Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q4 2023 Earnings Presentation
50 slides from Carter Bankshares's earnings presentation, Jan 30, 2024
Slide 1: Fourth Quarter and Full Year 2023
FOURTH QUARTER AND FULL YEAR 2023
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 12-21 3 Balance Sheet Transformation 22-27 4 Asset Quality 28-33 5 Deposit Mix & Cost of Funds 34-36 6 Commercial Loan Portfolio Metrics 37-46 7 Non-GAAP Reconciliation 47-50 3
Slide 4: Overview
O V E R V I E W 4
Slide 5: 2023 Focused on the Future
5 As of December 31, 2023 FOCUSED ON THE FUTURE 65 CORPORATE CENTERS BRANCHES ◦ Continued Strong Capital and Liquidity Position ◦ Diversified and granular deposit base, approximately 78.9% Retail Customers ◦ Approximately 87.2% of Deposits, including Collateralized Muni deposits are FDIC Insured ◦ C
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 $3.3 DEPOSITS TOTAL BILLION Washington DC Roanoke Lynchburg Charlottesville Blacksburg- Christiansburg Non MSA VIRGINIA NORTH CAROLINA 12 BRANCHES TOTAL Charlotte
Slide 8: Corporate & Social Responsibility
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 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 The Bank recycled
Slide 9: Corporate & Social Responsibility
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 During 2023, the Bank hosted or volunteered at nine community blood drives in partnership with the American Red Cross. With 163 donors, 168 units and 475 lives impacted! VOLUNTEER COMMUNITY SERVICE HOURS CHARITABLE DONATIONS & SPONSORSH
Slide 10: Strategic Initiatives
10 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 11: Safety and Soundness
11 8.83% ACL/Total Portfolio Loans NPL/Portfolio Loans Net Chg-offs/ Portfolio Loans (YTD) 0.07% Delinquency/ Portfolio Loans S A F E T Y A N D S O U N D N E S S 2.77% 0.17% Asset Quality Earnings LiquidityCapital Return on Avg Assets (YTD)0.53% 6.79% NIM(FTE)(YTD) 2.87% Core Efficiency Ratio (YTD)
Slide 12: Financial Highlights
F I N A N C I A L H I G H L I G H T S 12
Slide 13: Financial Highlights Summary Table
13 $ in thousands 4Q2023 3Q2023 QTD Q/Q Change % 4Q2022 QTD Y/Y Change % 12/31/23 12/31/22 YTD Change % Operational Results Net Interest Income $ 27,420 $ 27,394 0.1 % $ 41,522 (34.0) % $ 122,310 $ 139,928 (12.6) % Provision for Credit Losses 2,895 1,105 162.0 % 52 5,467.3 % 5,500 2,419 127.4 % Prov
Slide 14: Shareholder, Financial and Asset Quality Ratios
4Q2023 3Q2023 QTD Q/Q Change % 4Q2022 QTD Y/Y Change % 12/31/23 12/31/22 YTD Change % Shareholder Ratios Diluted (Loss) Earnings Per Share (QTD & YTD) $ (0.08) $ 0.16 (150.0) % $ 0.65 (112.3) % $ 1.00 $ 2.03 (50.7) % Financial Ratios Return on Avg Assets (QTD & YTD) (0.17) % 0.33 % (151.5) % 1.49 %
Slide 15: Financial Performance Trends
Core Efficiency Ratio 71.62% 75.20% 73.51% 60.67% 72.54% 2019 2020 2021 2022 2023 Net Income, in millions $26,575 $(45,858) $31,590 $50,118 $23,384 2019 2020 2021 2022 2023 15 F I N A N C I A L P E R F O R M A N C E T R E N D S ROA 0.65% (1.12)% 0.76% 1.21% 0.53% 2019 2020 2021 2022 2023 TCE 11.81%
Slide 16: Capital
16 As of December 31, 2023 We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period. 1 Non-GAAP Financial measure - see Non-GAAP reconciliation Regulatory Well Capitalized Carter Bankshares 12/31/2023 Excess ($) (In Thous
Slide 17: Liquidity Sources
$ in thousands December 31, 2023 December 31, 2022 Favorable / (Unfavorable) Cash and Due From Banks, including Interest-bearing Deposits $ 54,529 $ 46,869 $ 7,660 FHLB Borrowing Availability(1) 480,266 676,746 (196,480) Unsecured Lines of Credit 50,000 127,130 (77,130) Unpledged Investment Securiti
Slide 18: Deposit Composition
18 For the Period Ending Variance $ in thousands 12/31/23 09/30/23 12/31/22 Quarter Year Lifetime Free Checking $ 685,218 $ 664,819 $ 705,539 $ 20,399 $ (20,321) Interest-Bearing Demand 481,506 469,904 496,948 11,602 (15,442) Money Market 513,664 426,172 484,238 87,492 29,426 Savings 454,876 487,105
Slide 19: Loan Composition
19 For the Period Ending Variance $ in thousands 12/31/23 09/30/23 12/31/22 Quarter Year Commercial Real Estate $ 1,670,631 $ 1,688,947 $ 1,470,562 $ (18,316) $ 200,069 Commercial and Industrial 271,511 264,329 309,792 7,182 (38,281) Residential Mortgages 787,929 738,368 657,948 49,561 129,981 Other
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 2023 (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
Slide 21: Top Ten Relationships
21 For the Periods Ending Variance 12/31/23 to 12/31/22 % of Gross Loans % of RBC $ in thousands 12/31/23 12/31/22 1. Hospitality, Agriculture & Energy $ 301,913 $ 309,107 $ (7,194) 8.61% 62.26% 2. Retail Real Estate & Food Services 53,576 55,625 (2,049) 1.53% 11.05% 3. Multifamily Development 40,00
Slide 22: 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 22
Slide 23: Earning Assets
23 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 $4.3B • Our primary mandate is to grow the loan book with well diversified, attractively priced loan products to increase the NIM and mitigate co
Slide 24: Loans
24 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, small business and consumer loans. Continuation of increased granularity is also a focus. • Portfolio loans currently stand at $3.5B • Our primary mandate is to alwa
Slide 25: Bond Portfolio
25 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 $779.0M, or about 17.3% of total assets, target is 15-20% of total assets • Per the charts, diversification has improved significantly over the p
Slide 26: Debt Securities Portfolio
26 12/31/2023 12/31/2022 $ in thousands Amortized Cost Net Unrealized (Losses)/ Gains Fair Value Amortized Cost Net Unrealized (Losses)/ Gains Fair Value U.S. Treasury Securities $ — $ — $ — $ 19,318 $ (1,452) $ 17,866 U.S. Government Agency Securities 44,185 (358) 43,827 50,334 (570) 49,764 Residen
Slide 27: Deposits
27 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 $3.7B • CD Portfolio ($1.5B) is relatively short with 80% of the portfolio scheduled to mature within 12 months and 95% of the
Slide 28: Asset Quality
A S S E T Q U A L I T Y 28
Slide 29: Asset Quality
$42 $32 $7 $7 31 22 3 5 8 Commercial Real Estate Commercial and Industrial Construction Residential Mortgages Other Consumer Other YE 2019 YE 2020 YE 2021 YE 2022 29 A S S E T Q U A L I T Y Nonperforming Loans / Total Portfolio Loans $2,885 $2,947 $2,812 $3,149 $3,506 42 32 7 7 310 2,843 2,915 2,805
Slide 30: Delinquency Trends
30 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% 0.16% 0.05% 0.03% 0.01% 0.07% 0.01% —% —% —% —% —% 0.14% 0.22% 0.06% 0.15% 0.17% $4,070 $6,404 $1,670 $4,837 $6,032 30-59 Days PD 60-89 Days PD 90+ Days PD and still accruing Total PD Loans Total PD A
Slide 31: Nonperforming Relationships
31 Nonaccrual Balance Variance 12/31/23 to 12/31/22 Comments $ in thousands 12/31/23 12/31/22 1. Other $ 301,913 $ — $ 301,913 Other 2. Residential Construction 2,090 — 2,090 Residential Construction 3. Residential 1,142 — 1,142 Residential Mortgage Loan 4. Residential 825 825 — Residential Mortgage
Slide 32: Loan Portfolio Risk Ratings
Portfolio Credit Quality Trend $2,885 $2,947 $2,812 $3,149 $3,506 2,451 2,523 2,616 2,992 3,192 430 238 186 142 310 186 Pass Substandard Special Mention YE 2019 YE 2020 YE 2021 YE 2022 YE 2023 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 32 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 33: ACL, Net Charge-offs & Provision Expense
33 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 $2,300 $3,404 $18,006 $3,350 $2,419 $5,500 0.13% 0.09% 0.79% 0.15% 0.07% Net Charge-offs Provision Expense Net Charge-offs (annualized)/ Average Loans YE 2019 YE 2
Slide 34: 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 34
Slide 35: Deposits
Total Deposit Composition $3,504 $3,685 $3,698 $3,633 $3,722 2,949 2,976 2,950 2,927 3,037 555 709 748 706 685 Interest-bearing deposits Noninterest-bearing deposits YE 2019 YE 2020 YE 2021 YE 2022 YE 2023 35 D E P O S I T S (1) Period end balances, at December 31, 2023, $ in millions (2) Collateral
Slide 36: Net Interest Income
Net Interest Income & NIM 1.23% 0.94% 0.57% 0.50% 1.73% 4.28% 3.74% 3.41% 4.01% 4.60% 3.05% 2.80% 2.84% 3.51% 2.87% Total Cost of Funds Yield on Interest-earning Assets Net Interest Margin YE 2019 YE 2020 YE 2021 YE 2022 YE 2023 Avg. Earning Assets & Yield $3,789 $3,834 $3,972 $4,024 $4,294 4.28% 3.
Slide 37: 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 37
Slide 38: CRE Segment Overview
38 C R E S E G M E N T O V E R V I E W As of December 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 (2) Includes restaurant loans of $33.2 million B
Slide 39: Hospitality Metrics
39 H O S P I T A L I T Y M E T R I C S As of December 31, 2023 *Relates to the Company's largest NPL relationship. 1 Commitment Level • Total portfolio balance $341.1M • Geographic diversification (see map) • Mean loan size in portfolio $6.0M1 • Median of loans in portfolio $4.1M1 • The largest loan
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 December 31, 2023, $ 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 $ 107,833 31.6 % $ 128,995
Slide 41: Multifamily Metrics
41 M U L T I F A M I L Y M E T R I C S As of December 31, 2023 1Commitment Level • Total portfolio balance $386.1M • Geographic diversification (see map) • Mean loan size in portfolio $3.4M1 • Median of loans in portfolio $228K1 • The largest loan in portfolio $32M1 • 32.80% are under construction1
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 December 31, 2023, $ in thousands (1) The Other category consists of multifamily properties for which we do not have the data for. Category Multifamily Portfolio Balance Percentage of Total Balance Multifamily Commitment Balance Weighted Avg. Commitment L
Slide 43: Retail Metrics
43 R E T A I L M E T R I C S As of December 31, 2023 ** Excludes restaurant loans of $33.2 million 1Commitment Level • Total portfolio balance $396.8M** • Geographic diversification (see map) • Mean loan size in portfolio $2.76M1 • Median of loans in portfolio $1.11M1 • The largest loan in portfolio
Slide 44: Retail Metrics
44 R E T A I L M E T R I C S As of December 31, 2023, $ in thousands (1) Excludes restaurant loans of $33.2 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 Commitmen
Slide 45: Office Metrics
45 O F F I C E M E T R I C S As of December 31, 2023 1Commitment Level • Total portfolio balance $222.2M • Geographic diversification (see map) • Mean loan size in portfolio $1.85M1 • Median of loans in portfolio $400K1 • The largest loan in portfolio $23M1 • 4.12% are under construction1 • Top 10 b
Slide 46: Office Metrics
46 O F F I C E M E T R I C S As of December 31, 2023, $ 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 $ 189,367 85.2 % $ 216,593 $ 1,973 $ 117 Medical Offices
Slide 47: Non-GAAP Statement
47 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 48: Non-GAAP Reconciliation
48 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 Year-to-Date (Dollars in Thousands) 4Q2023 3Q2023 4Q2022 12/31/23 12/31/22 Interest Income (FTE)(Non-GAAP) Interest and Dividend Income (GAAP) $ 51,863 $ 48,886 $ 48,216 $ 196,420 $ 160,182 Tax Equi
Slide 49: Efficiency Ratio (Non-GAAP)
49 2 Efficiency Ratio (Non-GAAP) Quarter-to-Date Year-to-Date (Dollars in Thousands) 4Q2023 3Q2023 4Q2022 12/31/23 12/31/22 Noninterest Expense $ 29,072 $ 27,282 $ 27,617 $ 105,466 $ 97,001 Less: Losses on sales and write-downs of Branch Premises, net (19) (18) — (103) — Less: Losses on Sales and wr
Slide 50: Non-GAAP Reconciliation: Adjusted Book Value
50 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) Year-to-Date 2023 (Dollars in Thousands) Adjusted Book Value (Non-GAAP) Total Shareholders' Equity 0 0$ 351,243 Add: Accumulated Other Comprehensive Loss ("AOCI") 71,439 Add: Other Segment Reserve Release, net of tax 44,