4.29%  
 
                                               
LIABILITIES
                                               
Deposits:
                                               
Interest-Bearing Demand
  297,605     688       0.46%     264,447     1,235       0.94%  
Money Market
    169,053       481       0.57%       113,562       760       1.35%  
Savings
    577,453       302       0.11%       596,566       984       0.33%  
Certificates of Deposit
    1,882,067       18,261       1.95%       2,087,216       20,337       1.96%  
Total Interest-Bearing Deposits
  2,926,178     19,732       1.36%     3,061,791     23,316       1.54%  
Borrowings:
                                               
FED Funds Purchased
    110       1       1.62%       -       -       -  
FHLB Borrowings
    26,209       159       1.20%       -       -       -  
Other Borrowings
    1,363       35       5.16%       692       40       11.66%  
Total Borrowings
    27,682       195       1.40%       692       40       11.66%  
Total Interest-Bearing Liabilities
  2,953,860     19,927       1.36%     3,062,483     23,356       1.54%  
Net Interest Income
          54,753                     57,577          
Net Interest Margin
                    2.88%                       3.06%  
                                                 

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
LOANS AND LOANS HELD-FOR-SALE
(Unaudited)

                   
 
  June 30,     December 31,     June 30,  
(Dollars in Thousands)
  2020     2019     2019  
Commercial
                 
Commercial Real Estate
  1,374,242     1,365,310     1,396,986  
Commercial and Industrial
    279,143       256,798       257,947  
Obligations of State and Political Subdivisions
    338,190       364,869       405,212  
Commercial Construction
    374,609       292,827       223,711  
Total Commercial Loans
    2,366,184       2,279,804       2,283,856  
Consumer
                       
Residential Mortgages
    508,388       514,538       489,158  
Other Consumer
    69,884       73,688       73,096  
Consumer Construction
    12,888       16,736       19,351  
Total Consumer Loans
    591,160       604,962       581,605  
Total Portfolio Loans
    2,957,344       2,884,766       2,865,461  
Loans Held-for-Sale
    9,345       19,714       9,841  
Total Loans
  2,966,689     2,904,480     2,875,302  
                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
ASSET QUALITY DATA
(Unaudited)

                   
(Dollars in Thousands)
  June 30,     December 31,     June 30,  
Nonperforming Loans
  2020     2019     2019  
Commercial Real Estate
  247     1,017     328  
Commercial and Industrial
    155       77       397  
Obligations of State and Political Subdivisions
    -       -       -  
Commercial Construction
    3,162       3,210       2,976  
Residential Mortgages
    3,326       2,857       1,580  
Other Consumer
    206       267       142  
Consumer Construction
    -       -       -  
Total Nonperforming Loans
    7,096       7,428       5,423  
 
                       
Nonperforming Troubled Debt Restructurings
                       
Commercial Real Estate
    29,010       30,073       34,329  
Commercial and Industrial
    240       390       -  
Obligations of State and Political Subdivisions
    -       -       -  
Commercial Construction
    4,252       4,242       5,154  
Residential Mortgages
    -       -       -  
Other Consumer
    -       -       -  
Consumer Construction
    -       -       -  
Total Nonperforming Troubled Debt Restructurings
    33,502       34,705       39,483  
Total Nonperforming Loans and Troubled Debt Restructurings
    40,598       42,133       44,906  
Other Real Estate Owned
    17,245       18,324       24,622  
Total Nonperforming Assets
  57,843     60,457     69,528  
                         
                         
 
  June 30,     December 31,     June 30,  
 
  2020     2019     2019  
Nonperforming Loans
  40,598     42,133     44,906  
Other Real Estate Owned
    17,245       18,324       24,622  
Total Nonperforming Assets
    57,843       60,457       69,528  
 
                       
Troubled Debt Restructurings (Nonaccruing)
    33,502       34,705       39,483  
Troubled Debt Restructurings (Accruing)
    107,284       109,265       113,899  
Total Troubled Debt Restructurings
  140,786     143,970     153,382  
 
                       
Nonperforming Loans to Total Portfolio Loans
    1.37%       1.46%       1.57%  
Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned
    1.94%       2.08%       2.41%  
Allowance for Loan Losses to Total Portfolio Loans
    1.60%       1.34%       1.40%  
Allowance for Loan Losses to Nonperforming Loans
    116.77%       92.00%       89.09%  
Net Loan Charge-offs (Recoveries)
  1,628     3,841     2,187  
Net Loan Charge-offs (Recoveries) (Annualized) to Average Loans
    0.11%       0.13%       0.16%  
                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA

ALLOWANCE FOR LOAN LOSSES
(Unaudited)

             
 
  Quarter-to-Date     Year-to-Date  
 
  June 30,     March 31,     June 30,     June 30,     June 30,  
(Dollars in Thousands)
  2020     2020     2019     2020     2019  
Balance Beginning of Year
  42,942     38,762     39,572     38,762     39,199  
Provision for Loan Losses
    5,473       4,798       1,369       10,271       2,996  
Charge-offs:
                                       
Commercial Real Estate
    40       -       19       40       69  
Commercial and Industrial
    8       38       2       46       2  
Obligations of State and Political Subdivisions
    -       -       -       -       -  
Commercial Construction
    -       -       -       -       393  
Residential Mortgages
    15       5       18       20       23  
Other Consumer
    1,094       1,527       1,031       2,621       1,959  
Consumer Construction
    -       -       -       -       -  
Total Charge-offs
    1,157       1,570       1,070       2,727       2,446  
Recoveries:
                                       
Commercial Real Estate
    -       707       -       707       -  
Commercial and Industrial
    1       1       -       2       -  
Obligations of State and Political Subdivisions
    -       -       -       -       -  
Commercial Construction
    -       -       -       -       -  
Residential Mortgages
    -       -       -       -       -  
Other Consumer
    146       244       137       390       259  
Consumer Construction
    -       -       -       -       -  
Total Recoveries
    147       952       137       1,099       259  
Total Net Charge-offs
    1,010       618       933       1,628       2,187  
Balance End of Year
  47,405     42,942     40,008     47,405     40,008  
                                         

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
(Unaudited)
(Dollars in Thousands, except per share data)

DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:

1Pre-tax pre-provision earnings are computed as net interest income plus noninterest income minus noninterest expense before the provision for loan losses and income tax provision.

             
2Tangible Equity
  Quarter-to-Date     Year-to-Date  
 
  June 30,     March 31,     June 30,     June 30,     June 30,  
 
  2020     2020     2019     2020     2019  
Total Shareholders' Equity
  489,059     474,821     464,233     489,059     464,233  
Less: Goodwill
    62,192       62,192       62,192       62,192       62,192  
Tangible Equity
  $ 426,867     $ 412,629     $ 402,041     $ 426,867     $ 402,041  
 
                                       
Shares Outstanding at End of Period
    26,384,801       26,385,754       26,333,929       26,384,801       26,333,929  
Tangible Book Value Per Common Share
  16.18     15.64     15.27     16.18     15.27  
                                         

3Net interest income has been computed on a fully taxable equivalent basis ("FTE") using a 21% federal income tax rate for the 2020 and 2019 periods.

             
Net Interest Income (FTE) (Non-GAAP)
  Quarter-to-Date     Year-to-Date  
 
  June 30,     March 31,     June 30,     June 30,     June 30,  
 
  2020     2019     2019     2020     2019  
Interest Income
  35,617     37,836     40,068     73,453     79,207  
Interest Expense
    (9,355 )     (10,572 )     (12,113 )     (19,927 )     (23,356 )
Net Interest Income
    26,262       27,264       27,955       53,526       55,851  
Tax Equivalent Adjustment3
    626       601       816       1,227       1,726  
NET INTEREST INCOME (FTE) (Non-GAAP)
  26,888     27,865     28,771     54,753     57,577  
Net Interest Income (Annualized)
    106,615       110,537       115,400       108,543       116,108  
Average Earning Assets
    3,821,516       3,723,708       3,818,484       3,772,613       3,800,203  
NET INTEREST MARGIN (FTE) (Non-GAAP)
    2.79%       2.97%       3.02%       2.88%       3.06%  

4Core Efficiency Ratio (Non-GAAP)

 
  Quarter-to-Date     Year-to-Date  
 
  June 30,     March 31,     June 30,     June 30,     June 30,  
 
  2020     2020     2019     2020     2019  
NONINTEREST EXPENSE
  23,023     24,748     22,834     47,634     44,774  
Less: Losses on Sales and Write-downs of Other Real Estate Owned, net
    -       (189 )     (88 )     (52 )     (276 )
Less: Losses on Sales and Write-downs of Bank Premises, net
    (59 )     (12 )     -       (71 )     -  
Less: Tax Credit Amortization
    (272 )     (272 )     (563 )     (544 )     (1,126 )
Plus: Contingent Liability
    -       -       331       -       331  
Less: Conversion Expense
    -       -       -       -       (2 )
Plus: Conversion Vacation Accrual
    192       288       291       480       560  
CORE NONINTEREST EXPENSE (Non-GAAP)
  22,884     24,563     22,805     47,447     44,261  
 
                                       
NET INTEREST INCOME
  26,262     27,264     27,955     53,526     55,851  
Plus: Taxable Equivalent Adjustment3
    626       601       816       1,227       1,726  
NET INTEREST INCOME (FTE) (Non-GAAP)
  26,888     27,865     28,771     54,753     57,577  
Less: Gains on Sales of Securities, net
    (2,321 )     (1,214 )     (909 )     (3,535 )     (940 )
Less: Gains on Sales of Other Real Estate Owned, net
    (137 )     -       -       -       -  
Less: Gains on Sales Bank Premises, net
    -       -       (178 )     -       (8 )
Less: Other Real Estate Owned Income
    (82 )     (139 )     (231 )     (221 )     (521 )
Less: Other Gains
    (38 )     (269 )     (176 )     (307 )     (447 )
Noninterest Income
    6,201       6,952       4,579       13,016       8,213  
CORE NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME
  30,511     33,195     31,856     63,706     63,874  
 
                                       
CORE EFFICIENCY RATIO (Non-GAAP)
    75.00%       74.00%       71.59%       74.48%       69.29%  
                                         

Carter Bank & Trust
Wendy Bell, 276-656-1776
Senior Executive Vice President & Chief Financial Officer

[email protected]

SOURCE: Carter Bank & Trust

Topic:
Earnings
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