Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q4 2020 Earnings Presentation
55 slides from Carter Bankshares's earnings presentation, Jan 29, 2021
Slide 1: Investor Update: Q4/YE 2020
Investor Update: Q4/YE 2020 Updated January 2021
Slide 2: Important Note Regarding Forward Looking Statements
IMPORTANT NOTE REGARDING FORWARD LOOKING STATEMENTS 2 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, obj
Slide 3: Important Note Regarding Non-GAAP Financial Measures
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 tab les in our definitions and reconciliations of GAAP to non - GAAP financial measures. This press release and the ac
Slide 4: Table of Contents
4 TABLE OF CONTENTS 1. INTRODUCTION TO CARTER BANKSHARES, INC. 2. FINANCIAL RESULTS 3. CAPITAL & LIQUIDITY UPDATE 4. LOAN PORTFOLIO COMPOSITION 5. STRATEGIC INITIATIVES UPDATE 6. RETAIL NETWORK OPTIMIZATION UPDATE 7. TECHNOLOGY/NEW PRODUCTS UPDATE 8. ASSET QUALITY UPDATE 9. BALANCE SHEET TRANSFORMAT
Slide 5: Introduction
INTRODUCTION 01 5
Slide 6: Overview of Carter Bankshares, Inc.
• On November 23, 2020, the Company completed the reorganization in which Carter Bankshares , Inc. became the parent bank holding company of Carter Bank & Trust • Bank established de novo in 1974 as First National Bank of Rocky Mount • Current Carter Bank & Trust charter established in 2006 • Headqu
Slide 7: Branch Footprint
BRANCH FOOTPRINT 7
Slide 8: Executive Management Team
EXECUTIVE MANAGEMENT TEAM 8 NAME TITLE YEARS OF EXPERIENCE PRIOR POSITIONS CURRENT ROLE WITH CB&T IN BANKING Litz Van Dyke Chief Executive Officer 5 5 35+ Practice Manager, Chief Operating Officer, President and Chief Executive Officer Bradford Langs President & Chief Strategy Officer 1 4 35 Chief R
Slide 9: Financial Results
FINANCIAL RESULTS 02 9
Slide 10: Key Financial Metrics
KEY FINANCIAL METRICS 10 (1) At December 31, 2020, total deposits include $84.7 million of deposits held for assumption and total loans included $9.8 mil lion of loans held - for - sale, both in connection with the Company’s agreement to sell four of its banking branches. (2) Net income, excluding a
Slide 11: Actual Balance Sheet: Month-End
ACTUAL BALANCE SHEET: MONTH - END 11 $ in thousands December 31, 2020September 30, 2020December 31, 2019 Quarter Year Cash and Due From Banks, including interest-bearing deposits in Other Financial Institutions $78,489 $43,955 $86,542 $34,534 $(8,053) Securities 778,679 777,986 742,617 693 36,062 FR
Slide 12: Income Statement
INCOME STATEMENT 12 $ in thousands, except per share data (1) Pre - tax pre - provision is computed as net interest income plus noninterest income minus noninterest expense before provision for loan losses and provision for income taxes. (2) Net Interest Margin has been computed on a fully taxable e
Slide 13: Capital & Liquidity Update
CAPITAL & LIQUIDITY UPDATE 03 13
Slide 14: Capital Levels
CAPITAL LEVELS 14 As of December 31, 2020 Well - Capitalized Minimums Under Prompt Corrective Action Regulations Ratios (%) 12/31/2019 Ratios (%) 12/31/2020 Excess ($) (In Thousands) 12/31/2020 Common Equity Tier 1 Ratio (“CET1”) ≥6.5% 13.58% 13.08% $213,453 Tier 1 Risk - Based Ratio ≥8.0% 13.58% 13
Slide 15: Available Liquidity
AVAILABLE LIQUIDITY 15 $ in thousands (1) For the periods presented above, the Bank maintained a secured FHLB Borrowing Facility with FHLB of Atlanta equal to 25% of the Bank’s assets approximating $1.0 billion, with available borrowing capacity subject to the amount of eligible collateral pledged a
Slide 16: Loan Portfolio Composition
LOAN PORTFOLIO COMPOSITION 04 16
Slide 17: Loan Portfolio Composition - YoY Growth
$2,562 $2,460 $2,280 $2,333 $2,398 $170 $225 $424 $552 $549 4.0% - 1.7% 0.7% 6.7% 2.2% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 Loan Portfolio Composition - YoY Growth % Commercial Loan Consumer Loans PoP Growth (Annualized
Slide 18: Loan Portfolio Composition Year-End 2020
18 LOAN PORTFOLIO COMPOSITION YEAR - END 2020 $ in millions (1) Total Portfolio Loans (net of Loans Held - for - Sale) are presented for December 31, 2020. All Loan Portfolio Segmentations are sourced from Fed. Call Codes (RC - C) for the same period presented above. Commercial Real Estate $1,454 49
Slide 19: Loan Portfolio: CRE Segment Overview
19 LOAN PORTFOLIO: CRE SEGMENT OVERVIEW By Collateral Code (1) Other CRE & Other Commercial Construction Segments include, but are not limited to, Special / Limited Use, Church, Mobile Hom e P ark, Gas Station, Self - Storage Facilities, Auto Shops As of December 31, 2020 Row Labels Balance $ in tho
Slide 20: Loan Portfolio Repricing & Index
20 LOAN PORTFOLIO REPRICING & INDEX YE 20 $ in millions (1) Floating Rate Loans are defined as loans with contractual interest rate terms that allow the loan to reprice at lease once ea ch month. (2) Variable Rate Loans are defined as loans with contractual interest rate terms that allow the loan to
Slide 21: Strategic Initiatives Update
STRATEGIC INITIATIVES UPDATE 05 21
Slide 22: Strategic Initiatives Completed
22 STRATEGIC INITIATIVES COMPLETED MANAGEMENT & CORPORATE GOVERNANCE • Build out executive management team (2017 - present) • Expand and enhance board of directors (2017 - present) KEY INFRASTRUCTURE BUILDOUT • Credit Underwriting/Administration, Compliance, Risk Management (2017 – present) LINES OF
Slide 23: Key Strategic Initiatives in Play
23 KEY STRATEGIC INITIATIVES IN PLAY DEPOSIT MIX RESTRUCTURE AND GROWTH • Reduce time deposits %, increase checking, savings and money market accounts • Deposit acquisition strategy (Retail) initiated 2019, brought in - house 2020 • Treasury Management Services (Commercial), Launched 2019 RETAIL NET
Slide 24: Retail Network Optimization Updates
RETAIL NETWORK OPTIMIZATION UPDATES 06 24
Slide 25: Retail Network Optimization
25 RETAIL NETWORK OPTIMIZATION Analyze and Assess Market Opportunity & Branch Performance Develop Strategic Plan for Growth and Roadmap Implement Phase I 4Q 2019 – 3Q 2020 Implement Phase II 4Q 2020 – 2Q 2021 Near Horizon 114 Branches 69 Branches Market Opportunity • Deposit Share • Share of Wallet
Slide 26: Technology & New Products Update
TECHNOLOGY & NEW PRODUCTS UPDATE 07 26
Slide 27: Technology Updates Lead to New Products & Services
27 TECHNOLOGY UPDATES LEAD TO NEW PRODUCTS & SERVICES DATA AND VOICE INFRASTRUCTURE: VOIP & Bandwidth (Enhanced in 2017) CUSTOMER CONTACT CENTER: Established (August 2018) CORE BANKING PLATFORM: Conversion to Fiserv DNA (November 2018) ENHANCED OR NEW PRODUCTS AND SERVICES INCLUDE: Corporate Cash Ma
Slide 28: Technology Updates Lead to New Products & Services Cont'd
28 TECHNOLOGY UPDATES LEAD TO NEW PRODUCTS & SERVICES CONT’D. ONLINE BANKING OFFERS A FULL SUITE OF DIGITAL TOOLS: Online & Mobile Banking Bill Pay eStatements Mobile Deposit Zelle ® CardValet ® Digital Wallet MoneyPass ® Network
Slide 29: Asset Quality Update
ASSET QUALITY UPDATE 08 29
Slide 30: Delinquency Trends
30 DELINQUENCY TRENDS 0.34% 0.21% 0.07% 0.09% 0.16% 0.01% 0.01% 0.22% 0.05% 0.06% 0.02% 0.02% 0.00% 0.00% 0.00% 0.37% 0.24% 0.28% 0.14% 0.22% 0.00% 0.10% 0.20% 0.30% 0.40% YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Past Due Loans / Total Portfolio Loans 30-59 Days PD 60-89 Days PD 90+ Days PD Total PD
Slide 31: Nonperforming Loans
31 NONPERFORMING LOANS $ in millions As of December 31, 2020 $62 $14 $11 $7 $5 $57 $78 $37 $31 $22 $1 $2 $3 $4 $1 $1 $1 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Nonperforming Loan Breakdown Construction CRE Residential Mortgage C&I Consumer Municipal $119 $93 $51 $42 $32 $119.0 $93.0 $51.0 $42.0 $32.
Slide 32: Nonperforming Borrowers
32 NONPERFORMING BORROWERS $ in thousands *All lots are under contract As of December 31, 2020 Type Nonaccrual Balance 12/31/20 Nonaccrual Balance 09/30/20 Variance Q4 2020 to Q3 2020 Comments 1. CRE / Construction; $17,910 $24,829 ($6,919) Golf courses, commercial and residential lot developer. Rec
Slide 33: Nonperforming Assets
33 NONPERFORMING ASSETS $ in millions $24 $40 $33 $18 $16 $23 $42 $47 $35 $25 $96 $51 $4 $7 $7 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Nonperforming Assets OREO Nonperforming TDR's Nonperforming Loans $143 $133 $84 $60 $48 $4,506 $4,112 $4,040 $4,006 $4,179 3.2% 3.2% 2.1% 1.5% 1.1% 0.0% 0.5% 1.0% 1.
Slide 34: Loan Portfolio - Pass/Non-Pass and Criticized Assets
$651 $719 $461 $430 $239 $75 $97 $11 $4 $186 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Credit Quality Trend Substandard Special Mention 34 LOAN PORTFOLIO* – PASS/NON - PASS AND CRITICIZED ASSETS $ in millions *Excludes loans held - for - sale $2,006 $1,8
Slide 35: Net Charge-Off & Provision Expense Trends
35 NET CHARGE - OFF & PROVISION EXPENSE TRENDS $ in thousands $10,207 $42,379 $12,989 $3,841 $2,694 $17,717 $43,197 $16,870 $3,404 $18,006 $- $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Net Charge-Offs Provision Expense
Slide 36: ALLL Composition & Coverage Ratio Trends
36 ALLL COMPOSITION & ALLL COVERAGE RATIO TRENDS $ in thousands ~99% ~99% 87% 84% 72% <1% <1% 13% 16% 28% 1.26% 1.32% 1.45% 1.34% 1.83% 1.64% 1.58% 1.34% 1.19% 1.38% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 YE 2016 YE 2017 Y
Slide 37: Balance Sheet Transformation
BALANCE SHEET TRANSFORMATION 9 37
Slide 38: Earning Assets
38 EARNING ASSETS Goal is to deploy cash into higher yielding loans and investments while foregoing undue concentration risk: • Earning Assets stand at $3.9B • Our primary mandate is to use cash to grow the loan book with well diversified, higher yielding loan products to increase the NI M and mitig
Slide 39: Loans
39 LOANS Goal is to further diversify and de - risk the loan portfolio by reducing dependency on CRE loans and increasing C&I loans, consumer loans and single - family mortgages. Increased granularity is also a focus. • Portfolio loans currently stand at $2.9B • Our primary mandate is to always prov
Slide 40: Bond Portfolio
40 BOND PORTFOLIO Goal is to increase diversification, maintain strong credit quality, and improve performance versus peer group. • Portfolio stands at $779MM, or about 19% of total assets, target is 15 - 20% of total assets • Per the charts, diversification has improved significantly over the past
Slide 41: Deposits
41 DEPOSITS Goal is to restructure and diversity funding sources with a focus on lower cost/core relationships (both retail and commercia l): • Deposits currently stand at $3.7B • Dependence on CDs remains high but is declining, and maturities are proactively managed on a weekly basis. • Multiple st
Slide 42: Deposit Mix/COF Updates
DEPOSIT MIX/COF UPDATES 10 42
Slide 43: Deposits
43 DEPOSITS $ in millions $3,529 $3,139 $3,067 $2,949 $2,976 $535 $530 $525 $555 $709 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Total Deposit Composition (1) Interest-Bearing Deposits Noninterest-Bearing Deposits $4,064 $3,669 $3,592 $3,5
Slide 44: Deposits: Interest Bearing Composition & Deposit Rate
44 DEPOSITS $ in millions $2,634 $2,199 $2,090 $2,054 $1,819 $710 $727 $664 $582 $600 $243 $245 $247 $249 $321 $220 $141 $96 $135 $197 1.22% 1.12% 1.23% 1.54% 1.21% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 YE 2016 YE 2017 YE 2018
Slide 45: Total Deposits & Total Cost of Deposits
45 TOTAL DEPOSITS & TOTAL COST OF DEPOSITS $ in millions $2,999 $2,959 $2,934 $2,919 $2,949 $2,946 $569 $567 $551 $651 $668 $695 1.34% 1.27% 1.21% 1.04% 0.93% 0.79% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Q3 2019 Q4 2019 Q1
Slide 46: Net Interest Margin
46 NET INTEREST MARGIN 3.42% 3.70% 4.11% 4.28% 3.74% 1.02% 0.90% 1.01% 1.23% 0.94% 2.40% 2.80% 3.10% 3.05% 2.80% YE 2016 YE 2017 YE 2018 YE 2019 YE 2020 Yield on Interest-earning Assets Total Cost of Funds Net Interest Margin (1) Total Cost of Funds incorporates the free funds contribution with the
Slide 47: Loan Deferral Update
LOAN DEFERRAL UPDATE 11 47
Slide 48: COVID-19 Loan Deferral Program Update
48 COVID - 19 LOAN DEFERRAL PROGRAM UPDATE AS OF DECEMBER 31, 2020 The bank has offered loan deferrals in three phases: • The Phase I program began in March 2020 and expired August 31, 2020 • The Phase II program began in August 2020 and expired on December 31, 2020 • The Phase III program began in
Slide 49: Phase III Loan Deferrals for Total Loan Portfolio
49 PHASE III LOAN DEFERRALS FOR TOTAL LOAN PORTFOLIO $ in millions * Phase I loan balances are as of August 31, 2020. Phase II loan balances are as of November 12, 2020. (1) The Phase I deferment period ended on August 31, 2020. (2) Excludes loans held - for - sale.
Slide 50: Phase III Hospitality Loan Deferrals
50 PHASE III HOSPITALITY LOAN DEFERRALS $ in thousands As of December 31, 2020.
Slide 51: Hospitality Metrics by State
51 HOSPITALITY METRICS BY STATE $ in thousands As of December 31, 2020 State Balance Avg. LTV Avg. Commitment Size Avg. of Debt per Key NC $191,934 61.15% $4,436 $66 SC $154,385 60.18% $6,062 $87 VA $59,363 57.39% $3,298 $81 WV $62,509 27.93% $15,627 $65 FL $12,743 64.71% $6,372 $122 GA $11,728 61.9
Slide 52: Hospitality Metrics by Brand
52 HOSPITALITY METRICS BY BRAND As of December 31, 2020 $ in thousands Hilton - 26.4% IHG - 22.9% Upscale Independent/Boutique - 11.5% Marriott - 13.6% Wyndham - 8.1% Choice - 6.1% Independent - 5% Best Western - 3.5% Other - 2.9% $497 million Brand Balance Avg. LTV Avg. Commitment Size Avg. of Debt
Slide 53: CRE Segment Overview
53 CRE SEGMENT OVERVIEW By Collateral Code (1) Other CRE & Other Commercial Construction Segments include, but are not limited to, Special / Limited Use, Church, Mobile Hom e P ark, Gas Station, Self - Storage Facilities, Auto Shops As of December 31, 2020 Row Labels Balance $ in thousands Deferment
Slide 54: Paycheck Protection Program Updates
PAYCHECK PROTECTION PROGRAM UPDATES 12 54
Slide 55: Paycheck Protection Program (PPP)
PAYCHECK PROTECTION PROGRAM (PPP) 55 Round I (April 3 - 17) – Referral Agreement with Kabbage Round II (April 27 – June 15) – Carter Bank stood up internal process and referred to Kabbage Round III (Jan 22, 2021...) – Carter Bank is processing in - house only PPP Rounds I and II • 966 loans totaling