Carter Bankshares, Inc. · NASDAQ:CARE
Carter Bankshares — Q3 2021 Earnings Presentation
47 slides from Carter Bankshares's earnings presentation, Nov 4, 2021
Slide 1: Investor Presentation Third Quarter 2021
Investor Presentation Third Quarter 2021
Slide 2: Forward-Looking Statements
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, objectives, outlook for earnings
Slide 3: Non-GAAP Statements
Non-GAAP Statements 3 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, net interest income and net interest
Slide 4: Table of Contents
4 TABLE OF CONTENTS Section Title Slides 1 Overview 05-12 2 Financial Highlights 13-21 3 Balance Sheet Transformation 22-26 4 Asset Quality 27-34 5 Deposit Mix & Cost of Funds 35-39 6 Loan Deferral Update 40-41 7 Commercial Loan Portfolio Metrics 42-45 8 PPP Loan Update 46-47
Slide 5: Overview
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Slide 6: Our Mission, Purpose and Values
Our Mission At Carter Bank & Trust, we strive to be the preferred lifetime financial partner for our customers and shareholders, and the employer of choice in the communities we are privileged to serve. Our Purpose Enrich lives and enhance communities today, to build a better tomorrow. Our Values Lo
Slide 7: Our Company History
Bank established denovo in 1974 as First National Bank of Rocky Mount, VA Carter Bank & Trust charter established in 2006 with the merger of ten banks Carter Bancshares, Inc. holding company established in 2020 with the assets of Carter Bank & Trust Our Company History 7 As of September 30, 2021 Hea
Slide 8: Our Leadership Team
8 Our Leadership Team Litz Van Dyke Chief Executive Officer Wendy Bell Senior Executive Vice President Chief Financial Officer Bradford Langs President Chief Strategy Officer ‘Our leadership team is collaborative and courageous. Together we continue to press forward, through the uncertainties and op
Slide 9: Our Footprint
North Carolina | Total Deposits: $0.4MM 1 5 2 1 4 13 Charlotte Greensboro Raleigh Durham Fayetteville Non MSA TOTAL The following counties are also included in our CRA Assessment area: Randolph, NC: Greensboro MSA Niagra, NY: Varsity Bank Our Footprint YE 2020 92 Branches YE 2019 101 Branches YE 201
Slide 10: Environmental, Social, Governance
10 August 2021: Through FHLB membership, funded a $500,000 Affordable Housing Program (AHP) gap loan for Britton Village, a multifamily affordable housing project in North Carolina. Carter Bank & Trust is committed to the consideration and integration of environmental, social and governance factors
Slide 11: Our Culture of Care
Our Culture of Care 11 CARE Forward Q3 2021 focus: Financial Literacy and supporting local Boys & Girls Clubs $31,370 Contribution to 23 charities and the American Red Cross Q3 2021 Carter Bank & Trust is the Preferred Community Bank of Virginia Tech Athletics – Welcome HOKIE Nation! For the communi
Slide 12: Strategic Initiatives Update
Strategic Initiatives Update • Ongoing diversification of earning asset mix to maximize yield without increasing risk profile of the Bank. • Renewed focus on noninterest income sources (fee revenue) to supplement the Net Interest Income. • Improved funding cost and deposit mix to reduce reliance on
Slide 13: Financial Highlights
Financial Highlights 02 13 Insert CB&T photo here
Slide 14: Balance Sheet and Income Statement
3Q2021 2Q2021 3Q2020 Operational Results Net Interest Income $ 29,401 $ 27,203 $ 25,436 Provision for Credit Losses (413) 967 2,914 Provision for Unfunded Commitments (60) (603) — Noninterest income 6,915 7,238 7,975 Noninterest expense 24,685 27,759 87,300 Income tax expense 931 886 875 Net Income
Slide 15: Financial / Shareholder Ratios
3Q2021 2Q2021 3Q2020 Shareholder Ratios Diluted Earnings Per Share (QTD) $ 0.42 $ 0.21 $ (2.19) Diluted Earnings Per Share (YTD) $ 0.98 $ 0.56 $ (1.85) Financial Ratios Return on Assets (YTD) 0.84 % 0.72 % (1.59) % Return on Equity (YTD) 8.76 % 7.62 % (13.43) % Total Capital Ratio 15.11 % 14.66 % 14
Slide 16: Capital Management
Capital Management 16 As of September 30, 2021 We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period. • Focus on maintaining a "well capitalized" capital position allowing for the resolution of legacy credit issues. •
Slide 17: Liquidity
Liquidity 17 (1) For the periods presented above, the Company 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 at any given time. • Co
Slide 18: Deposit Composition
Deposit Composition 18 $ in thousands Improving Deposit Mix Reliance on Certificates of Deposit continues to decline with a net decrease of $359.7M (20.4%) from Q3 2020 to Q3 2021 while all Non-maturing Deposit categories showed an increase in ending balances for the same period. For the Period Endi
Slide 19: Total Portfolio Loan Growth and Loan Composition
Total Portfolio Loan Growth $2,684 $2,704 $2,885 $2,947 $2,884 (1.76)% 0.75% 6.69% 2.15% (2.86)% Portfolio Loans Growth YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 (3.00%) (2.00%) (1.00%) 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Loan Composition 19 $ in
Slide 20: Loan Portfolio Repricing & Index
20 LOAN PORTFOLIO REPRICING & INDEX Q3 2021 $ in millions (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 loan t
Slide 21: Top Ten Relationships (Total Commitment)
21 Top Ten (10) Relationships (Total Commitment) $ in thousands Segment For the Periods Ending Variance 9/30/21 to 12/31/20 09/30/2021 % of Gross Loans 09/30/2021 % of RBC09/30/21 12/31/20 1. Hospitality, agriculture & energy $354,240 $375,990 ($21,750) 12.26 % 74.07 % 2. Hospitality 63,855 61,691 2
Slide 22: Balance Sheet Transformation
22 Balance Sheet Transformation 03
Slide 23: Earning Assets
23 Earning Assets Goal is to deploy cash into higher yielding loans and investments while foregoing undue concentration risk. • Earning Assets stand at $4.0B • Our primary mandate is to use cash to grow the loan book with well diversified, higher yielding loan products to increase the NIM and mitiga
Slide 24: Loans: Past, Present, Future
Commercial Real Estate Commercial & Industrial Residential Mortgages Construction Other Consumer Other(1) 24 Loans Past Present Future 57% 47% 45% 20% 16% 5% 3% 2% 7% Loan Portfolio - 12/31/17 Loan Portfolio - 09/30/21 Loan Portfolio - Target 5% 10% 5% 30% 13% 23% Goal is to further diversify and de
Slide 25: Bond Portfolio
Muni MBS Corporates Agencies & Treasuries ABS SBA CMBS CMO 25 Bond Portfolio Past Present Future 9% 8% 25% 41% 16% 10% Bond Portfolio - 06/30/17 Bond Portfolio - 09/30/21 Bond Portfolio - Target 10% 34% 26% 28% 15% 5% 30% 12% 25% Goal is to increase diversification, maintain strong credit quality, a
Slide 26: Deposits: Past, Present, Future
CDs DDA - Int. Free DDA - Int. Bearing Money Markets Savings 26 Deposits Past Present Future 56% 38% 30% 15% 12%3% 10% Deposit Mix - 12/31/17 Deposit Mix - 09/30/21 Deposit Mix - Target 20% 18% 20% 7% 20% 25% 14% 12% Goal is to restructure and diversify funding sources with a focus on lower cost/cor
Slide 27: Asset Quality
Asset Quality 04 27 Insert CB&T photo here
Slide 28: Delinquency Trends
28 Delinquency Trends Past Due Loans / Total Portfolio Loans 0.21% 0.07% 0.09% 0.19% 0.07% 0.01% 0.22% 0.05% 0.03% 0.24% 0.02% 0.00% 0.00% 0.00% 0.00% 0.24% 0.28% 0.14% 0.22% 0.31% 30-59 Days PD 60-89 Days PD 90+ Days PD Total PD Loans YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 0.00% 0.10% 0.20% 0.30%
Slide 29: Nonperforming Loan Breakdown
Nonperforming Loan Breakdown $93 $52 $43 $9 $78 $37 $31 $22 $0 $1 $1 $1 $1 $1 $3 $3 $5 $5 $4 $14 $11 $8 Commercial Real Estate Commercial and Industrial Construction Residential Mortgages Other Consumer Other YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 $0 $10 $19 $29 $38 $48 $58 $67 $77 $86 $96 29 Nonpe
Slide 30: Nonperforming Relationships
30 Nonperforming Relationships $ in thousands Type Nonaccrual Balance 9/30/21 Nonaccrual Balance 6/30/21 Variance 9/30/21 to 6/30/21 Comments 1. Construction $1,741 $1,741 $0 Commercial lot development 2. Construction $1,739 $1,739 $0 Residential lot developer 3. Construction $1,332 $1,332 $0 Reside
Slide 31: Nonperforming Assets
Nonperforming Assets $133 $84 $60 $48 $22 $40 $33 $18 $16 $13 $42 $47 $35 $25 $3 $51 $4 $7 $7 $6 OREO Nonperforming TDRs Nonperforming Loans YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 $0 $14 $28 $42 $56 $70 $84 $98 $112 $126 $140 31 Nonperforming Assets $ in millions As of September 30, 2021 (1) During
Slide 32: Loan Portfolio – Risk Ratings
Portfolio Credit Quality Trend $2,684 $2,704 $2,885 $2,947 $2,884 $1,868 $2,232 $2,451 $2,523 $2,679 $719 $461 $430 $238 $185 $97 $186 Pass Substandard Special Mention YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 $0 $1,000 $2,000 $3,000 $4,000 Non-Pass Credit Quality Trend $816 $472 $434 $424 $205 $719 $
Slide 33: Net Charge-off & Provision Expense Trends
33 Net Charge-off & Provision Expense Trends $ in thousands As of September 30, 2021 (1) YTD Net charge-offs for 2021 consist of $9.2 million for nine sold loans that were a part of two relationships in 3Q21 and $6.3 million and $1.9 million in 2Q21 for the resolution of our two largest nonperformin
Slide 34: ACL Composition & ACL Coverage Ratio Trends
34 ACL Composition & ACL Coverage Ratio Trends $ in thousands As of September 30, 2021 (1) Included in the three months ended March 31, 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
Slide 35: Deposit Mix and Cost of Funds
35 Deposit Mix and Cost of Funds 05
Slide 36: Total Deposit Composition
Total Deposit Composition $3,669 $3,592 $3,504 $3,685 $3,666 3,139 3,067 2,949 2,976 2,944 530 525 555 709 722 Interest-bearing deposits Nonnterest-bearing deposits YE 2017 YE 2018 YE 2019 YE 2020 Q3 2021 $0 $700 $1,400 $2,100 $2,800 $3,500 $4,200 36 Deposits $ in millions (1) (1) Period end balance
Slide 37: Interest-bearing Deposit Composition & Deposit Rates
Interest-bearing Deposit Composition & Deposit Rates $3,312 $3,097 $3,020 $2,937 $2,943 $2,199 $2,090 $2,054 $1,819 $1,522 $727 $664 $582 $600 $657 $245 $247 $249 $321 $403 $141 $96 $135 $197 $361 Certificates of Deposit Savings Interest-bearing Deposits Money Market Deposit Rate YE 2017 YE 2018 YE
Slide 38: Total Deposits and Cost of Deposits
Total Deposits and Cost of Deposits $3,570 $3,617 $3,641 $3,665 $3,682 $3,685 $2,919 $2,949 $2,946 $2,954 $2,927 $2,949 $651 $668 $695 $711 $755 $736 1.04% 0.93% 0.79% 0.70% 0.63% 0.58% Interest-bearing Deposits Noninterest-bearing Deposits Total Cost of Deposits Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2
Slide 39: Net Interest Margin
39 Net Interest Margin (1) Cost of Funds incorporates the free funds contribution with the rate on total interest-bearing liabilities to illustrate the impact of noninterest-bearing liabilities on the overall cost of funds (2) Net Interest Margin has been computed on a fully taxable equivalent basis
Slide 40: Loan Deferral Update
40 Loan Deferral Update 06
Slide 41: COVID-19 Loan Deferral Program Update
41 COVID-19 Loan Deferral Program Update The Company has offered loan deferrals in three parts: ◦ Deferrals allow the operating company and its principals to preserve liquidity and develop strategies to operate at a lower break even level to ensure long term survival ◦ The Part I program began in Ma
Slide 42: Commercial Loan Portfolio Metrics
42 Commercial Loan Portfolio Metrics 07
Slide 43: CRE Segment Overview By Collateral Code
23% 17% 16% 11% 9% 9% 8% 5% 2% 43 CRE Segment Overview By Collateral Code ($ in thousands) (1) Other CRE & Other Commercial Construction Segments include, but are not limited to, Special / Limited Use, Church, Mobile Home Park, Gas Station, Self-Storage Facilities, Auto Shops As of September 30, 202
Slide 44: Hospitality Metrics By State
37% 35% 13% 11% 1% 3% 44 Hospitality Metrics By State $ in thousands As of September 30, 2021 State Hospitality Portfolio Balance Percentage of Total Balance Avg. LTV Avg. GL Balance Size Avg. of Debt per Key - Total Commitment NC $169,023 37 % 61.5 % $4,448 $69 SC 157,330 35 % 63.3 % 6,840 93 VA 59
Slide 45: Hospitality Metrics By Brand
30% 20% 14% 13% 8% 5% 4% 3% 3% 45 Hospitality Metrics By Brand $ in thousands Brand Hospitality Portfolio Balance Percentage of Total Balance Avg. LTV Avg. GL Balance Size Avg. of Debt per Key - Total Commitment Hilton $134,110 30 % 65.8 % $9,579 $104 IHG 89,180 20 % 62.4 % 5,246 72 Marriott 61,927
Slide 46: Paycheck Protection Program
46 Paycheck Protection Program 08
Slide 47: Paycheck Protection Program
Paycheck Protection Program PROGRAM TIMING APPLICATIONS APPROVED FUNDS APPROVED (1) ($ in millions) TOTAL IN FEES ($ in millions) ROUND ONE: April 3 - 16, 2020 451 $17.9 $1.5 ROUND TWO: April 29 - June 30, 2020 515 $39.9 ROUND THREE: January 22, 2021 - June 30, 2021 136 $11.0 $0.6 TOTAL 1,102 $68.8