Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q2 2024 Earnings Presentation
50 slides from Carter Bankshares's earnings presentation, Jul 29, 2024
Slide 1: Second Quarter 2024 Investor Presentation
SECOND QUARTER 2024 INVESTOR PRESENTATION
Slide 2: Forward-Looking Statement
2 F O R W A R D - L O O K I N G S T A T E M E N T This information contains or incorporates certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that relate to our financial condition, market cond
Slide 3: Section Title Slides
SECTION TITLE SLIDES 1 Overview 4-11 2 Financial Highlights 12-24 3 Asset Quality 25-31 4 Deposit Mix 32-34 5 Commercial Loans 35-44 6 Non-GAAP Reconciliation 45-50 3
Slide 4: Overview
OVERVIEW S E C T I O N 0 1
Slide 5: 2024 Focused on the Future
5 As of June 30, 2024 FOCUSED ON THE FUTURE 65 CORPORATE CENTERS BRANCHES ◦ Strong Deposit Growth in Q2 2024, 5.3%, annualized ◦ Strong and Improving Available Liquidity Position in Q2 2024, 195.7% available liquidity to uninsured deposits ◦ Diversified and granular deposit base, approximately 78.4%
Slide 6: Leadership Team
6 L E A D E R S H I P T E A M Litz Van Dyke Chief Executive Officer 38 years in Industry 8 years at the Bank Bradford Langs President Chief Strategy Officer 37 years in Industry 7+ years at the Bank Wendy Bell Senior Executive Vice President Chief Financial Officer 39 years in Industry 7+ years at t
Slide 7: Regional Footprint
Branches in Metropolitan Statistical Areas 7 R E G I O N A L F O O T P R I N T V I R G I N I A N O R T H C A R O L I N A 53 BRANCHES TOTAL $3.4 DEPOSITS TOTAL BILLION Washington DC Roanoke Lynchburg Charlottesville Blacksburg- Christiansburg Non MSA VIRGINIA NORTH CAROLINA 12 BRANCHES TOTAL Charlott
Slide 8: Rewarding Relationships
8 R E W A R D I N G R E L A T I O N S H I P S CMO 20% SBA 8% MBS 13% Nurturing Relationships and Rewarding Customers, Associates, and Shareholders Rewarding Relationships Regulators Customers Communities Associates Investors
Slide 9: Corporate & Social Responsibility
CLASSES FACILITATED FOR 970 STUDENTS 9 * C O R P O R A T E & S O C I A L R E S P O N S I B I L I T Y Associates participated in the Juneteenth “Celebration of Freedom” event hosted by Fayette Area Historical Initiative ("FAHI"). The goal of FAHI is to collect, preserve and interpret the Fayette Stre
Slide 10: Investment Highlights
• Investments in Human Capital & Technology Should Provide Operational Leverage Going Forward • Well Positioned in Virginia & North Carolina including Fast Growing Markets such as Charlottesville, Charlotte & Raleigh • Extraordinarily well-reserved with our other segment reserve for the largest lend
Slide 11: Strategic Initiatives
11 S T R A T E G I C I N I T I A T I V E S E N H A N C E E X P A N DI N V E S T We will invest in human capital strategies to enhance the associate experience. We will continue to drive efficiency and process improvement across all levels of the organization, leveraging technology and automation. We
Slide 12: Safety and Soundness
12 8.46% ACL/Total Portfolio Loans 2 NPL/Portfolio Loans 1 Net Chg- offs/Portfolio Loans (YTD) 0.05% Delinquency/Port folio Loans S A F E T Y A N D S O U N D N E S S 2.72% 0.05% Asset Quality Earnings LiquidityCapital Return on Avg Assets (YTD)0.47% 5.99% NIM(FTE)(YTD)2.58% Core Efficiency Ratio (YT
Slide 13: Financial Highlights
FINANCIAL HIGHLIGHTS S E C T I O N 0 2
Slide 14: Operational Results and Balance Sheet Condition
14 $ in thousands 2Q 2024 1Q 2024 QTD Q/Q Change % 2Q 2023 QTD Y/Y Change % Operational Results Net Interest Income $28,092 $28,419 (1.2) % $26,711 5.2 % Provision for Credit Losses 491 16 2,968.8 % 85 477.6 % (Recovery) Provision for Unfunded Commitments (236) (43) 448.8 % 360 (165.6) % Noninterest
Slide 15: Financial / Shareholder Ratios
2Q 2024 1Q 2024 QTD Q/Q Change % 2Q 2023 QTD Y/Y Change % Shareholder Ratios Diluted Earnings Per Share (QTD) $0.21 $0.25 (16.0)% $0.24 (12.5)% Financial Ratios Return on Avg Assets (QTD) 0.43 % 0.52 % (17.3)% 0.52 % (17.3)% Return on Avg Shareholders' Equity (QTD) 5.40 % 6.59 % (18.1)% 6.38 % (15.4
Slide 16: Financial Performance Trends
16 F I N A N C I A L P E R F O R M A N C E T R E N D S * *A loss of $57.7 million was recognized during the third quarter of 2020 related to a one-time charge resulting from goodwill impairment. This impairment charge reduced net income by $62.2 million, resulting in a net loss for the third quarter
Slide 17: Regulatory Capital
17 As of June 30, 2024 1 During the second quarter of 2024, $1.4M of the other segment reserve release from the $7.8M curtailment payments resulted in a $0.04 per share increase in book value. 2 Non-GAAP Financial measure - see Non-GAAP reconciliation Regulatory Well Capitalized Carter Bankshares 06
Slide 18: Liquidity Sources
$ in thousands June 30, 2024 December 31, 2023 YoY Change Cash and Due From Banks, including Interest-bearing Deposits $ 61,746 $ 54,529 $ 7,217 FHLB Borrowing Availability1 669,474 480,266 189,208 Unsecured Lines of Credit 50,000 50,000 — Collateralized Lines of Credit 45,000 — 45,000 Unpledged Inv
Slide 19: Loan Composition
19 For the Period Ending Variance $ in thousands 06/30/24 03/31/24 06/30/23 Quarter Year Commercial Real Estate $ 1,801,397 $ 1,728,929 $ 1,642,597 $ 72,468 $ 158,800 Commercial and Industrial 240,611 257,176 279,156 (16,565) (38,545) Residential Mortgages 783,903 788,125 707,893 (4,222) 76,010 Othe
Slide 20: Loan Portfolio Repricing & Index
20 L O A N P O R T F O L I O R E P R I C I N G & I N D E X 2Q 2024 1 Floating Rate Loans are defined as loans with contractual interest rate terms that allow the loan to reprice at lease once each month. 2 Variable Rate Loans are defined as loans with contractual interest rate terms that allow the l
Slide 21: Top Ten Relationships
21 For the Periods Ending Change % of Gross Loans % of RBC $ in thousands 06/30/24 12/31/23 1. Hospitality, Agriculture & Energy $ 294,140 $ 301,913 $ (7,773) 8.29% 60.75% 2. Health Care Facility / Long-Term Care 53,297 53,683 (386) 1.50% 11.01% 3. Retail Real Estate & Food Services 52,913 53,576 (6
Slide 22: Bond Portfolio
22 6/30/2024 12/31/2023 $ in thousands Amortized Cost Net Unrealized (Losses)/G ains Fair Value Amortized Cost Net Unrealized (Losses)/G ains Fair Value U.S. Government Agency Securities 30,288 (698) 29,590 44,185 (358) 43,827 Residential Mortgage-Backed Securities 108,898 (10,430) 98,468 110,726 (1
Slide 23: Deposit Composition
23 D E P O S I T C O M P O S I T I O N DEPOSIT STATISTICS • Total deposits increased $301.2M YoY • Diversified and granular deposit base, approximately 78.4% Retail Customers • Approximately 82.8% of Deposits, including Collateralized Muni deposits are FDIC Insured • Partnership with IntraFi for ava
Slide 24: Deposits
24 D E P O S I T S Goal is to enhance and diversify funding sources with a focus on lower cost/core relationships (both retail and commercial): • Deposits currently stand at $3.9B • CD Portfolio ($1.8B) is relatively short with 92% of the portfolio scheduled to mature within 12 months and 97% of the
Slide 25: Asset Quality
ASSET QUALITY S E C T I O N 0 3
Slide 26: Asset Quality
26 A S S E T Q U A L I T Y As of June 30, 2024, $ in millions 1 The Company placed commercial loans in the Other segment of the Company’s loan portfolio, relating to the Bank’s largest lending relationship which has a current principal balance of $294.1 million, on nonaccrual status due to loan matu
Slide 27: Delinquency Trends
27 D E L I N Q U E N C Y T R E N D S As of June 30, 2024, $ in thousands
Slide 28: Delinquency Trends
28 D E L I N Q U E N C Y T R E N D S 1 Represents the Bank’s largest lending relationship with a current principal balance of $294.1 million placed on nonaccrual status during the second quarter of 2023. Note: Other Real Estate Owned was $2.5M as of Q2 2024. Note: Peers include BHB, CCBG, CHCO, CCNE
Slide 29: Nonperforming Loans
29 Nonaccrual Balance Change Comments $ in thousands 06/30/24 12/31/23 1. Other 1 $ 294,140 $ 301,913 $ (7,773) Other 2. Residential Construction 2,090 2,090 — Residential Construction 3. Commercial & Industrial 1,065 — 1,065 Purchase Business Equipment 4. CRE 449 689 (240) Commercial Property 5. Re
Slide 30: Loan Portfolio - Risk Ratings
30 L O A N P O R T F O L I O - R I S K R A T I N G S 8 As of June 30, 2024, $ in millions 1 The Company placed $301.9 million of commercial loans in the Other segment of the Company’s loan portfolio, relating to the Bank’s largest lending relationship which has a current principal balance of $294.1
Slide 31: ACL, Net Charge-offs & Provision Expense
31 A C L, N E T C H A R G E - O F F S & P R O V I S I O N E X P E N S E 2 As of June 30, 2024, $ in thousands 1 Included in 2021 is the $61.6 million Day 1 adjustment related to the adoption ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financia
Slide 32: Deposit Mix
DEPOSIT MIX S E C T I O N 0 4
Slide 33: Deposits
33 D E P O S I T S 1 Period end balances, at June 30, 2024, $ in millions 2 Collateralized Muni deposits are FDIC insured up to $250,000. All balances in excess of $250,000 are fully collateralized with eligible securities 1 2 • Well-diversified deposit base of 213,310 customers – average commercial
Slide 34: Net Interest Income
34 N E T I N T E R E S T I N C O M E 1 2 Average balances, as of June 30, 2024, $ in millions 1 Cost of Funds incorporates the free funds contribution with the rate on total interest-bearing liabilities to illustrate the impact of noninterest-bearing liabilities on the overall cost of funds. 2 Compu
Slide 35: Commercial Loans
COMMERCIAL LOANS S E C T I O N 0 5
Slide 36: CRE Segment Overview
36 C R E S E G M E N T O V E R V I E W As of June 30, 2024, $ in millions 1 Other CRE & Other Commercial Segments include, but are not limited to, Special / Limited Use, Church, Mobile Home Park, Gas Station, Self-Storage Facilities & Auto Shops 2 Includes restaurant loans of $36.1 million By Collat
Slide 37: Hospitality Metrics
37 H O S P I T A L I T Y M E T R I C S As of June 30, 2024 *Relates to the Company's largest lending relationship. 1 Commitment Level • Total portfolio balance $361.3M • Geographic diversification (see map) • Mean loan size in portfolio $6.1M1 • Median of loans in portfolio $4.2M1 • The largest loan
Slide 38: Hospitality Metrics
38 H O S P I T A L I T Y M E T R I C S As of June 30, 2024, $ in thousands Category Hospitality Portfolio Balance Percentage of Total Balance Hospitality Commitment Balance Weighted Avg. Commitment LTV Avg. GL Balance Size Avg. of Debt per Key - Total Commitment Hilton $124,513 34.5 % $149,475 61.4
Slide 39: Multifamily Metrics
39 M U L T I F A M I L Y M E T R I C S As of June 30, 2024 1Commitment Level • Total portfolio balance $373.1M • Geographic diversification (see map) • Mean loan size in portfolio $3.1M1 • Median of loans in portfolio $224K1 • The largest loan in portfolio $35.5M1 • 42.87% are under construction1 •
Slide 40: Multifamily Metrics
40 M U L T I F A M I L Y M E T R I C S As of June 30, 2024, $ in thousands (1) The Other category consists of multifamily properties for which we do not have the data. Category Multifamily Portfolio Balance Percentage of Total Balance Multifamily Commitment Balance Weighted Avg. Commitment LTV Avg.
Slide 41: Retail Metrics
41 R E T A I L M E T R I C S As of June 30, 2024 ** Excludes restaurant loans of $36.1 million 1Commitment Level • Total portfolio balance $422.9M** • Geographic diversification (see map) • Mean loan size in portfolio $2.8M1 • Median of loans in portfolio $1.1M1 • The largest loan in portfolio $28M1
Slide 42: Retail Metrics
42 R E T A I L M E T R I C S As of June 30, 2024, $ in thousands (1) Excludes restaurant loans of $36.1 million (2) A Power Center is a large outdoor shopping mall that usually includes three or more "Big Box" stores. Category Retail Portfolio Balance Percentage of Total Balance Retail Commitment Ba
Slide 43: Office Metrics
43 O F F I C E M E T R I C S As of June 30, 2024 1Commitment Level • Total portfolio balance $223.7M • Geographic diversification (see map) • Mean loan size in portfolio $1.84M1 • Median of loans in portfolio $376K1 • The largest loan in portfolio $23M1 • 4.30% are under construction1 • Top 10 borro
Slide 44: Office Metrics
44 O F F I C E M E T R I C S As of June 30, 2024, $ in thousands Category Office Portfolio Balance Percentage of Total Balance Office Commitment Balance Avg. GL Balance Size Avg. of Debt per Square Ft- Total Commitment General Office Space $190,575 85.2 % $208,107 $ 2,049 $117 Medical Offices 24,550
Slide 45: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION S E C T I O N 0 6
Slide 46: Non-GAAP Statement
46 N O N - G A A P S T A T E M E N T Statements in this exhibit 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. Management uses, and this exhibit references, the efficiency ratio,
Slide 47: Non-GAAP Reconciliation
47 N O N - G A A P R E C O N C I L I A T I O N Net Interest Income (FTE) (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 2Q 2024 1Q 2024 2Q 2023 Interest Income (FTE)(Non-GAAP) Interest and Dividend Income (GAAP) $ 54,583 $ 54,049 $ 43,716 Tax Equivalent Adjustment 3 197 206 257 Interest and Divid
Slide 48: Non-GAAP Reconciliation
48 Adjusted Efficiency Ratio (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 2Q 2024 1Q 2024 2Q 2023 Noninterest Expense $ 27,446 $ 26,257 $ 25,536 Less: Losses on Sales and Write-downs of Branch Premises, net (44) (1) (33) Less: Gains on Sales and Write-downs of OREO, net 8 342 5 Adjusted Noninte
Slide 49: Non-GAAP Reconciliation
49 N O N - G A A P R E C O N C I L I A T I O N Adjusted Book Value (Non-GAAP) Quarter-to-Date Q2 2024 (Dollars in Thousands) Adjusted Book Value (Non-GAAP) Total Shareholders' Equity 0 0$ 364,411 Add: AOCI 69,633 Add: Other Segment Reserve Release, net of tax 42,718 Total Shareholders' Equity, exclu
Slide 50: Non-GAAP Reconciliation
50 N O N - G A A P R E C O N C I L I A T I O N Adjusted Nonperforming Loans ("NPL") to Total Portfolio Loans (Non-GAAP) Quarter-to-Date Q2 2024 (Dollars in Thousands) Adjusted NPLs (Non-GAAP) Total NPL 0 0$ 300,242 Less: Bank's Largest Lending Relationship 294,140 Total NPL, excluding Bank's Largest