Market Overview

Carter Bank & Trust Announces First Quarter 2018 Financial Results; Announces Trading on OTCQX

Share:

Carter Bank & Trust ( the "Bank") (OTCQX:CARE) today announced net
income of $8.8 million, or $0.34 earnings per share, for the first
quarter of 2018, as compared to net income of $6.3 million, or $0.24
earnings per share, for the first quarter of 2017. Pre-tax pre-provision
earnings1 were $9.6 million in the first quarter of 2018 as
compared to $11.7 million in the same period last year.

First Quarter 2018 Financial Highlights

  • First quarter net income of $8.8 million, or $0.34 earnings per share,
    an increase of 40.1% over the same quarter of 2017;
  • Net income was positively impacted by the Tax Cuts and Jobs Act (Tax
    Act) which lowered the federal corporate tax rate from 35% to 21%
    effective January 1, 2018;
  • Net interest margin, on a fully taxable equivalent basis, improved 30
    basis points to 3.04% over the same period last year, on a $327.2
    million lower asset base and despite the negative impact of a lower
    taxable equivalent adjustment resulting from the lower corporate tax
    rate;
  • Provision for loan losses declined $11.2 million, or 88.1%, compared
    to linked quarter;
  • Deployed excess cash into new loan categories for earnings and
    diversification purposes;
  • Securities gains of $0.9 million were realized the first quarter of
    2018 to take advantage of market opportunities;
  • Noninterest expense decreased $12.7 million, or 36.1%, compared to the
    linked quarter primarily due to one-time charges recognized in the
    fourth quarter of 2017;
  • Nonperforming loans decreased $30.4 million from the linked quarter
    and decreased $55.9 million from March 31, 2017.

Litz H. Van Dyke, Chief Executive Officer, stated, "I am especially
pleased with the improvement in our financial performance and credit
quality metrics this quarter, and the progress with our newly launched
mortgage initiative. We continue to progress with our comprehensive
systems conversion project, targeted to occur in the fourth quarter of
2018. The new system will lay the foundation to provide additional
products and services for our customers, operational efficiencies and
cost savings throughout the organization ultimately creating value for
our shareholders."

Operating Highlights

Net interest income increased $0.9 million to $27.4 million for the
period ended March 31, 2018 as compared to the same period of 2017. The
increase in net interest income is primarily driven by a $1.7 million
decrease in interest expense, offset by a decrease of $0.8 million in
interest income as compared to the same period of 2017. This is a result
of the intentional runoff of higher cost certificates of deposit. The
net interest margin, on a fully taxable equivalent basis, increased 30
basis points to 3.04% over the past twelve months due to our deployment
of excess cash into higher yielding and diversified investment
securities as well as the aforementioned runoff of higher cost deposits
despite the decreased tax benefit from our tax exempt securities due to
the aforementioned decreased in the federal corporate tax rate.

The provision for loan losses totaled $1.5 million for the period ended
March 31, 2018, a decrease of $2.4 million as compared to the same
period of 2017. At March 31, 2018, nonperforming loans were $62.5
million, a decrease of $30.4 million from December 31, 2017 and a
decrease of $55.9 million from March 31, 2017. Net recoveries were $33
thousand in the first three months of 2018 as compared to $0.4 million
of net charge-offs in the same period of 2017. As a percentage of loans,
on an annualized basis, net charge-offs (recoveries) were (0.01)%, 1.58%
and 0.06% for the periods ending March 31, 2018, December 31, 2017 and
March 31, 2017, respectively. Nonperforming loans as a percentage of
total loans were 2.35%, 3.46% and 4.33% as of March 31, 2018, December
31, 2017 and March 31, 2017, respectively.

Noninterest income increased $1.0 million, or 31.1%, to $3.9 million,
excluding net securities gains, for the three months ending March 31,
2018 as compared to $2.9 million in the same period of 2017. The
increase in noninterest income is attributable to $0.4 million higher
income from other real estate owned due to the acquisition of several
properties generating income during the period, increased service
charges of $0.2 million, increased insurance fees, and the gain on the
sale of our insurance agency during the first quarter of 2018.
Securities gains of $0.9 million were realized during the first three
months of 2018 to take advantage of market opportunities and reduce the
credit risk of the securities portfolio.

Total noninterest expense increased $4.8 million, or 26.7%, for the
first three months of 2018 to $22.6 million as compared to $17.8 million
in the same period of 2017. The increase is primarily due to an increase
in salaries and employee benefits of $2.1 million, an increase in
professional and legal fees of $0.9 million, $1.0 million of tax credit
amortization and a $0.3 million increase in the reserve for unfunded
loan commitments, included in other expenses. The increase in salaries
and benefits was expected and planned as investments were made in the
appropriate infrastructure to support the Bank in the future. Offsetting
these increases were decreases of $1.2 million in data processing
expenses due to the write-off of expenses that were previously
capitalized that were fully expensed during 2017, and a decrease of $0.3
million in FDIC insurance expense attributable to lower FDIC assessment
rates and a decrease in the assessment base.

Financial Condition

Total assets were $4.1 billion at March 31, 2018 and December 31, 2017.
Total loans were essentially flat at $2.7 billion as of March 31, 2018
and December 31, 2017 due to the reduction of several large legacy
credit relationships, which offset new loan growth. Nonperforming loans
decreased $30.4 million to $62.5 million as of March 31, 2018 from $92.9
million at December 31, 2017 and decreased $55.9 million from $118.4
million as of March 31, 2017. The decrease in nonperforming loans is
primarily due to nonperforming credits migrating to OREO during the
first quarter of 2018. OREO increased $23.5 million as of March 31, 2018
as compared to December 31, 2017, primarily due to $26.4 million in
commercial loans that were transferred to OREO during the first quarter
of 2018.

Federal Reserve Bank excess reserves declined $54.3 million as compared
to December 31, 2017 and declined $508.5 million from the year ago
period. This excess cash was deployed into higher yielding and
diversified securities and also funded the planned decrease in high cost
deposits during the past twelve months.

The securities portfolio increased $6.9 million and is currently 23.2%
of total assets at March 31, 2018 as compared to 23.0% of total assets
at December 31, 2017. The increase is a result of more active balance
sheet management and as a replacement for loan growth due to the
aforementioned reduction of several large legacy credit relationships.
We have further diversified the securities portfolio as to bond types,
maturities and interest rate structures.

Total deposits as of March 31, 2018 were $3.7 billion essentially flat
as compared to December 31, 2017. Certificates of deposits decreased
only slightly by $22.4 million, or 1.1%, as compared to December 31,
2017 and declined $265.7 million, or 11.6%, as compared to March 31,
2017 due to the aforementioned intentional reduction in higher cost time
deposits. Noninterest bearing deposits increased by $44.6 million, or
8.4%, to $574.8 million as of March 31, 2018 as compared to $530.2
million as of December 31, 2017. Noninterest bearing deposits comprised
15.7% and 14.4% of total deposits at March 31, 2018 and December 31,
2017.

The allowance for loan losses was 1.39% of total loans as of March 31,
2018 as compared to 1.32% as of December 31, 2017. The allowance for
loan losses was 59.0% of nonperforming loans as of March 31, 2018 as
compared to 38.0% of nonperforming loans as of December 31, 2017. 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
increased to 13.31% as of March 31, 2018 as compared to 12.93% as of
December 31, 2017. The Bank's leverage ratio was 9.62% at March 31, 2018
as compared to 9.33% as of December 31, 2017. The Bank's Total
Risk-Based Capital ratio was 14.56% at March 31, 2018 as compared to
14.15% at December 31, 2017.

OTCQX Market

Carter Bank & Trust today announced that the Bank's common stock will
begin trading, effective today, on the OTCQX® Best Market,
under the ticker symbol "CARE". In making the announcement, Litz H. Van
Dyke, Chief Executive Officer, stated, "The OTCQX is a great fit for our
Bank as it will improve our visibility to investors who are interested
in community banks, while providing a source of liquidity to our current
shareholders. As we move the Bank forward with our transformation
initiatives, it is the perfect time to bring our Bank's story to the
forefront."

About Carter Bank & Trust

Headquartered in Martinsville, VA, Carter Bank & Trust is a
state-chartered community bank in Virginia with $4.1 billion in assets
and 109 branches in Virginia and North Carolina. For more information
visit www.CarterBankandTrust.com.

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 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 SEC.
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 SHEET
(Unaudited)
 
(Dollars in Thousands, except per share data) March 31, December 31, March 31,
2018     2017     2017
ASSETS
Cash and Due From Banks $ 52,030 $ 58,533 $ 37,087
Interest-Bearing Deposits in Other Financial Institutions 62,880 58,365 42,821
Federal Reserve Bank Excess Reserves   97,367         151,715         605,828  
Total Cash and Cash Equivalents

212,277

268,613

685,736

 
Securities, Available-for-Sale, at Fair Value 954,127

947,201

-
Securities, Held-to-Maturity, at Cost (Fair Value $842,426 at March
31, 2017)
- -

837,189

Loans Held-for-Sale -

517

-
Portfolio Loans, net of Unearned Income 2,660,898

2,684,445

2,731,754

Allowance for Loan Losses   (36,866 )      

(35,318

)      

(37,953

)
Portfolio Loans, net

2,624,032

2,649,127

2,693,801

 
Bank Premises and Equipment, net 79,896 77,273 96,272
Other Real Estate Owned, net 63,263 39,793 20,076
Goodwill 58,726 59,762 59,762
Other Intangibles - 122 135
Bank Owned Life Insurance 50,000 - -
Other Assets   70,472         69,884         47,033  
TOTAL ASSETS $ 4,112,793       $ 4,112,292       $ 4,440,004  
 
 
LIABILITIES
Deposits
Noninterest-Bearing Demand $ 574,811 $ 530,242 $ 540,898
Interest-Bearing Demand 264,939 260,979 257,105
Money Market 107,624 102,686 165,767
Savings 690,315 721,459 732,625
Certificates of Deposits   2,031,887         2,054,249         2,297,626  

Total Deposits

3,669,576

3,669,615

3,994,021

Other Liabilities  

10,340

       

10,551

       

5,031

 
TOTAL LIABILITIES

 

3,679,916      

 

3,680,166      

 

3,999,052

 
 
 
SHAREHOLDERS' EQUITY

Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000
Shares; 26,257,761 outstanding in 2018 and 2017

26,258

26,258

26,258

Additional Paid-in-Capital

142,178

142,178

142,178

Retained Earnings

274,759

265,930

272,516

Accumulated Other Comprehensive Loss  

(10,318

)      

(2,240

)       -  
TOTAL SHAREHOLDERS' EQUITY  

432,877

       

432,126

       

440,952

 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,112,793       $ 4,112,292       $ 4,440,004  
 
PROFITABILITY RATIOS (ANNUALIZED)
Return on Average Assets

0.88%

 

-0.02%

 

0.56%

 

Portfolio Loan to Deposit Ratio

72.51%

 

73.15%

 

68.40%

 

Allowance to Total Portfolio Loans

1.39%

 

1.32%

 

1.39%

 

 
             
CARTER BANK & TRUST
CONSOLIDATED FINANCIAL DATA
INCOME STATEMENT
(Unaudited)
   
(Dollars in Thousands, except per share data) Quarter-to-Date
March 31, December 31, March 31,
2018     2017     2017
Interest Income $ 35,588 $ 36,453 $ 36,353
Interest Expense   8,151         8,669         9,844  
NET INTEREST INCOME 27,437 27,784 26,509
 
Provision for Loan Losses   1,515         12,685         3,880  
NET INTEREST INCOME AFTER 25,922 15,099 22,629
PROVISION FOR LOAN LOSSES
 
NONINTEREST INCOME
Gains on Sales of Securities, net 868 114 -
Service Charges, Commissions and Fees 1,252 717 1,008
Debit Card Interchange Fees 1,133 1,210 1,205
Insurance Commissions 535 379 464
Other Real Estate Owned Income 549 163 109
Other   394         846         161  
TOTAL NONINTEREST INCOME   4,731         3,429         2,947  
 
NONINTEREST EXPENSE
Salaries and Employee Benefits 12,260 11,597 10,174
Occupancy Expense, net 2,325 2,945 2,106
FDIC Insurance Expense 838 900 1,129
Other Taxes 477 523 441
Telephone Expense 669 460 412
Professional and Legal Fees 1,210 3,260 278
Data Processing License Fee 268 1,331 1,460
Losses (Gains) on Sales and Write-downs of Other Real Estate Owned,
net
291 2,515 (52 )
Loss on Sales and Write-downs of Bank Premises 51 5,295 -
Debit Card Expense 652 669 619
Tax Credits Amortization 1,015 - -
Tax Credits Impairment - 3,259 -
Other Real Estate Owned Expense 531 426 187
Other   1,972         2,119         1,050  
TOTAL NONINTEREST EXPENSE   22,559         35,299         17,804  
 
INCOME (LOSS) BEFORE INCOME TAXES 8,094 (16,771 ) 7,772
Income Tax (Benefit) Provision   (735 )   (11,700 )   1,470  
NET INCOME (LOSS) $ 8,829       $ (5,071 )     $ 6,302  
 
Average Shares Outstanding 26,257,761 26,257,761 26,257,761
 
PER SHARE DATA
Earnings (Loss) Per Common Share- Basic and Diluted $ 0.34 $ (0.19 ) $ 0.24
Market Value $ 17.05 $ 17.55 $ 16.90
 
PROFITABILITY RATIOS
Net Interest Margin (FTE)²

3.04%

 

2.98%

 

2.74%

 

Core Efficiency Ratio³

64.67%

 

65.57%

 

56.66%

 

 
             
CARTER BANK & TRUST
CONSOLIDATED SELECTED FINANCIAL DATA
(Unaudited)
 
DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES:
 

¹ Pre-tax pre-provision is computed as net interest income plus
noninterest income minus noninterest expense before the provision
for loan losses and income tax (benefit) provision.

 

² Net interest income has been computed on a fully taxable
equivalent basis ("FTE") using a 35% federal income tax rate for
the March 31, 2017 and December 31, 2017 quarters and the 21%
federal income tax statutory rate for the March 31, 2018 quarter.

 
Net Interest Income (FTE) (non-GAAP) Quarter-to-Date
March 31, December 31, March 31,
2018     2017     2017
 
Interest Income $ 35,588 $ 36,453 $ 36,353
Interest Expense (8,151 ) (8,669 ) (9,844 )
Tax Equivalent Adjustment²   1,087         2,244         2,057  
NET INTEREST INCOME (FTE) (non-GAAP) $ 28,524 $ 30,028 $ 28,566
 
 
³ Core Efficiency Ratio (non-GAAP)
Quarter-to-Date
March 31, December 31, March 31,
2018     2017     2017
NONINTEREST EXPENSE $ 22,559 $ 35,299 $ 17,804
Less: One Time Regulatory and Compliance (500 ) (1,845 ) -
Less: (Losses) Gains on Sales and Write-downs of Other Real Estate
Owned, net
(291 ) (2,515 ) 52

Less: Loss on Sales and Write-downs of Bank Premises

(51 ) (5,295 ) -
Less: Tax Credits Impairment - (3,259 ) -
Less: Tax Credits Amortization (1,015 ) - -
Less: Regulatory Review   -         (521 )       -  
NET NONINTEREST EXPENSE $ 20,702 $ 21,864 $ 17,856
 
NET INTEREST INCOME $ 27,437 $ 27,784 $ 26,509
Plus: Taxable Equivalent Adjustment   1,087         2,244         2,057  
NET INTEREST INCOME (FTE) (Non-GAAP) $ 28,524 $ 30,028 $ 28,566
Less: Securities Gains, net (868 ) (114 ) -
Less: Other Gains (374 ) - -
Noninterest Income   4,731         3,429         2,947  
NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME $ 32,013 $ 33,343 $ 31,513
 
CORE EFFICIENCY RATIO

64.67%

 

65.57%

 

56.66%

 

 

View Comments and Join the Discussion!