Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q2 2023 Earnings Presentation
51 slides from Carter Bankshares's earnings presentation, Aug 4, 2023
Slide 1: Investor Presentation Second Quarter 2023
INVESTOR PRESENTATION SECOND QUARTER 2023 = Carter Bankshares, Inc.
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 4-12 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: 2023 Focused on the Future: Corporate Highlights
5 As of June 30, 2023 FOCUSED ON THE FUTURE 66 CORPORATE CENTERS BRANCHES ◦ Launched new corporate Guiding Principles ◦ Launched new marketing campaign to drive awareness in key markets for core deposit growth ◦ Hosted internal leadership conference for 150 associates ◦ Continued strong capital and
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 $3.2 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 Hosted a volunteer workday alongside members of
Slide 9: New Guiding Principles
NEW GUIDING PRINCIPLES OUR PURPOSE OUR VALUES Build To create ‘ ; ties fi relationships opportunities or Relationships are at the heart of more people and everything we do. businesses to Farn prosper. trust Trust is built in the ways we respect and treat each other Take |. ownership WE ARE CARTER BA
Slide 10: Care in the Community
10 * C A R E I N T H E C O M M U N I T Y For the 3rd year in a row, in partnership with the American Red Cross, Associates from across the bank footprint wrote more than 400 thank you cards to veterans, active duty service members, and families of active duty service members. The Bank sponsored the
Slide 11: Strategic Initiatives
11 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 12: Safety and Soundness
12 9.42% ACL/Total Portfolio Loans NPA/Total Assets plus OREO Net Chg-offs/ Portfolio Loans (QTD annualized) 0.08% NPL/Portfolio Loans S A F E T Y A N D S O U N D N E S S 2.83% 9.33% Asset Quality Earnings LiquidityCapital Return on Avg Assets (QTD) annualized 0.52% 6.38% Return on Avg Shareholders'
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
$5.7M 14 $ in thousands 2Q2023 1Q2023 QTD Q/Q Change % 2Q2022 QTD Y/Y Change % Operational Results Net Interest Income $ 26,711 $ 40,785 (34.5) % $ 32,459 (17.7) % Provision for Credit Losses 85 1,415 (94.0) % 1,814 (95.3) % Provision for Unfunded Commitments 360 84 328.6 % 269 33.8 % Noninterest In
Slide 15: Financial / Shareholder Ratios
6.38% $0.24 QTD EPS ROA ROE 2Q2023 1Q2023 QTD Q/Q Change % 2Q2022 QTD Y/Y Change % Shareholder Ratios Diluted Earnings Per Share (QTD) $ 0.24 $ 0.67 (64.2) % $ 0.44 (45.5) % Financial Ratios Return on Avg Assets (QTD) 0.52 % 1.51 % (65.6) % 1.04 % (50.0) % Return on Avg Shareholders' Equity (QTD) 6.
Slide 16: Financial Performance Trends
Core Efficiency Ratio 71.62% 75.20% 73.51% 60.69% 79.77% 2019 2020 2021 2022 Q2 2023 Net Income, in millions $26,575 $(45,858) $31,590 $50,118 $43,649 2019 2020 2021 2022 Q2 2023 16 F I N A N C I A L P E R F O R M A N C E T R E N D S ROA 0.65% (1.12)% 0.76% 1.21% 0.52% 2019 2020 2021 2022 Q2 2023 TC
Slide 17: Capital Ratios
17 As of June 30, 2023 We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period. 1 Non-GAAP Financial measure - see Non-GAAP reconciliation Regulatory Well Capitalized Carter Bankshares 6/30/2023 Excess ($) (In Thousands)
Slide 18: Liquidity Sources
$ in thousands June 30, 2023 December 31, 2022 Favorable / (Unfavorable) Cash and Due From Banks, including Interest-bearing Deposits $ 53,275 $ 46,869 $ 6,406 FHLB Borrowing Availability(1) 508,369 676,746 (168,377) Unsecured Lines of Credit 137,100 127,130 9,970 Unpledged Investment Securities 602
Slide 19: Deposit Composition
19 For the Period Ending Variance $ in thousands 06/30/23 03/31/23 06/30/22 Quarter Year Lifetime Free Checking $ 686,124 $ 687,333 $ 704,323 $ (1,209) $ (18,199) Interest-Bearing Demand 489,971 500,749 499,282 (10,778) (9,311) Money Market 422,780 430,938 555,621 (8,158) (132,841) Savings 526,588 6
Slide 20: Loan Composition
20 For the Period Ending Variance $ in thousands 06/30/23 03/31/23 06/30/22 Quarter Year Commercial Real Estate $ 1,642,597 $ 1,575,675 $ 1,389,117 $ 66,922 $ 253,480 Commercial and Industrial 279,156 290,293 336,477 (11,137) (57,321) Residential Mortgages 707,893 675,340 559,313 32,553 148,580 Othe
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 Q2 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 t
Slide 22: Top Ten Relationships
22 For the Periods Ending Variance 06/30/23 to 12/31/22 % of Gross Loans % of RBC $ in thousands 06/30/23 12/31/22 1. Hospitality, agriculture & energy $ 301,913 $ 309,107 $ (7,194) 9.06% 61.97% 2. Retail real estate & food services 54,232 55,625 (1,393) 1.63% 11.13% 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 $3.3B • 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 $821.4M, or about 18.7% 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 6/30/2023 12/31/2022 $ in thousands Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses U.S. Treasury Securities 4 $ 13,174 $ (1,197) 5 $ 17,866 $ (1,452) U.S. Government Agency Securities 20 23,574 (803) 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 $3.6B • CD Portfolio ($1.45B) is relatively short with 92% of the Portfolio scheduled to mature and reprice over the next 24 m
Slide 29: Asset Quality
A S S E T Q U A L I T Y 29
Slide 30: Nonperforming Loans and Assets
$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 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 $3,149 $3,330 42 32 7 7 311 2,843 2,915 2,8
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% 0.02% 0.05% 0.03% 0.01% 0.07% 0.02% —% —% —% —% —% 0.14% 0.22% 0.06% 0.15% 0.04% $4,070 $6,404 $1,670 $4,837 $1,476 30-59 Days PD 60-89 Days PD 90+ Days PD and still accruing Total PD Loans Total PD A
Slide 32: Nonperforming Relationships
32 Nonaccrual Balance Variance 06/30/23 to 12/31/22 Comments $ in thousands 06/30/23 12/31/22 1. Other(1) $ 301,913 $ — $ 301,913 Other 2. Residential Construction 2,090 — 2,090 Residential Construction 3. CRE 1,946 2,106 (160) Commercial Property 4. Residential 1,212 1,212 — Residential Mortgage Lo
Slide 33: Loan Portfolio Risk Ratings
Portfolio Credit Quality Trend $2,885 $2,947 $2,812 $3,149 $3,330 2,451 2,523 2,616 2,992 3,014 430 238 186 142 312 186 Pass Substandard Special Mention YE 2019 YE 2020 YE 2021 YE 2022 Q2 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 $635 $3,404 $18,006 $3,350 $2,419 $850.13% 0.09% 0.79% 0.15% 0.08% Net Charge-offs Provision Expense Net Charge-offs (annualized)/ Average Loans YE 2019 YE 2020 YE
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 $3,577 2,949 2,976 2,950 2,927 2,891 555 709 748 703 686 Interest-bearing deposits Noninterest-bearing deposits YE 2019 YE 2020 YE 2021 YE 2022 Q2 2023 36 D E P O S I T S (1) Period end balances, at June 30, 2023, $ in millions (2) Collateralized
Slide 37: Net Interest Income
Net Interest Income & NIM 1.23% 0.94% 0.57% 0.50% 1.60% 4.28% 3.74% 3.41% 4.01% 4.14% 3.05% 2.80% 2.84% 3.51% 2.54% Total Cost of Funds Yield on Interest-earning Assets Net Interest Margin YE 2019 YE 2020 YE 2021 YE 2022 Q2 2023 Avg. Earning Assets & Yield $3,789 $3,834 $3,972 $4,024 $4,262 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 June 30, 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 $32.1 million By Co
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 June 30, 2023 • Total portfolio balance $349.3M • Geographic diversification (see map) • Mean loan size in portfolio $5.7M • Median of loans in portfolio $3.7M • The largest loan in portfolio $51.6M • 6.94% are under construction • Top 10 borrowers make u
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 June 30, 2023, $ in thousands Category Hospitality Portfolio Balance Percentage of Total Balance Hospitality Commitment Balance Weighted Avg. LTV Avg. GL Balance Size Avg. of Debt per Key - Total Commitment Hilton $ 108,074 30.9 % $ 119,476 63.5 % $ 9,006
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 June 30, 2023 • Total portfolio balance $348.2M • Geographic diversification (see map) • Mean loan size in portfolio $3.4M • Median of loans in portfolio $234K • The largest loan in portfolio $32M • 33.99% are under construction • Top 10 borrowers make up
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 June 30, 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. LTV Avg. GL Bala
Slide 44: Retail Metrics
44 R E T A I L M E T R I C S As of June 30, 2023 (1) Excludes restaurant loans of $32.1 million • Total portfolio balance $356.5M(1) • Geographic diversification (see map) • Mean loan size in portfolio $2.73M • Median of loans in portfolio $1.05M • The largest loan in portfolio $29M • 13.81% are und
Slide 45: Retail Metrics
45 R E T A I L M E T R I C S As of June 30, 2023, $ in thousands (1) Excludes restaurant loans of $32.1 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 46: Office Metrics
46 O F F I C E M E T R I C S As of June 30, 2023 • Total portfolio balance $218.9M • Geographic diversification (see map) • Mean loan size in portfolio $1.87M • Median of loans in portfolio $381K • The largest loan in portfolio $23M • 1.58% are under construction • Top 10 borrowers make up 56.02% of
Slide 47: Office Metrics
47 O F F I C E M E T R I C S As of June 30, 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 $ 200,528 91.6 % $ 237,081 $ 1,946,874 $ 165 Medical Offices
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) 6/30/2023 3/31/2023 6/30/2022 Interest Income (FTE)(Non-GAAP) Interest and Dividend Income (GAAP) $ 43,716 $ 51,955 $ 36,961 Tax Equivalent Adjustment 3 257 264 293 Interest a
Slide 50: Core Efficiency Ratio (Non-GAAP)
50 2 Core Efficiency Ratio (Non-GAAP) Quarter-to-Date (Dollars in Thousands) 6/30/2023 3/31/2023 6/30/2022 EFFICIENCY RATIO (GAAP) 80.46 % 51.79 % 61.50 % Noninterest Expense $ 25,536 $ 23,576 $ 23,410 Less: Gains (Losses) on Sales and Write-downs of OREO, net 5 — 60 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) Year-to-Date (Dollars in Thousands) Adjusted Book Value (Non-GAAP) Total Shareholders' Equity 0 0$ 344,237 Add: Accumulated Other Comprehensive Loss ("AOCI") 81,985 Add: Other Segment Reserve Release, net of tax 44,326 T