Carter Bank & Trust Announces Second Quarter 2019 Financial Results

MARTINSVILLE, VA / ACCESSWIRE / July 25, 2019 / Carter Bank & Trust (the “Bank”) (NASDAQ: CARE) today announced net income of $7.8 million, or $0.30 diluted earnings per share, for the second quarter of 2019, as compared to net income of $7.2 million, or $0.27 diluted earnings per share, for the second quarter of 2018. Pre-tax pre-provision earnings were $9.7 million and $11.0 million for the quarters ended June 30, 2019 and 2018, respectively.

For the six months ended June 30, 2019, net income was $15.4 million, or $0.58 diluted earnings per share, as compared to net income of $16.0 million, or $0.61 diluted earnings per share in the first six months of 2018. Pre-tax pre-provision earnings were $19.3 million for the six months ended June 30, 2019 as compared to $20.6 million for the same period of 2018.

Second Quarter 2019 Financial Highlights

  • Second quarter net income of $7.8 million, or $0.30 diluted earnings per share, as compared to net income of $7.5 million, or $0.29 diluted earnings per share, in the first quarter of 2019 and net income of $7.2 million, or $0.27 diluted earnings per share, over the same quarter of 2018;
  • Net interest margin, on a fully taxable equivalent basis, declined seven basis points to 3.02% over the linked quarter and declined 21 basis points over the same quarter last year;
  • Securities gains of $0.9 million were realized in the second quarter of 2019 to take advantage of market opportunities, as compared to securities gains of $0.1 million in the same period of 2018;
  • Solid loan growth of $23.4 million, or 3.3% on an annualized basis, as compared to the linked quarter and growth of $123.1 million, or 4.5%, as compared to June 30, 2018;
  • Total deposits were $3.6 billion at June 30, 2019, December 31, 2018 and June 30, 2018. Noninterest-bearing deposits increased by $23.6 million, or 4.3%, to $571.4 million as compared to December 31, 2018 and money market accounts increased $51.5 million, or 63.7%, due to recent special rate promotions during the first half of 2019;
  • Nonperforming loans declined $5.8 million, or 11.5% as compared to December 31, 2018 and decreased $15.3 million, or 25.4%, from June 30, 2018. Nonperforming loans as a percentage of total portfolio loans were 1.57%, 1.88% and 2.19% as of June 30, 2019, December 31, 2018 and June 30, 2018, respectively.

2019 Year-to-Date Financial Highlights

  • Year-to-date net income of $15.4 million, or $0.58 diluted earnings per share, as compared to a net income of $16.0 million, or $0.61 diluted earnings per share, in same period of 2018;
  • Net interest margin, on a fully taxable equivalent basis, declined seven basis points to 3.06% year-over-year;
  • Net interest income decreased $0.8 million, or 1.5%, to $55.9 million year-over-year;
  • Provision for loan losses declined $0.2 million, or 7.7%, as compared to the same period of 2018;
  • Securities gains of $0.9 million were realized in 2019 to take advantage of market opportunities, as compared to securities gains of $1.0 million in the same period of 2018.

Litz H. Van Dyke, Chief Executive Officer, stated, “Our performance this quarter reflects solid loan and core deposit growth as a result of our various strategic initiatives designed to better position our balance sheet to support an enhanced level of earnings.”

Van Dyke continued, “We continue to have a great deal of excitement at Carter Bank & Trust as we continue to launch new products and services. Online consumer account opening and commercial treasury services, which includes a ‘best in class’ online and mobile commercial platform, are on target to roll out in the third quarter of 2019, accompanied with the opening of a new commercial loan production office in Greensboro, North Carolina. While there is still work to be done in dealing with some of the legacy issues we have mentioned previously, in the coming months our shareholders should begin to see a shift in focus from problem remediation to growth.”

Operating Highlights

Net interest income decreased $0.8 million, or 1.5%, to $55.9 million during the first six months of 2019 as compared to the same period of 2018. The net interest margin, on a fully taxable equivalent basis, decreased seven basis points to 3.06% over the past twelve months. The increases in short-term interest rates positively impact both net interest income and net interest margin, but are muted by lower replacement loan yields from legacy loan pay-downs during 2018. The yield on interest-earning assets increased 24 basis points, offset by a 41 basis point increase in funding costs as compared to the same period of 2018.

The provision for loan losses totaled $3.0 million for the six months ended June 30, 2019 and $3.2 million for the same period of 2018. At June 30, 2019, nonperforming loans were $44.9 million, a decrease of $5.8 million, or 11.5% as compared to December 31, 2018. Net charge-offs were $2.2 million in the first six months of 2019 as compared to $33 thousand of net charge-offs in the same period of 2018. As a percentage of total portfolio loans, on an annualized basis, net charge-offs were 0.15% and 0.01% for the quarters ending June 30, 2019 and 2018, respectively. Nonperforming loans as a percentage of total portfolio loans were 1.57%, 1.88% and 2.19% as of June 30, 2019, December 31, 2018 and June 30, 2018, respectively.

Noninterest income decreased $0.9 million, or 10.5%, to $7.3 million, excluding net securities gains, for the six months ending June 30, 2019 as compared to the same period of 2018. This decrease was primarily due to lower income from other real estate owned (“OREO”) due to the sale of several large commercial properties over the last 12 months that generated income beginning in the first quarter of 2018, offset by higher fees on deposits and higher bank owned life insurance earnings. Securities gains of $0.9 million and $1.0 million were realized during the first six months of 2019 and 2018, respectively, to take advantage of market opportunities and reduce the credit risk of the securities portfolio.

Total noninterest expense decreased $0.4 million, or 1.0%, for the first six months of 2019 to $44.8 million as compared to $45.2 million in the same period of 2018. The reduction was primarily driven by decreases of $2.0 million in legal and professional fees, $0.9 million in tax credit amortization and $1.2 million in OREO expenses due to fewer properties under management.

The decrease in legal and professional fees were related to regulatory and compliance reviews which were completed as of June 30, 2018. Offsetting these decreases were increases of $0.7 million in data processing expense due to our core conversion completed in the fourth quarter of 2018 and $1.0 million in occupancy expense as a result of higher depreciation for hardware and software and amortization of maintenance agreements related to the aforementioned core conversion.

Financial Condition

Total assets were $4.1 billion at June 30, 2019 and $4.0 billion at December 31, 2018. Total portfolio loans increased $161.7 million, or 6.0%, to $2.9 billion as of June 30, 2019 as compared to December 31, 2018. Nonperforming loans decreased $5.8 million to $44.9 million, or 11.5% as of June 30, 2019 as compared to $50.7 million at December 31, 2018. OREO decreased $9.1 million at June 30, 2019 as compared to December 31, 2018 due to the sale of properties during the first half of 2019. Closed retail bank offices declined $2.5 million from December 31, 2018 and have a remaining book value of $4.3 million at June 30, 2019.

Federal Reserve Bank excess reserves decreased $148.0 million at June 30, 2019 as compared to December 31, 2018. The balance was higher at year-end primarily due to large legacy credit reductions received late in December of 2018. This excess cash was deployed into higher yielding and diversified securities, funded loan growth, and also funded the planned decrease in high cost deposits.

The securities portfolio increased $20.9 million and is currently 19.8% of total assets at June 30, 2019 as compared to 19.4% of total assets at December 31, 2018. The increase is a result of deposit growth and active balance sheet management. We have further diversified the securities portfolio as to bond types, maturities and interest rate structures.

Total deposits were $3.6 billion as of June 30, 2019 and December 31, 2018. Noninterest-bearing deposits increased by $23.6 million, or 4.3%, to $571.4 million as of June 30, 2019 as compared to $547.8 million as of December 31, 2018 and money market accounts increased $51.5 million, or 63.7%, due to recent special rate promotions during the first six months of 2019. Offsetting these increases were decreases of $19.1 million, or 7.5%, in interest-bearing demand deposits, $34.6 million, or 5.7%, in savings accounts and $35.1 million in certificates of deposits as compared to December 31, 2018. Noninterest-bearing deposits comprised 16.0% and 15.3% of total deposits at June 30, 2019 and December 31, 2018.

The allowance for loan losses was 1.40% of total portfolio loans as of June 30, 2019 as compared to 1.45% as of December 31, 2018. General reserves as a percentage of total portfolio loans were 1.18% at June 30, 2019 as compared to 1.26% as of December 31, 2018. The allowance for loan losses was 89.1% of nonperforming loans as of June 30, 2019 as compared to 77.3% of nonperforming loans as of December 31, 2018. In the view of management, the allowance for loan losses is adequate to absorb probable losses inherent in the loan portfolio.

The Bank remains well capitalized. The Bank’s Tier 1 Capital ratio decreased to 13.33% as of June 30, 2019 as compared to 13.97% as of December 31, 2018. The Bank’s leverage ratio was 9.86% at June 30, 2019 as compared to 9.69% as of December 31, 2018. The Bank’s Total Risk-Based Capital ratio was 14.58% at June 30, 2019 as compared to 15.22% at December 31, 2018.

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 $4.1 billion in assets and 104 branches in Virginia and North Carolina. For more information visit www.CarterBankandTrust.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. 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; 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 FINANCIAL DATA
BALANCE SHEETS
(Unaudited)

(Dollars in Thousands, except per share data)
June 30, December 31, June 30,
2019 2018 2018
ASSETS
Cash and Due From Banks
$ 47,071 $ 47,413 $ 45,868
Interest-Bearing Deposits in Other Financial Institutions
55,138 61,612 54,131
Federal Reserve Bank Excess Reserves
36,806 184,798 88,624
Total Cash and Cash Equivalents
139,015 293,823 188,623
Securities, Available-for-Sale, at Fair Value
803,673 782,758 865,689
Loans Held-for-Sale
9,841 2,559 1,121
Portfolio Loans
2,865,461 2,703,792 2,751,129
Allowance for Loan Losses
(40,008 ) (39,199 ) (38,530 )
Portfolio Loans, net
2,825,453 2,664,593 2,712,599
Bank Premises and Equipment, net
85,641 85,841 80,568
Other Real Estate Owned, net
24,622 33,681 60,047
Goodwill
58,726 58,726 58,726
Federal Home Loan Bank Stock, at Cost
3,688
Bank Owned Life Insurance
51,878 51,161 50,393
Other Assets
60,371 66,457 71,745
TOTAL ASSETS
$ 4,062,908 $ 4,039,599 $ 4,089,511
LIABILITIES
Deposits:
Noninterest-Bearing Demand
$ 571,421 $ 547,773 $ 548,566
Interest-Bearing Demand
234,953 254,015 255,139
Money Market
132,297 80,835 92,760
Savings
576,145 610,757 662,689
Certificates of Deposits
2,062,664 2,097,801 2,082,444
Total Deposits
3,577,480 3,591,181 3,641,598
Other Liabilities
21,195 12,204 10,066
TOTAL LIABILITIES
3,598,675 3,603,385 3,651,664
SHAREHOLDERS’ EQUITY
Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares;
26,333,929 outstanding at June 30, 2019,
26,270,174 outstanding at December 31, 2018 and 26,257,761 at June 30, 2018
26,334 26,270 26,258
Additional Paid-in-Capital
142,268 142,175 142,178
Retained Earnings
292,951 277,835 281,958
Accumulated Other Comprehensive Income (Loss)
2,680 (10,066 ) (12,547 )
TOTAL SHAREHOLDERS’ EQUITY
464,233 436,214 437,847
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 4,062,908 $ 4,039,599 $ 4,089,511
PROFITABILITY RATIOS (ANNUALIZED)
Return on Average Assets
0.76% 0.29% 0.80%
Return on Average Shareholders’ Equity
6.87% 2.75% 7.47%
Portfolio Loan to Deposit Ratio
80.10% 75.29% 75.55%
Allowance to Total Portfolio Loans
1.40% 1.45% 1.40%
CAPITALIZATION RATIOS
Shareholders’ Equity to Average Assets
11.06% 10.70% 10.69%
Tier 1 Leverage Ratio
9.86% 9.69% 9.78%
Risk-Based Capital – Tier 1
13.33% 13.97% 13.65%
Risk-Based Capital – Total
14.58% 15.22% 14.90%

CARTER BANK & TRUST
CONSOLIDATED 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,
2019 2019 2018 2019 2018
Interest Income
$ 40,068 $ 39,139 $ 38,362 $ 79,207 $ 73,950
Interest Expense
12,113 11,243 9,111 23,356 17,262
NET INTEREST INCOME
27,955 27,896 29,251 55,851 56,688
Provision for Loan Losses
1,369 1,627 1,730 2,996 3,245
NET INTEREST INCOME AFTER
26,586 26,269 27,521 52,855 53,443
PROVISION FOR LOAN LOSSES
NONINTEREST INCOME
Gains on Sales of Securities, net
909 31 132 940 1,000
Service Charges, Commissions and Fees
892 1,226 780 2,118 2,032
Debit Card Interchange Fees
1,320 1,174 1,234 2,494 2,367
Insurance
369 274 69 643 604
Bank Owned Life Insurance Income
356 361 393 717 393
Gains on Sales of Other Real Estate Owned, net
915 573
Gains on Sales of Bank Premises, net
178 8
Other Real Estate Owned Income
231 290 966 521 1,515
Other
324 448 252 772 646
TOTAL NONINTEREST INCOME
4,579 3,804 4,741 8,213 9,130
NONINTEREST EXPENSE
Salaries and Employee Benefits
12,809 12,035 12,607 24,844 24,867
Occupancy Expense, net
2,836 2,827 2,321 5,663 4,646
FDIC Insurance Expense
433 714 633 1,147 1,471
Other Taxes
711 643 643 1,354 1,120
Telephone Expense
562 505 643 1,067 1,312
Professional and Legal Fees
980 649 2,402 1,629 3,612
Data Processing
409 721 200 1,130 468
Losses on Sales and Write-downs of Other Real Estate Owned, net
88 188 276
Losses on Sales and Write-downs of Bank Premises, net
170 71 71
Debit Card Expense
830 710 662 1,540 1,314
Tax Credit Amortization
563 563 1,015 1,126 2,030
Other Real Estate Owned Expense
(46 ) 89 707 43 1,238
Other
2,659 2,296 1,118 4,955 3,090
TOTAL NONINTEREST EXPENSE
22,834 22,110 23,022 44,774 45,239
INCOME BEFORE INCOME TAXES
8,331 7,963 9,240 16,294 17,334
Income Tax Provision
504 422 2,041 926 1,306
NET INCOME
$ 7,827 $ 7,541 $ 7,199 $ 15,368 $ 16,028
Shares Outstanding, at End of Period
26,333,929 26,308,087 26,257,761 26,333,929 26,257,761
Average Shares Outstanding-Basic
26,333,929 26,293,108 26,257,761 26,313,631 26,257,761
Average Shares Outstanding-Diluted
26,347,635 26,295,226 26,257,761 26,320,530 26,257,761
PER SHARE DATA
Basic Earnings Per Common Share
$ 0.30 $ 0.29 $ 0.27 $ 0.58 $ 0.61
Diluted Earnings Per Common Share
$ 0.30 $ 0.29 $ 0.27 $ 0.58 $ 0.61
Book Value
$ 17.63 $ 17.10 $ 16.67 $ 17.63 $ 16.67
Tangible Book Value2
$ 15.40 $ 14.86 $ 14.44 $ 15.40 $ 14.44
Market Value
$ 19.75 $ 19.19 $ 17.96 $ 19.75 $ 17.96
PROFITABILITY RATIOS (non-GAAP)
Net Interest Margin (FTE)3
3.02 % 3.09 % 3.23 % 3.06 % 3.13 %
Core Efficiency Ratio4
71.59 % 67.01 % 63.42 % 69.29 % 64.17 %

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

(Dollars in Thousands)
June 30, 2019 March 31, 2019 June 30, 2018
ASSETS
Average Balance Income/ Expense Rate Average Balance Income/ Expense Rate Average Balance Income/ Expense Rate
Interest-Bearing Deposits with Banks
$ 127,377 $ 763 2.40% $ 172,155 $ 1,021 2.41% $ 105,286 $ 500 1.90%
Tax-Free Investment Securities
91,148 795 3.50% 110,955 1,018 3.72% 136,902 1,360 3.98%
Taxable Investment Securities
737,949 4,283 2.33% 701,390 4,122 2.38% 789,703 4,064 2.06%
Tax-Free Loans
387,053 3,088 3.20% 401,066 3,314 3.35% 423,621 3,272 3.10%
Taxable Loans
2,473,376 31,929 5.18% 2,396,152 30,574 5.17% 2,300,378 30,139 5.26%
Federal Home Loan Bank
1,581 26 6.60%
Total Interest-Earning Assets
$ 3,818,484 $ 40,884 4.29% $ 3,781,718 $ 40,049 4.29% $ 3,755,890 $ 39,335 4.20%
LIABILITIES
Deposits:
Interest-Bearing Demand
$ 257,754 $ 595 0.93% $ 271,214 $ 641 0.96% $ 258,539 $ 515 0.80%
Money Market
136,271 517 1.52% 90,601 243 1.09% 92,211 167 0.73%
Savings
586,923 498 0.34% 606,317 486 0.33% 677,935 513 0.30%
Certificates of Deposit
2,075,899 10,483 2.03% 2,098,658 9,854 1.90% 2,040,047 7,916 1.56%
Total Interest-Bearing Deposits
$ 3,056,847 $ 12,093 1.59% $ 3,066,790 $ 11,224 1.48% $ 3,068,732 $ 9,111 1.19%
Borrowings:
Other Borrowings
1,029 20 7.80% 954 20 8.50%
Total Borrowings
1,029 20 7.80% 954 20 8.50%
Total Interest-Bearing Liabilities
$ 3,057,876 $ 12,113 1.59% $ 3,067,744 $ 11,244 1.49% $ 3,068,732 $ 9,111 1.19%
Net Interest Income
$ 28,771 $ 28,805 $ 30,224
Net Interest Margin
3.02% 3.09% 3.23%

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

(Dollars in Thousands)
June 30, 2019 June 30, 2018
ASSETS
Average Balance Income/ Expense Rate Average Balance Income/ Expense Rate
Interest-Bearing Deposits with Banks
$ 149,643 $ 1,784 2.40% $ 155,016 $ 1,362 1.77%
Tax-Free Investment Securities
100,997 1,813 3.62% 153,036 3,203 4.22%
Taxable Investment Securities
719,770 8,405 2.35% 781,086 7,819 2.02%
Tax-Free Loans
394,021 6,402 3.28% 429,025 6,609 3.11%
Taxable Loans, net of Unearned Income
2,434,977 62,503 5.18% 2,265,223 57,018 5.08%
Federal Home Loan Bank
795 26 6.60%
Total Interest-Earning Assets
$ 3,800,203 $ 80,933 4.29% $ 3,783,386 $ 76,011 4.05%
LIABILITIES
Deposits:
Interest-Bearing Demand
$ 264,447 $ 1,235 0.94% $ 261,609 $ 919 0.71%
Money Market
113,562 760 1.35% 104,528 300 0.58%
Savings
596,566 984 0.33% 694,386 1,038 0.30%
Certificates of Deposit
2,087,216 20,337 1.96% 2,026,539 15,005 1.49%
Total Interest-Bearing Deposits
$ 3,061,791 $ 23,316 1.54% $ 3,087,062 $ 17,262 1.13%
Borrowings
Other Borrowings
692 40 11.66%
Total Borrowings
692 40 11.66%
Total Interest-Bearing Liabilities
$ 3,062,483 $ 23,356 1.54% $ 3,087,062 $ 17,262 1.13%
Net Interest Income
$ 57,577 $ 58,749
Net Interest Margin
3.06% 3.13%

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

June 30, December 31, June 30,
(Dollars in Thousands)
2019 2018 2018
Commercial
Commercial Real Estate
$ 1,421,891 $ 1,381,231 $ 1,381,844
Commercial and Industrial
662,178 660,872 852,135
Commercial Construction
257,760 238,016 207,172
Total Commercial Loans
2,341,829 2,280,119 2,441,151
Consumer
Residential Mortgages
431,185 339,307 221,768
Other Consumer
73,096 73,058 80,506
Consumer Construction
19,351 11,308 7,704
Total Consumer Loans
523,632 423,673 309,978
Total Portfolio Loans
2,865,461 2,703,792 2,751,129
Loans Held-for-Sale
9,841 2,559 1,121
Total Loans
$ 2,875,302 $ 2,706,351 $ 2,752,250

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

(Dollars in Thousands)
June 30, December 31, June 30,
Nonperforming Loans
2019 2018 2018
Real Estate
$ 4,884 $ 3,289 $ 8,382
Consumer
142 65
Commercial
397 606
Total Nonperforming Loans
5,423 3,960 8,382
Nonperforming Troubled Debt Restructurings
Real Estate
39,483 46,771 51,821
Consumer
Commercial
Total Nonperforming Troubled Debt Restructurings
39,483 46,771 51,821
Total Nonperforming Loans and Troubled Debt Restructurings
44,906 50,731 60,203
Other Real Estate Owned
24,622 33,681 60,047
Total Nonperforming Assets
$ 69,528 $ 84,412 $ 120,250
June 30, December 31, June 30,
2019 2018 2018
Nonperforming Loans
$ 44,906 $ 50,731 $ 60,203
Other Real Estate Owned
24,622 33,681 60,047
Nonperforming Assets
69,528 84,412 120,250
Troubled Debt Restructurings (Nonaccruing)
39,483 46,771 51,821
Troubled Debt Restructurings (Accruing)
113,899 114,806 291,721
Total Troubled Debt Restructurings
$ 153,382 $ 161,577 $ 343,542
Nonperforming Loans to Total Portfolio Loans
1.57% 1.88% 2.19%
Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned
2.41% 3.08% 4.28%
Allowance for Loan Losses to Total Portfolio Loans
1.40% 1.45% 1.40%
Allowance for Loan Losses to Nonperforming Loans
89.09% 77.27% 64.00%
Net Loan Charge-offs (Recoveries)
$ 2,187 $ 12,989 $ 33
Net Loan Charge-offs (Recoveries) (Annualized) to Average Loans
0.16% 0.47% 0.01%

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
ALLOWANCE FOR LOAN LOSSES
(Unaudited)

June 30, December 31, June 30,
(Dollars in Thousands)
2019 2018 2018
Balance Beginning of Year
$ 39,199 $ 35,318 $ 35,318
Provision for Loan Losses
2,996 16,870 3,245
Charge-offs:
Real Estate Loans
485 11,924 684
Consumer Loans
1,959 2,710 851
Commercial Loans
2 20 6
Total Charge-offs
2,446 14,654 1,541
Recoveries:
Real Estate Loans
1,415 1,415
Consumer Loans
259 250 93
Commercial Loans
Total Recoveries
259 1,665 1,508
Total Net Charge-offs
2,187 12,989 33
Balance End of Year
$ 40,008 $ 39,199 $ 38,530

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,
2019 2019 2018 2019 2018
Total Shareholders’ Equity
$ 464,233 $ 449,769 $ 437,847 $ 464,233 $ 437,847
Less: Goodwill
58,726 58,726 58,726 58,726 58,726
Tangible Equity
405,507 391,043 379,121 405,507 379,121
Shares Outstanding at End of Period
26,333,929 26,308,087 26,257,761 26,333,929 26,257,761
Tangible Book Value Per Common Share
$ 15.40 $ 14.86 $ 14.44 $ 15.40 $ 14.44

3Net interest income has been computed on a fully taxable equivalent basis (“FTE”) using a 21% federal income tax rate for the 2019 and 2018 periods.

Net Interest Income (FTE) (Non-GAAP)
Quarter-to-Date Year-to-Date
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
Interest Income
$ 40,068 $ 39,139 $ 38,362 $ 79,207 $ 73,950
Interest Expense
(12,113 ) (11,243 ) (9,111 ) (23,356 ) (17,262 )
Net Interest Income
27,955 27,896 29,251 55,851 56,688
Tax Equivalent Adjustment3
816 909 973 1,726 2,061
NET INTEREST INCOME (FTE) (Non-GAAP)
$ 28,771 $ 28,805 $ 30,224 $ 57,577 $ 58,749
Net Interest Income (Annualized)
115,400 116,820 121,228 116,108 118,472
Average Earning Assets
3,818,484 3,781,718 3,755,890 $ 3,800,203 $ 3,783,386
NET INTEREST MARGIN (FTE) (Non-GAAP)
3.02% 3.09% 3.23% 3.06% 3.13%

4Core Efficiency Ratio (Non-GAAP)

Quarter-to-Date Year-to-Date
June 30, March 31, June 30, June 30, June 30,
2019 2019 2018 2019 2018
NONINTEREST EXPENSE
$ 22,834 $ 22,110 $ 23,022 $ 44,774 $ 45,239
Less: One Time Regulatory and Compliance
(1,353 ) (1,853 )
Less: Losses on Sales and Write-downs of Other Real Estate Owned, net
(88 ) (188 ) (276 )
Less: Losses on Sales and Write-downs of Bank Premises, net
(170 ) (71 ) (71 )
Less: Tax Credit Amortization
(563 ) (563 ) (1,015 ) (1,126 ) (2,030 )
Plus: Regulatory Review
323 323
Plus: Contingent Liability
331 331
Less: Conversion Expense
(2 ) (8 ) (2 ) (271 )
Plus: Conversion Vacation Accrual
291 269 560
CORE NONINTEREST EXPENSE (Non-GAAP)
$ 22,805 $ 21,456 $ 20,898 $ 44,261 $ 41,337
NET INTEREST INCOME
$ 27,955 $ 27,896 $ 29,251 $ 55,851 $ 56,688
Plus: Taxable Equivalent Adjustment3
816 909 973 1,726 2,061
NET INTEREST INCOME (FTE) (Non-GAAP)
$ 28,771 $ 28,805 $ 30,224 $ 57,577 $ 58,749
Less: Gains on Sales of Securities, net
(909 ) (31 ) (132 ) (940 ) (1,000 )
Less: Gains on Sales of Other Real Estate Owned, net
(915 ) (573 )
Less: Gains on Sales Bank Premises, net
(178 ) (8 )
Less: Other Real Estate Owned Income
(231 ) (290 ) (966 ) (521 ) (1,515 )
Less: Other Gains
(176 ) (271 ) (447 ) (374 )
Noninterest Income
4,579 3,804 4,741 8,213 9,130
CORE NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME
$ 31,856 $ 32,017 $ 32,952 $ 63,874 $ 64,417
CORE EFFICIENCY RATIO (Non-GAAP)
71.59% 67.01% 63.42% 69.29% 64.17%

CONTACT:

Wendy Bell
Executive Vice President and Chief Financial Officer
276-656-1776
wendy.bell@carterbankandtrust.com

SOURCE: Carter Bank & Trust

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