Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q1 2023 Earnings Presentation
51 slides from Carter Bankshares's earnings presentation, May 3, 2023
Slide 1: First Quarter 2023 Investor Presentation
LINWESTOR I RESENTAYL LO FIRST QUARTER 2023 Ta = Carter Bankshares, Inc.
Slide 2: Forward-Looking Statements
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 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, market conditions, results of operations,
Slide 3: Section Title Slides
SECTION TITLE SLIDES 1 Overview 4-12 2 Financial Highlights 13-22 3 Balance Sheet Transformation 23-28 4 Asset Quality 29-34 5 Deposit Mix & Cost of Funds 35-37 6 Commercial Loan Portfolio Metrics 38-47 7 Non-GAAP Reconciliation 48-51 3
Slide 4: Overview
O V E R V I E W 4
Slide 5: Focused on the Future / Corporate Highlights
5 As of March 31, 2023 FOCUSED ON THE FUTURE 66 CORPORATE CENTERS BRANCHES ◦ Continued strong capital and liquidity position. ◦ Three consecutive quarters of record earnings. ◦ Diversified and granular deposit base, approximately 77% Retail Customers. ◦ Approximately 88% of Deposits are FDIC Insured
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 Bradford Langs President Chief Strategy Officer Wendy Bell Senior Executive Vice President Chief Financial Officer Loran Adams Tami Buttrey Executive Vice President Chief Retail Banking Officer Channel Optimization Director Paul Car
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 NT V I R G I N I A N O R T H C A R O L I N A 53 BRANCHES TOTAL $3.1 DEPOSITS TOTAL BILLION Washington DC Roanoke Lynchburg Charlottesville Blacksburg- Christiansburg Non MSA VIRGINIA NORTH CAROLINA 13 BRANCHES TOTAL Charlotte
Slide 8: Commitment to ESG
8 We are committed to maintaining the highest standards of business conduct and governance to serve our customers and communities, create long-term value for our shareholders, and maintain our integrity in the marketplace. C O M M I T M E N T T O E S G Since 2019, our Facilities Director has oversee
Slide 9: Care in the Community
9 * C A R E I N T H E C O M M U N I T Y Virginia Enterprise Zone Job Creation Grant reinvested into Patrick & Henry Community College’s Workforce, Economic, and Community Development ("WECD") division to help citizens gain critical skills to fill job openings in the greater Martinsville and Henry Co
Slide 10: Strategic Initiatives
10 S T R A T E G I C I N 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 w
Slide 11: CARE Is Different
Differentiators • Balance sheet diversification/ granularity for loans & deposits • Modest exposure to uninsured depositors • 77% Retail deposit base • Bond portfolio structure: ◦ 100% AFS ◦ 20% of Total Assets ◦ ~50% fixed / 50% floating (peer average ~90% fixed / 10% floating) ◦ Shorter maturities
Slide 12: Safety and Soundness
12 0.51% ACL/Total Portfolio Loans NPA/Total Assets plus OREO Net Chg-offs/ Portfolio Loans (QTD annualized) 0.07% NPL/Portfolio Loans S A F E T Y A N D S O U N D N E S S 2.91% 0.26% Asset Quality Earnings LiquidityCapital Return on Avg Assets (QTD)1.51% 18.89% Return on Avg Shareholders' Equity (QT
Slide 13: Financial Highlights
F I N A N C I A L H I G H L I G H T S 13
Slide 14: Operational Results and Balance Sheet Condition
$12.6M 14 $ in thousands 1Q2023 4Q2022 QTD Q/Q Change % 1Q2022 QTD Y/Y Change % Operational Results Net Interest Income $ 40,785 $ 41,522 (1.8) % $ 28,222 44.5 % Provision for Credit Losses 1,415 52 2,621.2 % 630 124.6 % Provision (Recovery) for Unfunded Commitments 84 319 (73.7) % (236) (135.8) % N
Slide 15: Financial / Shareholder Ratios
18.89% $0.67 Record QTD EPS ROA ROE 1Q2023 4Q2022 QTD Q/Q Change % 1Q2022 QTD Y/Y Change % Shareholder Ratios Diluted Earnings Per Share (QTD) $ 0.67 $ 0.65 3.1 % $ 0.36 86.1 % Financial Ratios Return on Avg Assets (QTD) 1.51 % 1.49 % 1.3 % 0.92 % 64.1 % Return on Avg Shareholders' Equity (QTD) 18.8
Slide 16: Financial Performance Trends
Core Efficiency Ratio 71.62% 75.20% 73.51% 60.69% 52.51% 2019 2020 2021 2022 Q1 2023 Net Income, in millions $26,575 $(45,858) $31,590 $50,118 $64,649 2019 2020 2021 2022 Q1 2023 16 F I N A N C I A L P E R F O R M A N C E T R E N D S ROA 0.65% (1.12)% 0.76% 1.21% 1.51% 2019 2020 2021 2022 1Q 2023 TC
Slide 17: Regulatory Capital
17 As of March 31, 2023 We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period. 1 Non-GAAP Financial measure - see Non-GAAP reconciliation Regulatory Well Capitalized Carter Bankshares 3/31/2023 Excess ($) (In Thousands
Slide 18: Liquidity Sources
$ in thousands March 31, 2023 December 31, 2022 Favorable / (Unfavorable) Cash and Due From Banks, including Interest-bearing Deposits $ 81,378 $ 46,869 $ 34,509 FHLB Borrowing Availability(1) 461,913 676,746 (214,833) Unsecured Lines of Credit 145,000 127,130 17,870 Unpledged Investment Securities
Slide 19: Deposit Composition
19 For the Period Ending Variance $ in thousands 03/31/23 12/31/22 03/31/22 Quarter Year Lifetime Free Checking $ 687,333 $ 703,334 $ 708,353 $ (16,001) $ (21,020) Interest-Bearing Demand 500,749 496,948 480,192 3,801 20,557 Money Market 430,938 484,238 526,838 (53,300) (95,900) Savings 606,976 684,
Slide 20: Loan Composition
20 For the Period Ending Variance $ in thousands 03/31/23 12/31/22 03/31/22 Quarter Year Commercial Real Estate $ 1,575,675 $ 1,470,562 $ 1,343,206 $ 105,113 $ 232,469 Commercial and Industrial 290,293 309,792 345,345 (19,499) (55,052) Residential Mortgages 675,340 657,948 483,382 17,392 191,958 Oth
Slide 21: Loan Portfolio Repricing & Index
21 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 1 Q 2 0 2 3 (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) Floating Rate Loans are defined as loans with contractual interest rate terms that all
Slide 22: Top Ten Relationships
22 For the Periods Ending Variance 03/31/23 to 12/31/22 % of Gross Loans % of RBC $ in thousands 03/31/23 12/31/22 1. Hospitality, agriculture & energy $ 301,913 $ 309,107 $ (7,194) 9.29% 62.09% 2. Retail real estate & food services 54,524 55,625 (1,101) 1.68% 11.21% 3. Industrial & retail real esta
Slide 23: Balance Sheet Transformation
B A L A N C E S H E E T T R A N S F O R M A T I O N 23
Slide 24: Earning Assets
24 E A R N I N G A S S E T S Goal is to grow attractively priced loans and investments while foregoing undue concentration risk. • Earning Assets stand at $4.2B • Our primary mandate is to grow the loan book with well diversified, attractively priced loan products to increase the NIM and mitigate co
Slide 25: Loans
25 L O A N S 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 $3.2B • Our primary mandate is to always prov
Slide 26: Bond Portfolio
26 B O N D P O R T F O L I O Goal is to maintain diversification and strong credit quality, while delivering above peer performance. • Portfolio stands at $862.9M, or about 19.8% of total assets, target is 15-25% of total assets • Per the charts, diversification has improved significantly over the p
Slide 27: Bond Portfolio Unrealized Losses
27 3/31/2023 12/31/2022 $ in thousands Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses U.S. Treasury Securities 5 $ 18,132 $ (1,204) 5 $ 17,866 $ (1,452) U.S. Government Agency Securities 19 22,720 (740) 15 20,913 (788) Residential Mortgage-Backed
Slide 28: Deposits
28 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 $3.5B • Dependence on CDs has significantly declined, and maturities and pricing are proactively managed on a weekly basis • M
Slide 29: Asset Quality
A S S E T Q U A L I T Y 29
Slide 30: Nonperforming Loans and Assets
Nonperforming Loan Breakdown $42 $32 $7 $7 $831 22 0 3 5 8 Commercial Real Estate Commercial and Industrial Construction Residential Mortgages Other Consumer Other YE 2019 YE 2020 YE 2021 YE 2022 Q1 2023 30 N O N P E R F O R M I N G Nonperforming Loans / Total Portfolio Loans $2,885 $2,947 $2,812 $3
Slide 31: Delinquency Trends
31 D E L I N Q U E N C Y T R E N D S Past Due Loans / Total Portfolio Loans 0.09% 0.19% 0.05% 0.08% 0.07% 0.05% 0.03% 0.01% 0.07% 0.00% —% —% —% —% —% 0.14% 0.22% 0.06% 0.15% 0.07% $4,070 $6,404 $1,670 $4,837 $2,331 30-59 Days PD 60-89 Days PD 90+ Days PD Total PD Loans Total PD Amt YE 2019 YE 2020
Slide 32: Nonperforming Relationships
32 Nonaccrual Balance Variance 03/31/23 to 12/31/22 Comments $ in thousands 03/31/23 12/31/22 1. Residential Construction $ 2,090 $ — $ 2,090 Residential Construction 2. CRE 1,986 2,106 (120) Commercial Property 3. Residential 1,212 1,212 — Residential Mortgage Loan 4. Residential 825 825 — Resident
Slide 33: Loan Portfolio Risk Ratings
Portfolio Credit Quality Trend $2,885 $2,947 $2,812 $3,149 $3,249 2,451 2,523 2,616 2,992 3,097 430 238 186 142 137 186 Pass Substandard Special Mention YE 2019 YE 2020 YE 2021 YE 2022 Q1 2023 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 33 L O A N P O R T F O L I O - R I S K R A T I N G S Non-
Slide 34: ACL, Net Charge-offs & Provision Expense
34 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 Net Charge-offs & Provision Expense $3,841 $2,694 $23,127 $4,506 $573 $3,404 $18,006 $3,350 $2,419 $1,415 0.13% 0.09% 0.79% 0.15% 0.07% Net Charge-offs Provision Expense Net Charge-offs (annualized)/ Average Loans YE 2019 YE 202
Slide 35: Deposit Mix & Cost of Funds
D E P O S I T M I X & C O S T O F F U N D S 35
Slide 36: Deposits
Total Deposit Composition $3,504 $3,685 $3,698 $3,630 $3,533 2,949 2,976 2,950 2,927 2,846 555 709 748 703 687 Interest-bearing deposits Noninterest-bearing deposits YE 2019 YE 2020 YE 2021 YE 2022 Q1 2023 36 D E P O S I T S (1) Period end balances, at March 31, 2023, $ in millions (2) Collateralize
Slide 37: Net Interest Income
Net Interest Income & NIM 1.23% 0.94% 0.57% 0.50% 1.08% 4.28% 3.74% 3.41% 4.01% 5.06% 3.05% 2.80% 2.84% 3.51% 3.98% Total Cost of Funds Yield on Interest-earning Assets Net Interest Margin YE 2019 YE 2020 YE 2021 YE 2022 Q1 2023 Avg. Earning Assets & Yield $3,789 $3,834 $3,972 $4,024 $4,186 4.28% 3.
Slide 38: Commercial Loan Portfolio Mix
C O M M E R C I A L L O A N P O R T F O L I O M I X 38
Slide 39: CRE Segment Overview
39 C R E S E G M E N T O V E R V I E W As of March 31, 2023, $ 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 By Collateral Code Grand Total of Segments $2,136.7
Slide 40: Hospitality Metrics
40 H O S P I T A L I T Y M E T R I C S As of March 31, 2023 • Total portfolio commitment $383M • Geographic diversification (see map) • Mean loan size in portfolio $5.8M • Median of loans in portfolio $3.7M • The largest loan in portfolio $51.6M • 8.21% are under construction • Top 10 borrowers make
Slide 41: Hospitality Metrics
41 H O S P I T A L I T Y M E T R I C S As of March 31, 2023, $ in thousands Category Hospitality Portfolio Balance Percentage of Total Balance Hospitality Commitment Balance Avg. LTV Avg. GL Balance Size Avg. of Debt per Key - Total Commitment Hilton $ 107,894 30.8 % $ 107,894 65.0 % $ 9,809 $ 113 I
Slide 42: Multifamily Metrics
42 M U L T I F A M I L Y M E T R I C S As of March 31, 2023 (1) Excludes student housing loans of $43.8 million • Total Commitment $467M(1) • Geographic diversification (see map) • Mean loan size in portfolio $3.3M • Median of loans in portfolio $227K • The largest loan in portfolio $32M • 38.08% ar
Slide 43: Multifamily Metrics
43 M U L T I F A M I L Y M E T R I C S As of March 31, 2023, $ in thousands (1) The Other category consists of multifamily properties for which we do not have the data for. Category Hospitality Portfolio Balance Percentage of Total Balance Hospitality Commitment Balance Avg. LTV Avg. GL Balance Size
Slide 44: Retail Metrics
44 R E T A I L M E T R I C S As of March 31, 2023 • Total portfolio commitment $382M • Geographic diversification (see map) • Mean loan size in portfolio $2.66M • Median of loans in portfolio $1.06M • The largest loan in portfolio $29M • 11.45% are under construction • Top 10 borrowers make up 38.63
Slide 45: Retail Metrics
45 R E T A I L M E T R I C S As of March 31, 2023, $ in thousands (1) Excludes restaurant loans of $30.9 million (2) A Power Center is a large outdoor shopping mall that usually includes three or more "Big Box" stores. Category Hospitality Portfolio Balance Percentage of Total Balance Hospitality Co
Slide 46: Office Metrics
46 O F F I C E M E T R I C S As of March 31, 2023 • Total portfolio commitment $269M • Geographic diversification (see map) • Mean loan size in portfolio $1.83M • Median of loans in portfolio $386K • The largest loan in portfolio $23M • 8.12% are under construction • Top 10 borrowers make up 56% of
Slide 47: Office Metrics
47 O F F I C E M E T R I C S As of March 31, 2023, $ in thousands Category Total Commitment % of Total Portfolio Weighted Mean Debt/Sq FT General Office Space $ 239,579 89.2 % $ 436 Medical Offices 14,781 5.5 % 138 Veterinary Offices 13,568 5.1 % 1,571 Law Offices 707 0.2 % 51 Office Totals $ 268,63
Slide 48: Non-GAAP Statement
48 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 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 1 Net Interest Income (FTE) (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 3/31/2023 12/31/2022 3/31/2022 Interest Income (FTE)(Non-GAAP) Interest and Dividend Income (GAAP) $ 51,955 $ 48,216 $ 32,678 Tax Equivalent Adjustment 3 264 273 298 Interest
Slide 50: Core Efficiency Ratio (Non-GAAP)
50 2 Core Efficiency Ratio (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 3/31/2023 12/31/2022 3/31/2022 EFFICIENCY RATIO (GAAP) 53.14 % 58.68 % 67.08 % NONINTEREST EXPENSE $ 24,188 $ 27,617 $ 22,511 Less: Losses on Sales and Write-downs of OREO, net — (164) (159) Less: Losses on Sales and Write-
Slide 51: Non-GAAP Reconciliation: Adjusted Book Value
51 N O N - G A A P R E C O N C I L I A T I O N 1 Adjusted Book Value (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 3/31/2023 Adjusted Book Value (Non-GAAP) Total Shareholders Equity 0 0$ 354,880 Add: Accumulated Other Comprehensive Loss ("AOCI") 73,364 Add: Other Segment Reserve Release, net of