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Carter Bank & Trust Announces Third Quarter 2020 Financial Results

MARTINSVILLE, VA / ACCESSWIRE / October 29, 2020 / Carter Bank & Trust (the "Bank") (NASDAQ:CARE) today announced a net loss of $57.7 million, or $2.19 per share, for the third quarter of 2020 due to a one-time goodwill impairment charge of $62.2 million ($2.36 per share) that was recorded in the third quarter of 2020. Net income, excluding this one-time charge, was $4.5 million, or $0.17 diluted earnings per share as compared to net income of $4.5 million, or $0.17 diluted earnings per share, in the second quarter of 2020 and net income of $7.6 million, or $0.29 diluted earnings per share, for the third quarter of 2019. Pre-tax pre-provision earnings1, excluding goodwill impairment, were $8.3 million, $9.4 million and $9.4 million for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

For the nine months ended September 30, 2020, the Bank realized a net loss of $48.8 million, or $1.85 per share. Net income, excluding the one-time goodwill impairment charge, was $13.4 million, or $0.51 diluted earnings per share as compared to net income of $23.0 million, or $0.87 diluted earnings per share in the first nine months of 2019. Pre-tax pre-provision earnings1, excluding goodwill impairment, were $27.2 million and $28.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Third Quarter 2020 Financial Highlights

  • Net interest income declined $0.8 million, or 3.1%, to $25.4 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 13 basis point decrease in funding costs compared to the second quarter of 2020, and decreased $2.6 million, or 9.4%, over the same quarter in 2019;
  • Net interest margin, on a fully taxable equivalent basis, declined 13 basis points to 2.66% over the linked quarter and decreased 35 basis points over the same quarter last year;
  • A one-time goodwill impairment charge of $62.2 million ($2.36 per share) was recorded in the third quarter of 2020. The impairment charge is a non-cash charge that does not affect regulatory capital ratios, liquidity, or our overall financial strength;
  • Eight retail branch banking offices were closed during the third quarter of 2020 as part of our branch optimization project. Five of these branches were moved to other real estate owned ("OREO") and marketed for sale resulting in a $1.1 million write-down;
  • Portfolio loan growth totaled $28.6 million, or 3.9% on an annualized basis, as compared to the linked quarter, and growth of $82.2 million, or 2.8%, as compared to September 30, 2019;
  • Total deposits increased $7.1 million to $3.6 billion as of September 30, 2020 as compared to the linked quarter and growth of $91.8, or 2.6%, as compared to September 30, 2019. Noninterest-bearing and interest-bearing demand deposits, money market accounts and savings, increased by $70.2 million, or 3.9%, as compared to linked quarter and increased $350.5 million, or 23.4%, as compared to September 30, 2019;
  • The provision for loan losses totaled $2.9 million for the quarter ended September 30, 2020, $5.5 million for the quarter ending June 30, 2020 and $1.4 million for the same quarter of 2019. Included in the third quarter provision for loan losses was an increase in qualitative loss factors as a result of the estimated economic impact of COVID-19 of $3.6 million, or $(0.11) per share, offset by an decrease to our quantitative reserves due to decreases in historic loss rates which were partially offset by an increase in loan volume;
  • Nonperforming loans declined $1.6 million, or 4.0% as compared to December 31, 2019 and decreased $6.6 million, or 14.1%, from September 30, 2019. Nonperforming loans as a percentage of total portfolio loans were 1.35%, 1.37% and 1.62% as of September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

"Obviously we are disappointed in having to take a goodwill impairment charge in the third quarter. Fortunately this is more of an accounting entry than a reflection of the financial performance of the Bank. While a significant negative impact to earnings, the impairment is a non-cash charge and has no impact on regulatory capital or our liquidity. Regulatory capital levels as well as our liquidity remain strong." stated Litz H. Van Dyke, Chief Executive Officer. "We continue to provide direct financial flexibility to our individual and business customers, to offer our products and services through multiple delivery channels, to show our trademark caring and empathy to every customer, and to provide a safe environment for both employees and customers."

Van Dyke continued, "I again commend our associates for their commitment, performance and professionalism during these difficult times. We continue to open accounts, make loans, and process transactions. We experienced growth in both loans and lower cost deposits in the third quarter. While the economy has shown some signs of improvement in the third quarter, there still remain headwinds and tremendous uncertainty around the continuing impacts from COVID-19. We continue to work on improving the operating fundamentals of the Bank by focusing on resolving legacy credit issues, expense control, margin improvement, and optimizing our branch network. While we expect uncertainty and challenges ahead due to the pandemic, we are confident in our team, technology, products/services, risk management, and strong capital/liquidity position."

Operating Highlights

Net interest income decreased $5.0 million, or 5.9%, to $79.0 million during the first nine months of 2020 as compared to the same period of 2019. The net interest margin, on a fully taxable equivalent basis, decreased 24 basis points to 2.80% 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 49 basis points, offset by a 28 basis point decline in funding costs as compared to the same period of 2019.

The provision for loan losses totaled $13.2 million for the nine month period ended September 30, 2020 and $4.4 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 nine months ended September 30, 2020 is the estimated economic impact of COVID-19 of $9.6 million, or $(0.29) per share, driven by economic and market conditions as a result of COVID-19. This represents a 201% 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 September 30, 2020, nonperforming loans were $40.5 million, a decrease of $1.6 million, or 4.0% as compared to December 31, 2019. Net charge-offs were $2.0 million in the first nine months of 2020 as compared to $3.3 million in the same period of 2019. As a percentage of total portfolio loans, on an annualized basis, net charge-offs were 0.09% and 0.15% for the periods ending September 30, 2020 and 2019, respectively. Nonperforming loans as a percentage of total portfolio loans were 1.35%, 1.37% and 1.62% as of September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

Noninterest income at September 30, 2020, excluding net securities gains, increased $4.3 million, or 40.0%, for the nine months ending September 30, 2020 as compared to the same period of 2019. The increase was primarily due to $3.1 million of commercial loan swap fee income as result of the high demand for this product in the current low interest rate environment, $1.0 million of higher insurance commissions, related to the adoption of ASU 2014-09, Topic 606 by our provider, $0.4 million of higher debit card interchange fees, which were offset by lower service charges on deposit accounts of $0.2 million due to COVID-19 fee waivers. 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 $5.9 million and $1.6 million were realized during the first nine 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 $67.4 million, or 99.8%, to $134.9 million for the nine months ending September 30, 2020 as compared to the same period of 2019. This increase was primarily due to the aforementioned goodwill impairment charge of $62.2 million. Excluding the impact of the goodwill impairment charge, noninterest expense increased $5.2 million, or 7.7%, to $72.7 million. The increase was primarily driven by salaries and employee benefits and occupancy expenses. The increase of $1.3 million in salaries and benefits were primarily attributable to a $0.7 million increase of normal merit increases and a $0.6 million decrease in salary deferrals on new loan originations in the first nine months of 2020. There have not been any permanent or temporary reductions in employees as a result of COVID-19. The $1.4 million increase in occupancy expense is a result of higher depreciation for software and equipment for ancillary products and services. FDIC insurance increased $0.9 million primarily due to the $1.1 million one-time credit for eligible institutions available in the third quarter of 2019. The $0.7 million increase in advertising is related to our deposit acquisition strategy. Losses on Sales and Write-downs of Other Real Estate Owned increased $0.8 million due to the aforementioned write-down of $1.1 million on five closed retail branch offices moved to OREO in the third quarter of 2020.

Financial Condition

Total assets were $4.1 billion at September 30, 2020 and $4.0 billion at December 31, 2019. Total portfolio loans increased $101.2 million, or 3.5%, to $3.0 billion as of September 30, 2020 as compared to December 31, 2019. Nonperforming loans decreased $1.6 million to $40.5 million, or 4.0% as of September 30, 2020 as compared to $42.1 million at December 31, 2019. OREO decreased $1.9 million at September 30, 2020 as compared to December 31, 2019. Closed retail bank offices have a remaining book value of $2.5 million at September 30, 2020 and $3.0 million at December 31, 2019.

Federal Reserve Bank excess reserves increased $67.9 million at September 30, 2020 as compared to December 31, 2019 due to maintaining higher liquidity levels as a result of COVID-19.

The securities portfolio increased $35.4 million and is currently 18.8% of total assets at September 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 $109.5 million to $3.6 billion as of September 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 $307.3 million, or 19.9%, as compared to December 31, 2019. Offsetting these increases was the intentional runoff of $197.8 million of higher cost certificates of deposits. Noninterest-bearing deposits comprised 18.4% and 15.8% of total deposits at September 30, 2020 and December 31, 2019, respectively.

The allowance for loan losses was 1.67%, 1.60% and 1.34% of total portfolio loans as of September 30, 2020, June 30, 2020 and December 31, 2019, respectively. General reserves as a percentage of total portfolio loans were 1.40%, 1.33% and 1.13% at September 30, 2020, June 30, 2020 and December 31, 2019, respectively. Included in the allowance for loan losses is the estimated economic impact of COVID-19 of $9.6 million, or $(0.29) per share, driven by economic and market conditions as a result of COVID-19. The allowance for loan losses was 123.5% of nonperforming loans as of September 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 nine months of 2020, please see the discussion above under Provision for Loan Losses.

The Bank provides deferrals to customers under Section 4013 of the CARES Act and regulatory interagency statements on loan modifications. The Bank launched a deferral program in March 2020 that ran through August 2020 (Part I). The deferrals in the initial program typically provided deferral of both principal and interest for up to 180 days. The Bank is providing deferrals in another program that launched in August 2020 and runs through December 2020 (Part II). The deferrals in this program is needs based and requires the collection of updated financial information. The majority of the deferrals in the second program will be principal only deferrals. 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 October 27, 2020, we have had 116 loans opt for deferrals under Part II of the program which continues through December 31, 2020, with an aggregate principal balance of $381.1 million. The weighted average deferment period for these customers is 3.98 months. Approximately $321.8 million of these modifications were in the hospitality industry, comprised of deferrals on 58 loans. We have participated in the Paycheck Protection Program ("PPP") passed by Congress. As of September 30, 2020, we had 962 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.

A one-time goodwill impairment charge of $62.2 million ($2.36 per share) was recorded as of September 30, 2020. The Bank performed an interim impairment analysis of goodwill as of September 30, 2020 due to the continued decline in our stock price primarily related to the economic fallout of COVID-19. The impairment charge is a non-cash charge that does not affect regulatory capital ratios, liquidity, or our overall financial strength.

The Bank remains well capitalized. The Bank's Tier 1 Capital ratio was 13.08% as of September 30, 2020 as compared to 13.58% as of December 31, 2019. The Bank's leverage ratio was 10.12% at September 30, 2020 as compared to 10.33% as of December 31, 2019. The Bank's Total Risk-Based Capital ratio was 14.33% at September 30, 2020 as compared to 14.83% at December 31, 2019.

Total capital of $434.8 million at September 30, 2020, reflects a decrease of $38.3 million as compared to December 31, 2019. The decrease in equity during the first nine months of 2020 is due to a net loss of $48.8 million and a $13.4 million increase in other comprehensive income due to changes in fair value of investment securities. The net decrease also included the $3.7 million special dividend paid in March of 2020. The remaining difference of $0.8 million is related to restricted stock activity during the first nine months.

At September 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. In addition to the above resources, the Bank also has $651.6 million of unpledged available-for-sale investment securities as an additional source of liquidity.

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 91 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 and asset quality. 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; 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
Wendy Bell, 276-656-1776
Senior Executive Vice President & Chief Financial Officer

wendy.bell@CBTCares.com

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

(Dollars in Thousands, except per share data) September 30,  December 31,  September 30, 
  2020  2019  2019 
ASSETS         
Cash and Due From Banks $37,688  $41,386  $46,517 
Interest-Bearing Deposits in Other Financial Institutions  6,267   45,156   44,540 
Federal Reserve Bank Excess Reserves  107,219   39,270   35,108 
Total Cash and Cash Equivalents  151,174    125,812    126,165  
             
Securities, Available-for-Sale, at Fair Value  777,986   742,617   734,453 
Loans Held-for-Sale  32,104   19,714   20,514 
Portfolio Loans  2,985,921   2,884,766   2,903,701 
Allowance for Loan Losses  (49,965)  (38,762)  (40,331)
Portfolio Loans, net   2,935,956    2,846,004    2,863,370  
             
Bank Premises and Equipment, net  87,439   85,942   86,531 
Other Real Estate Owned, net  16,410   18,324   23,112 
Goodwill  -   62,192   62,192 
Federal Home Loan Bank Stock, at Cost  5,093   4,113   3,688 
Bank Owned Life Insurance  53,651   52,597   52,240 
Other Assets  74,312   48,793   47,811 
TOTAL ASSETS $4,134,125   $4,006,108   $4,020,076  
             
             
LIABILITIES            
Deposits:            
Noninterest-Bearing Demand $665,813  $554,875  $566,826 
Interest-Bearing Demand  351,066   286,561   207,334 
Money Market  211,465   140,589   157,123 
Savings  622,806   561,814   569,392 
Certificates of Deposits  1,762,645   1,960,406   2,021,306 
     Total Deposits  3,613,795    3,504,245    3,521,981  
FHLB Borrowings  35,000   10,000   - 
Other Liabilities  50,523   18,752   24,047 
        TOTAL LIABILITIES  3,699,318    3,532,997    3,546,028  
             
             
SHAREHOLDERS' EQUITY             
Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares;            
     26,386,901 outstanding at September 30, 2020,            
     26,334,229 outstanding at December 31, 2019 and 26,333,929 at September 30, 2019  26,387   26,334   26,334 
Additional Paid-in-Capital  143,244   142,492   142,380 
Retained Earnings  251,669   304,158   300,552 
Accumulated Other Comprehensive Income  13,507   127   4,782 
  TOTAL SHAREHOLDERS' EQUITY  434,807    473,111    474,048  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,134,125   $4,006,108   $4,020,076  
             
PROFITABILITY RATIOS (ANNUALIZED)            
Return on Average Assets  (1.59)%  0.65%  0.75%
Return on Average Shareholders' Equity  (13.59)%  5.76%  6.71%
Portfolio Loan to Deposit Ratio  82.63%  82.32%  82.45%
Allowance to Total Portfolio Loans  1.67%  1.34%  1.39%
             
CAPITALIZATION RATIOS            
Shareholders' Equity to Assets  10.52%  11.81%  11.79%
Tier 1 Leverage Ratio  10.12%  10.33%  10.18%
Risk-Based Capital - Tier 1  13.08%  13.58%  13.36%
Risk-Based Capital - Total  14.33%  14.83%  14.61%

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

(Dollars in Thousands, except per share data) Quarter-to-Date  Year-to-Date 
  September 30,  June 30,  September 30,  September 30,  September 30, 
  2020  2020  2019  2020  2019 
Interest Income $33,986  $35,617  $40,154  $107,439  $119,361 
Interest Expense  8,550   9,355   12,084   28,477   35,440 
NET INTEREST INCOME  25,436    26,262    28,070    78,962    83,921  
                     
Provision for Loan Losses  2,914   5,473   1,390   13,185   4,386 
NET INTEREST INCOME AFTER  22,522    20,789    26,680    65,777    79,535  
PROVISION FOR LOAN LOSSES                    
                     
NONINTEREST INCOME                    
Gains on Sales of Securities, net  2,388   2,321   659   5,923   1,599 
Service Charges, Commissions and Fees  1,205   190   1,111   3,045   3,229 
Debit Card Interchange Fees  1,559   1,468   1,340   4,270   3,834 
Insurance  482   332   454   2,123   1,097 
Bank Owned Life Insurance Income  351   350   362   1,054   1,079 
Gains on Sales of Other Real Estate Owned, net  -   137   -   -   - 
Other Real Estate Owned Income  58   82   96   279   617 
Commercial Loan Swap Fee Income  1,572   1,125   -   3,120   - 
Other  360   196   134   1,177   906 
TOTAL NONINTEREST INCOME  7,975    6,201    4,156    20,991    12,361  
                     
NONINTEREST EXPENSE                    
Salaries and Employee Benefits  13,036   12,489   12,952   39,106   37,796 
Occupancy Expense, net  3,413   3,415   3,040   10,077   8,703 
FDIC Insurance Expense  547   537   (426)  1,628   721 
Other Taxes  809   788   747   2,343   2,101 
Advertising Expense  404   400   205   1,410   702 
Telephone Expense  578   573   557   1,725   1,624 
Professional and Legal Fees  1,474   1,399   1,318   3,310   2,947 
Data Processing  836   595   556   1,917   1,775 
Losses on Sales and Write-downs of Other Real Estate Owned, net  1,305   -   293   1,357   569 
Losses on Sales and Write-downs of Bank Premises, net  17   59   31   88   23 
Debit Card Expense  764   671   620   1,989   2,160 
Tax Credit Amortization  272   272   563   816   1,689 
Unfunded Loan Commitment Expense  (348)  (383)  158   251   376 
Other Real Estate Owned Expense  94   177   167   411   233 
Goodwill Impairment Expense  62,192   -   -   62,192   - 
Other  1,907   2,031   1,996   6,314   6,124 
TOTAL NONINTEREST EXPENSE  87,300    23,023    22,777    134,934    67,543  
                     
(LOSS) INCOME BEFORE INCOME TAXES  (56,803)   3,967    8,059    (48,166)   24,353  
Income Tax Provision (Benefit)  875   (488)  458   634   1,384 
NET (LOSS) INCOME  $(57,678)  $4,455   $7,601   $(48,800)  $22,969  
                     
Shares Outstanding, at End of Period  26,386,901   26,384,801   26,333,929   26,386,901   26,333,929 
Average Shares Outstanding-Basic  26,385,189   26,384,957   26,333,929   26,377,626   26,320,472 
Average Shares Outstanding-Diluted  26,385,189   26,384,957   26,352,910   26,377,626   26,331,268 
                     
PER SHARE DATA                     
Basic (Loss) Earnings Per Common Share $(2.19) $0.17  $0.29  $(1.85) $0.87 
Diluted (Loss) Earnings Per Common Share $(2.19) $0.17  $0.29  $(1.85) $0.87 
Book Value $16.48  $18.54  $18.00  $16.48  $18.00 
Tangible Book Value2 $16.48  $16.18  $15.64  $16.48  $15.64 
Market Value $6.65  $8.07  $18.89  $6.65  $18.89 
                     
PROFITABILITY RATIOS (non-GAAP)                    
Net Interest Margin (FTE)3  2.66%  2.79%  3.01%  2.80%  3.04%
Core Efficiency Ratio4  75.27%  75.00%  71.63%  74.74%  70.08%

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

(Dollars in Thousands)  September 30, 2020    June 30, 2020    September 30, 2019 
ASSETS   Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate  
Interest-Bearing Deposits with Banks  124,886    32      0.10%    106,710    26      0.10%    99,827    557      2.21% 
Tax-Free Investment Securities    54,541      455      3.34%      49,633      416      3.35%      33,452      332      3.94% 
Taxable Investment Securities    693,330      3,150      1.81%      685,468      3,594      2.09%      751,665      4,697      2.48% 
Tax-Free Loans    302,351      2,397      3.17%      322,739      2,563      3.17%      373,167      2,923      3.11% 
Taxable Loans    2,694,747      28,511      4.18%      2,651,873      29,577      4.44%      2,526,509      32,270      5.07% 
Federal Home Loan Bank Stock    5,093      39      3.04%      5,093      67      5.23%      3,688      58      6.24% 
Total Interest-Earning Assets   3,874,948     34,584       3.53%    3,821,516     36,243       3.77%    3,788,308     40,837       4.28% 
                                                                        
LIABILITIES                                                                        
Deposits:                                                                       
Interest-Bearing Demand  330,402    239      0.29%    297,815    242      0.33%    222,062    404      0.72% 
Money Market    200,303      210      0.42%      183,542      211      0.46%      156,509      552      1.40% 
Savings    616,414      168      0.11%      592,193      157      0.11%      572,716      256      0.18% 
Certificates of Deposit    1,801,535      7,815      1.73%      1,845,294      8,627      1.88%      2,048,043      10,853      2.10% 
Total Interest-Bearing Deposits   2,948,654     8,432       1.14%    2,918,844     9,237       1.27%    2,999,330     12,065       1.60% 
Borrowings:                                                                       
FHLB Borrowings    35,000      101      1.13%      35,000      100      1.13%      -      -      - 
Other Borrowings    1,183      17      5.72%      1,245      18      5.58%      1,226      19      6.15% 
Total Borrowings    36,183       118       1.28%      36,245       118       1.28%      1,226       19       6.15% 
Total Interest-Bearing Liabilities   2,984,837     8,550       1.14%    2,955,089     9,355       1.27%    3,000,556     12,084       1.60% 
Net Interest Income           26,034                     26,888                     28,753          
Net Interest Margin                    2.66%                      2.79%                      3.01% 
                                     

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

(Dollars in Thousands)  September 30, 2020    September 30, 2019 
ASSETS   Average Balance     Income/ Expense     Rate     Average Balance     Income/ Expense     Rate  
Interest-Bearing Deposits with Banks  98,283    268      0.36%    132,855    2,341      2.36% 
Tax-Free Investment Securities    41,922      1,076      3.42%      78,235      2,145      3.67% 
Taxable Investment Securities    696,954      11,246      2.15%      730,519      13,102      2.40% 
Tax-Free Loans    320,914      7,620      3.16%      386,993      9,324      3.22% 
Taxable Loans    2,644,031      88,885      4.45%      2,465,823      94,773      5.14% 
Federal Home Loan Bank Stock    4,869      170      4.65%      1,770      84      6.35% 
Total Interest-Earning Assets   3,806,973     109,265       3.80%    3,796,195     121,769       4.29% 
                                                
LIABILITIES                                               
Deposits:                                               
Interest-Bearing Demand  308,617    926      0.40%    250,163    1,639      0.88% 
Money Market    179,546      692      0.51%      128,035      1,312      1.37% 
Savings    590,534      470      0.11%      588,529      1,240      0.28% 
Certificates of Deposit    1,855,027      26,076      1.88%      2,074,015      31,190      2.01% 
Total Interest-Bearing Deposits   2,933,724     28,164       1.28%    3,040,742     35,381       1.56% 
Borrowings:                                               
FED Funds Purchased    73      1      1.59%      -      -      - 
FHLB Borrowings    29,161      260      1.17%      -      -      - 
Other Borrowings    1,303      52      5.33%      872      59      9.05% 
Total Borrowings    30,537       313       1.35%      872       59       9.05% 
          Total Interest-Bearing Liabilities   2,964,261     28,477       1.28%    3,041,614     35,440       1.56% 
Net Interest Income           80,788                     86,329          
Net Interest Margin                    2.80%                      3.04% 
                         

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

   September 30,    December 31,    September 30, 
(Dollars in Thousands)  2020    2019    2019 
Commercial              
Commercial Real Estate  1,417,164    1,365,310    1,396,935 
Commercial and Industrial    300,951      256,798      255,376 
Obligations of State and Political Subdivisions    310,610      364,869      394,781 
Commercial Construction    386,343      292,827      255,697 
Total Commercial Loans    2,415,068       2,279,804       2,302,789  
Consumer                        
Residential Mortgages    490,343      514,538      504,344 
Other Consumer    66,177      73,688      72,917 
Consumer Construction    14,333      16,736      23,651 
Total Consumer Loans     570,853       604,962       600,912  
Total Portfolio Loans    2,985,921       2,884,766       2,903,701  
Loans Held-for-Sale    32,104      19,714      20,514 
Total Loans  3,018,025     2,904,480     2,924,215  
             

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA

ASSET QUALITY DATA
(Unaudited)

(Dollars in Thousands)  September 30,    December 31,    September 30, 
Nonperforming Loans  2020    2019    2019 
Commercial Real Estate  235    1,017    1,393 
Commercial and Industrial    159      77      108 
Obligations of State and Political Subdivisions    -      -      498 
Commercial Construction    3,748      3,210      4,074 
Residential Mortgages    3,310      2,857      2,292 
Other Consumer    152      267      363 
Consumer Construction    -      -      - 
Total Nonperforming Loans    7,604       7,428       8,728  
                        
Nonperforming Troubled Debt Restructurings                        
Commercial Real Estate    28,599      30,073      34,085 
Commercial and Industrial    -      390      - 
Obligations of State and Political Subdivisions    -      -      - 
Commercial Construction    4,249      4,242      4,292 
Residential Mortgages    -      -      - 
Other Consumer    -      -      - 
Consumer Construction    -      -      - 
Total Nonperforming Troubled Debt Restructurings     32,848       34,705       38,377  
Total Nonperforming Loans and Troubled Debt Restructurings    40,452       42,133       47,105  
Other Real Estate Owned    16,410      18,324      23,112 
Total Nonperforming Assets  56,862     60,457     70,217  
             
   September 30,    December 31,    September 30, 
   2020    2019    2019 
Nonperforming Loans  40,452    42,133    47,105 
Other Real Estate Owned    16,410      18,324      23,112 
Total Nonperforming Assets     56,862       60,457       70,217  
                        
Troubled Debt Restructurings (Nonaccruing)    32,848      34,705      38,377 
Troubled Debt Restructurings (Accruing)    110,320      109,265      113,725 
Total Troubled Debt Restructurings  143,168     143,970     152,102  
                        
Nonperforming Loans to Total Portfolio Loans    1.35%      1.46%      1.62% 
Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned    1.89%      2.08%      2.40% 
Allowance for Loan Losses to Total Portfolio Loans    1.67%      1.34%      1.39% 
Allowance for Loan Losses to Nonperforming Loans    123.52%      92.00%      85.62% 
Net Loan Charge-offs (Recoveries)  1,982    3,841    3,254 
Net Loan Charge-offs (Recoveries) (Annualized) to Average Loans    0.09%      0.13%      0.15% 
             

CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA

ALLOWANCE FOR LOAN LOSSES
(Unaudited)

   Quarter-to-Date    Year-to-Date 
   September 30,    June 30,    September 30,    September 30,    September 30, 
(Dollars in Thousands)  2020    2020    2019    2020    2019 
Balance Beginning of Year  47,405    42,942    40,008    38,762    39,199 
Provision for Loan Losses    2,914      5,473      1,390      13,185      4,386 
Charge-offs:                                       
Commercial Real Estate    -      40      -      40      69 
Commercial and Industrial    -      8      1      46      3 
Obligations of State and Political Subdivisions    -      -      -      -      - 
Commercial Construction    -      -      -      -      393 
Residential Mortgages    -      15      174      20      197 
Other Consumer    680      1,094      1,080      3,301      3,039 
Consumer Construction    -      -      -      -      - 
Total Charge-offs    680       1,157       1,255       3,407       3,701  
Recoveries:                                       
Commercial Real Estate    -      -      -      707      - 
Commercial and Industrial    119      1      -      121      - 
Obligations of State and Political Subdivisions    -      -      -      -      - 
Commercial Construction    -      -      -      -      - 
Residential Mortgages    1      -      -      1      - 
Other Consumer    206      146      188      596      447 
Consumer Construction    -      -      -      -      - 
Total Recoveries     326       147       188       1,425       447  
Total Net Charge-offs    354       1,010       1,067       1,982       3,254  
Balance End of Year  49,965     47,405     40,331     49,965     40,331  
                     

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 
   September 30,    June 30,    September 30,    September 30,    September 30, 
   2020    2020    2019    2020    2019 
Total Shareholders' Equity  434,807    489,059    474,048    434,807    474,048 
Less: Goodwill    -      62,192      62,192      -      62,192 
Tangible Equity  434,807     426,867     411,856     434,807     411,856  
                                        
Shares Outstanding at End of Period    26,386,901      26,384,801      26,333,929      26,386,901      26,333,929 
Tangible Book Value Per Common Share  16.48     16.18     15.64     16.48     15.64  

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 
   September 30,    June 30,    September 30,    September 30,    September 30, 
   2020    2020    2019    2020    2019 
Interest Income  33,986    35,617    40,154    107,439    119,361 
Interest Expense    (8,550)    (9,355)    (12,084)    (28,477)    (35,440)
Net Interest Income    25,436      26,262      28,070      78,962      83,921 
Tax Equivalent Adjustment3    598      626      683      1,826      2,408 
NET INTEREST INCOME (FTE) (Non-GAAP)  26,034     26,888     28,753     80,788     86,329  
Net Interest Income (Annualized)    102,880      106,615      114,074      106,638      115,422 
Average Earning Assets    3,874,948      3,821,516      3,788,308      3,806,973      3,796,195 
NET INTEREST MARGIN (FTE) (Non-GAAP)    2.66%      2.79%      3.01%      2.80%      3.04% 

 

4Core Efficiency Ratio (Non-GAAP)  Quarter-to-Date    Year-to-Date 
   September 30,    June 30,    September 30,    September 30,    September 30, 
   2020    2020    2019    2020    2019 
NONINTEREST EXPENSE   87,300     23,023     22,777     134,934     67,543  
Less: Losses on Sales and Write-downs of Other Real Estate Owned, net    (1,305)    -      (293)    (1,357)    (569)
Less: Losses on Sales and Write-downs of Bank Premises, net    (17)    (59)    (31)    (88)    (23)
Less: Tax Credit Amortization    (272)    (272)    (563)    (816)    (1,689)
Plus: Contingent Liability    144      -      -      144      331 
Less: Conversion Expense    -      -      -      -      (2)
Less: Goodwill Impairment    (62,192)    -      -      (62,192)    - 
Plus: FDIC Assessment Credits    -      -      1,056      -      1,056 
Plus: Conversion Vacation Accrual    99      192      86      579      646 
CORE NONINTEREST EXPENSE (Non-GAAP)  23,757     22,884     23,032     71,204     67,293  
                                        
NET INTEREST INCOME   25,436     26,262     28,070     78,962     83,921  
Plus: Taxable Equivalent Adjustment3    598      626      683      1,826      2,408 
NET INTEREST INCOME (FTE) (Non-GAAP)  26,034     26,888     28,753     80,788     86,329  
Less: Gains on Sales of Securities, net    (2,388)    (2,321)    (659)    (5,923)    (1,599)
Less: Gains on Sales of Other Real Estate Owned, net    -      (137)    -      -      - 
Less: Other Real Estate Owned Income    (58)    (82)    (96)    (279)    (617)
Less: Other Gains    -      (38)    -      (307)    (447)
Noninterest Income    7,975      6,201      4,156      20,991      12,361 
CORE NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME  31,563     30,511     32,154     95,270     96,027  
                                        
CORE EFFICIENCY RATIO (Non-GAAP)    75.27%      75.00%      71.63%      74.74%      70.08% 
                                        

SOURCE: Carter Bank & Trust



View source version on accesswire.com:
https://www.accesswire.com/612921/Carter-Bank-Trust-Announces-Third-Quarter-2020-Financial-Results

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