8-K
Carter Bankshares, Inc. (CARE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2021
CARTER BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
| Virginia | 001-39731 | 85-3365661 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>file number) | (IRS Employer<br>Identification No.) |
1300 Kings Mountain Road, Martinsville, Virginia 24112
(Address of Principal Executive Offices) (Zip Code)
(276) 656-1776
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which<br>registered |
|---|---|---|
| Common Stock, $1.00 par value | CARE | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 28, 2021, Carter Bankshares, Inc. announced by press release its earnings for the three and nine months ended September 30, 2021. A copy of the press release is attached hereto ascare-3q21_ex991xer.htmExhibit 99.1. The information contained in this Report on Form 8-K furnished pursuant to Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Exchange Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
Exhibit No.
Exhibit 99.1 Press Release announcing Third Quarter 2021 Financial Results.
Important Note Regarding Forward-Looking Statements
Certain matters discussed in this Current Report on Form 8-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to the Company’s financial condition, litigation to which the Company is a party and the potential impacts thereon, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Company and its future business and operations.. Forward looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “ believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements. For a discussion of factors that could affect our business and financial results, see the “Risk Factors” outlined in our periodic and current report filings with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CARTER BANKSHARES, INC. | ||||
|---|---|---|---|---|
| (Registrant) | Date: October 28, 2021 | By: | /s/ Wendy S. Bell | |
| --- | --- | --- | ||
| Name: | Wendy S. Bell | |||
| Title: | Chief Financial Officer |
Document
Exhibit 99.1
FOR IMMEDIATE RELEASE – October 28, 2021
Carter Bankshares, Inc. Announces Third Quarter 2021 Financial Results
Martinsville, VA, October 28, 2021 – Carter Bankshares, Inc. (the “Company”) (NASDAQ:CARE), the holding company of Carter Bank & Trust (the “Bank”) today announced net income of $11.2 million, or $0.42 diluted earnings per share, for the third quarter of 2021 compared to net income of $5.4 million, or $0.21 diluted earnings per share, in the second quarter of 2021 and a net loss of $57.7 million, or $2.19 per share, for the third quarter of 2020. A loss of $57.7 million was recognized during the third quarter of 2020 related to a one-time charge resulting from goodwill impairment. This impairment charge reduced net income by $62.2 million, resulting in a net loss for the third quarter of 2020. The quarterly pre-tax pre-provision income1 , which excludes, among other things, the one-time goodwill impairment charge, were $9.6 million for the quarter ended September 30, 2021, $7.7 million for the quarter ended June 30, 2021 and $7.1 million for the quarter ended September 30, 2020.
For the nine months ended September 30, 2021, net income was $26.0 million, or $0.98 diluted earnings per share, compared to a net loss of $48.8 million, or $1.85 per share for the first nine months ended September 30, 2020. Net income for the nine months ended September 30, 2020, excluding the one-time goodwill impairment charge, was $13.4 million, or $0.51 diluted earnings per share. Pre-tax pre-provision income1 were $25.4 million for the nine months ended September 30, 2021 and $22.4 million for the nine months ended September 30, 2020 excluding the goodwill impairment charge.
Third Quarter 2021 Financial Highlights
•In August 2021, the Bank reached an agreement with West Virginia Governor James C. Justice, II, members of his family and related entities (the “Justice Parties”) to restructure certain loans to the Justice Parties. In connection with this agreement, on September 8, 2021, the lawsuit filed by the Justice Parties was dismissed with prejudice. The Bank’s loans to the Justice Parties were restructured with improved economic terms and an improved collateral position via cross collateralization. In addition, the Justice Parties executed documents that reaffirm the legality and binding nature of all of their loan documents and waive any causes of action they might have against the Bank;
•Nonperforming loans declined $0.7 million, or 7.3% to $8.9 million at September 30, 2021 compared to June 30, 2021 and decreased $31.6 million, or 78.1%, from September 30, 2020. The decline from September 30, 2020 is due to the resolution of our two largest nonperforming credits during the second quarter of 2021. Nonperforming loans as a percentage of total portfolio loans were 0.31%, 0.33% and 1.35% as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively;
•The provision for credit losses totaled $(0.4) million for the quarter ended September 30, 2021, as compared to $1.0 million for the quarter ended June 30, 2021 primarily due to the sale of nine loans within two performing relationships that had been previously reserved and released;
•Net interest income increased $2.2 million, or 8.1%, to $29.4 million compared to the second quarter of 2021 primarily due to a 13 basis point increase in earning assets related to enhanced return on loan assets restructured during the third quarter of 2021 and a seven basis point decrease in funding costs;
•Net interest margin, on a fully taxable equivalent basis3 (“FTE”), increased 17 basis points to 2.96% compared to the second quarter of 2021 and increased 29 basis points compared to the third quarter of 2020;
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•Total deposits increased $7.1 million to $3.7 billion at September 30, 2021 compared to June 30, 2021, and increased $52.7 million, or 1.5%, compared to September 30, 2020. The increases from June 30, 2021 and September 30, 2020 were primarily due to increased core deposits;
•Core deposits, including noninterest-bearing and interest-bearing demand deposits, money market accounts and savings, increased by $61.3 million, or 2.8%, as compared to June 30, 2021.
“We are pleased with the direction of the Company and our third quarter results. The continued decline in problem assets, particularly those in the substandard classification, is a positive reflection of our continued efforts to improve the asset quality of the Company. Further reduction of troubled assets remains one of our primary objectives,” stated Litz H. Van Dyke, Chief Executive Officer. “We also continue to make progress in improving the fundamentals of the Company, including an increase in interest-earning assets, a better deposit mix, and a continued reduction in our cost of funds, all of which are driving our net interest margin higher and improving our financial metrics.”
Van Dyke continued, “During the third quarter of 2021, the lawsuit filed by West Virginia Governor James Justice and related entities was dismissed and the Bank’s loans to the Justice Parties were restructured. This was a favorable outcome for our Company. This resolution enhanced the economics and collateral position of the relationship. Separately, we continue to focus on improving the main drivers of revenue and earnings growth which ultimately enhance the overall financial performance of the Company.”
Operating Highlights
Net interest income increased $2.2 million, or 8.1%, to $29.4 million compared to the second quarter of 2021 and $4.0 million, or 15.6%, as compared to the third quarter of 2020. The net interest margin, on an FTE basis3, increased 17 basis points to 2.96% compared to the quarter ended June 30, 2021 and increased 29 basis points compared to the third quarter of 2020. The yield on interest-earning assets increased 13 basis points and decreased three basis points compared to the quarters ended June 30, 2021 and September 30, 2020, respectively. Funding costs declined seven basis points as compared to the previous quarter and 41 basis points as compared to the same quarter of 2020.
The Company continues to focus on the expansion of net interest income and net interest margin. The third quarter of 2021 was positively impacted by the collection of significant late fees and enhanced pricing on restructured loans related to one large credit relationship. Certain of these restructured loans may not be renewed at maturity and/or may not otherwise impact the net interest income and net interest margin as significantly in future periods.
The Company previously elected to defer its adoption of Current Expected Credit Loss (“CECL”) in accordance with relief provided under the U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. As such, the Company did adopt the CECL accounting standard on March 31, 2021, effective January 1, 2021. Management believes the allowance for credit losses (“ACL”) is adequate to absorb expected losses in the Bank’s loan portfolio at September 30, 2021.
The provision for credit losses decreased to $(0.4) million in the third quarter of 2021 compared to $1.0 million in the second quarter of 2021. The decrease in the provision for credit losses was primarily driven by a decrease of $3.1 million to the ACL due to the sale of nine loans within two performing relationships. These loans were included in the commercial real estate loan segment, during the third quarter of 2021 with an aggregate unpaid principal balance of $50.0 million that were previously reserved. This decrease was offset by the increase of $1.6 million of special qualitative reserves in connection with increased uncertainty in credit quality with respect to two loan relationships with an aggregate unpaid balance of $12.0 million in the commercial real estate loan segment. During the third quarter of 2021, management observed that $62.0 million of loans that were previously in the deferral program were recovering at rates much lower than peers. Accordingly, management sold $50.0 million of
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these loans in the third quarter and has developed a workout strategy with the remaining two loan relationships with an aggregate unpaid balance of $12.0 million. The qualitative reserves were established given the uncertainty of the future performance of these borrowers.
The provision for unfunded commitments in the third quarter of 2021 was a release of $0.1 million compared to a release of $0.6 million in the second quarter of 2021.
At September 30, 2021 nonperforming loans declined $0.7 million, or 7.3%, to $8.9 million since June 30, 2021. Net charge-offs were $9.6 million for the third quarter of 2021 compared to $0.4 million in the same period of 2020. The increase in net charge-offs in the third quarter of 2021 was primarily due to $9.2 million charge-offs related to the aforementioned sale of nine loans within two performing relationships, included the commercial real estate loan segment, that had been previously reserved. As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 1.30% and 0.05% for the third quarter of 2021 and 2020, respectively. Nonperforming loans as a percentage of total portfolio loans were 0.31%, 1.09% and 1.35% as of September 30, 2021, December 31, 2020 and September 30, 2020, respectively.
Total noninterest income was $6.9 million for the third quarter of 2021, a decrease of $0.3 million, or 4.5%, from the second quarter of 2021 and a decrease of $1.1 million, or 13.3%, compared to the third quarter of 2020. The decrease of $0.3 million from the second quarter of 2021 was primarily driven by the $0.5 million gain received on the sale of four bank branches included in other income in the second quarter of 2021 and a reduction of $0.2 million in net securities gains, offset by an increase of $0.4 million in commercial loan swap fee income.
The decrease of $1.1 million compared to the third quarter of 2020 was impacted by declines in net security gains of $1.0 million and lower commercial loan swap fee income of $0.5 million, offset by a $0.5 million increase in service charges on deposit accounts. The fluctuations of commercial loan swap fee income were due to the timing and demand for this product in the current low interest rate environment. The increase in service charges on deposit accounts was due to reinstating fees on COVID-19 related fee waivers granted during 2020.
Total noninterest expense was $24.7 million for the third quarter of 2021, a decrease of $3.1 million, or 11.1%, from the second quarter of 2021 and a decrease of $62.6 million, or 71.7%, compared to the third quarter of 2020. The decrease of $3.1 million from the second quarter of 2021 was primarily driven by a write-down of $3.0 million for closed bank branches recorded in the second quarter of 2021. These branches were closed in the second quarter of 2021, transferred to Other Real Estate Owned (“OREO”) and marketed for sale. The write-downs were offset by $0.4 million in gains associated with the sale of four of the OREO properties during the second quarter of 2021. Also included in the third quarter of 2021, is a $0.6 million loss on the sale of OREO on 13 properties.
Also impacting the decrease from the second quarter of 2021 was a $0.9 million decline in salaries and employee benefits. This decline related to $0.5 million higher medical expenses in the second quarter of 2021 due to several large critical illness claims and $0.4 million of one-time severance and stay bonuses for impacted branch employees from the branch closures and sales, both recorded in the second quarter of 2021.
Other items impacting the decrease compared to the second quarter of 2021 included lower professional and legal expenses of $0.2 million, offset by an increase of $0.2 million in other noninterest expense primarily related to the finder’s fee for the aforementioned loan sales.
The decrease of $62.6 million in total noninterest expense for the third quarter of 2021 compared to the same period in 2020 was driven by the one-time charge resulting from goodwill impairment of $62.2 million, recorded in the third quarter of 2020.
Financial Condition
Total assets decreased $45.1 million to $4.1 billion at September 30, 2021 compared to $4.2 billion at December 31, 2020. Total portfolio loans decreased $63.0 million, or 2.9% on an annualized basis, to $2.9 billion at
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September 30, 2021 compared to December 31, 2020 primarily due to several large commercial loan payoffs. OREO decreased $2.5 million at September 30, 2021 compared to December 31, 2020 due to the sale of 18 branches and five OREO properties during 2021.
Closed retail bank offices increased $0.3 million and have a remaining book value of $2.8 million at September 30, 2021 compared to $2.5 million at December 31, 2020. During 2021, 20 branch closures were completed and 13 of those were sold as part of our branch network optimization project that aligns with our strategic goals to enhance franchise value and improve operating efficiency.
Federal Reserve Bank excess reserves decreased $42.2 million to $121.3 million at September 30, 2021 from $163.5 million at December 31, 2020 due to active balance sheet management.
The securities portfolio increased $118.8 million and is currently 21.7% of total assets at September 30, 2021 compared to 18.6% of total assets at December 31, 2020. The increase is a result of active balance sheet management. We have further diversified the securities portfolio as to bond types, maturities and interest rate structures.
Total deposits decreased $18.2 million to $3.7 billion at September 30, 2021 as compared to December 31, 2020. The decline from December 31, 2020 was due to the intentional runoff of $211.8 million of higher cost certificates of deposit (“CDs”) and $84.7 million of deposits held-for-assumption in connection with the sale of four bank branches which were completed during the second quarter of 2021. Offsetting these decreases at September 30, 2021 compared to December 31, 2020 was an increase of $278.3 million, or 14.0% in core deposits, which includes noninterest-bearing and interest-bearing demand deposits, money market accounts and savings accounts. At September 30, 2021, noninterest-bearing deposits comprised 19.7% compared to 19.0% and 18.4% of total deposits at December 31, 2020 and September 30, 2020, respectively. CDs comprised 38.3%, 43.8% and 48.8% of total deposits at September 30, 2021, December 31, 2020 and September 30, 2020, respectively.
The Bank provided deferrals to customers under Section 4013 of the CARES Act and regulatory interagency guidance regarding loan modifications. The Bank launched successive deferral programs with short-term expirations. The Part I program was launched on March 23, 2020 and expired on August 31, 2020. The deferrals in Part I provided for deferral of principal and up to the deferral of principal and interest, if requested through the expiry. The Part II program extended deferrals through December 31, 2020 subject to the collection of updated financial information and validation of need. For these borrowers the Bank requested verification of business and/or guarantor liquidity to ascertain the viability of the business in a post-pandemic environment. Prior to the extension of the CARES Act, the Bank launched the Part III program which offered borrowers in the Part II program an extension of deferrals through June 30, 2021. Borrowers who opted into the Part III program were required to provide monthly financial statements and remit payments on a quarterly basis equal to the lesser of: i) 90% of free cash flow (EBITDA) or, ii) the otherwise contractual payment (“recapture payment”). Following the expiration of the deferral programs on June 30, 2021, for term loans, payments were applied to accrued interest first and after accrued interest is current, payments will be applied to principal. Deferred principal will be due at maturity. For interest only loans, such as lines of credit, deferred interest will be due at maturity. As of September 30, 2021 all but $6.5 million of loans resumed regularly scheduled payments. Cumulative deferred interest totaled $12.0 million as of June 30, 2021, but declined to $2.8 million as of September 30, 2021.
The Bank also participated in the Paycheck Protection Program (“PPP”) established by the CARES Act. Through the first two rounds of PPP, we had approved 515 loan applications totaling $39.9 million through our internal lending program, of which 498 loans totaling $38.5 million have been fully forgiven by the Small Business Administration (“SBA”) as of September 30, 2021. The $39.9 million in PPP loans originated during the first two rounds of PPP generated $1.5 million in fees, which have been, or will be, recognized in income as loans are forgiven, or over the remaining life of the loan for any portion that is not forgiven. We had an additional 451 loans approved that were referred to an online small business lender, totaling $17.9 million during the first two rounds of PPP. On December 22, 2020 Congress passed legislation that was signed into law on December 27, 2020, making available a third
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round of PPP funding. We provided access to the program through our internal lending program for our current business customers. As of September 30, 2021, we had approved 136 loan applications totaling $11.1 million, of which 87 loans totaling $6.4 million have been fully forgiven by the SBA. These loans generated additional fee income of $0.3 million and $0.1 million and $1.0 million and $0.1 million for the three and nine months ended September 30, 2021 and September 30, 2020, respectively.
The Company remains well capitalized. The Company’s Tier 1 Capital ratio was 13.85% at September 30, 2021 as compared to 13.08% at December 31, 2020. The Company’s leverage ratio was 10.48% at September 30, 2021 as compared to 10.26% at December 31, 2020. The Company’s Total Risk-Based Capital ratio was 15.11% at September 30, 2021 as compared to 14.33% at December 31, 2020. In March 2020, the banking regulators issued an interim final rule (“IFR”) to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The IFR maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period.
Total capital of $405.9 million at September 30, 2021, reflects a decrease of $34.3 million as compared to December 31, 2020. The decrease in total capital during 2021 is primarily due to the transitional adjustment of $50.7 million, net of tax for the adoption of CECL and a $10.3 million decrease in other comprehensive income due to changes in fair value of available-for-sale investment securities, offset by net income of $26.0 million for the nine months ended September 30, 2021. The remaining difference of $0.7 million is related to restricted stock activity through September 30, 2021.
At September 30, 2021, funding sources accessible to the Company include borrowing availability at the Federal Home Loan Bank (“FHLB”), equal to 25.0% of the Company’s assets or approximately $1.0 billion, subject to the amount of eligible collateral pledged, federal funds unsecured lines with six other correspondent financial institutions in the amount of $145.0 million and access to the institutional CD market. In addition to the above funding resources, the Company also has $724.7 million of unpledged available-for-sale investment securities as an additional source of liquidity.
About Carter Bankshares, Inc.
Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ: CARE) provides a full range of commercial banking, consumer banking, mortgage and services through its subsidiary Carter Bank & Trust. The Company has $4.1 billion in assets and 69 branches in Virginia and North Carolina. For more information or to open an account visit www.CBTCares.com.
Important Note Regarding Non-GAAP Financial Measures
In addition to traditional measures presented in accordance with GAAP, our management uses, and this press release contains or references, certain 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. This press release and the accompanying tables discuss financial measures that we believe are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.
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Important Note Regarding Forward-Looking Statements
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, litigation to which the Company is or has been a party and the potential impacts thereof, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels and asset quality. Forward looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “ believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: changes in accounting policies, practices, or guidance, for example, our adoption of CECL; cyber-security threats, attacks or events; rapid technological developments and changes; changes in the Company’s liquidity and capital positions; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as the ongoing COVID-19 pandemic), and of any governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company’s liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; regulatory supervision and oversight; legislation affecting the financial services industry as a whole, and the Company and the Bank, in particular; the outcome of pending and future litigation and governmental proceedings, including litigation or actions arising from the Company’s participation in and administration of programs related to COVID-19, including, among other things, the PPP under the CARES Act; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or more costly than anticipated; material increases in costs and expenses; reliance on significant customer relationships; general economic or business conditions, including unemployment levels, continuing supply chain disruptions and slowdowns in economic growth, particularly related to the sustained economic impacts of the COVID-19 pandemic; changes in the Company’s branch expansions and consolidations, including that the anticipated benefits of the Company’s branch network optimization project are not fully realized in a timely manner or at all, deterioration of the housing market and reduced demand for mortgages; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses. Many of these factors, as well as other factors, are described in our filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are prepared. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.
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Carter Bankshares, Inc. Wendy Bell, 276-656-1776 Senior Executive Vice President & Chief Financial Officer wendy.bell@CBTCares.com
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
BALANCE SHEETS
| (Dollars in Thousands, except per share data) | December 31,<br>2020 | September 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|
| (audited) | (unaudited) | |||||||
| ASSETS | ||||||||
| Cash and Due From Banks | 43,061 | $ | 38,535 | $ | 37,688 | |||
| Interest-Bearing Deposits in Other Financial Institutions | 39,954 | 6,267 | ||||||
| Federal Reserve Bank Excess Reserves | 163,453 | 107,219 | ||||||
| Total Cash and Cash Equivalents | 241,942 | 151,174 | ||||||
| Securities Available-for-Sale, at Fair Value | 778,679 | 777,986 | ||||||
| Loans Held-for-Sale | 25,437 | 32,104 | ||||||
| Loans Held-for-Sale in Connection with Sale of Bank Branches, at the lower of cost or fair value | 9,835 | — | ||||||
| Portfolio Loans | 2,947,170 | 2,985,921 | ||||||
| Allowance for Credit Losses | (54,074) | (49,965) | ||||||
| Portfolio Loans, net | 2,893,096 | 2,935,956 | ||||||
| Bank Premises and Equipment, net | 85,307 | 87,439 | ||||||
| Bank Premises and Equipment, Held-for-Sale, net | 2,293 | — | ||||||
| Other Real Estate Owned, net | 15,722 | 16,410 | ||||||
| Federal Home Loan Bank Stock, at Cost | 5,093 | 5,093 | ||||||
| Bank Owned Life Insurance | 53,997 | 53,651 | ||||||
| Other Assets | 67,778 | 74,312 | ||||||
| Total Assets | 4,134,063 | $ | 4,179,179 | $ | 4,134,125 | |||
| LIABILITIES | ||||||||
| Deposits: | ||||||||
| Noninterest-Bearing Demand | 722,145 | $ | 699,229 | $ | 665,813 | |||
| Interest-Bearing Demand | 366,201 | 351,066 | ||||||
| Money Market | 294,229 | 211,465 | ||||||
| Savings | 625,482 | 622,806 | ||||||
| Certificates of Deposit | 1,614,770 | 1,762,645 | ||||||
| Deposits Held-for-Assumption in Connection with Sale of Bank Branches | 84,717 | — | ||||||
| Total Deposits | 3,684,628 | 3,613,795 | ||||||
| Federal Home Loan Bank Borrowings | 35,000 | 35,000 | ||||||
| Other Liabilities | 19,377 | 50,523 | ||||||
| Total Liabilities | 3,739,005 | 3,699,318 | ||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Common Stock, Par Value 1.00 Per Share, Authorized 100,000,000 Shares; | ||||||||
| 26,461,426 outstanding at September 30, 2021, | ||||||||
| 26,385,041 outstanding at December 31, 2020 and 26,386,901 at September 30, 2020 | 26,385 | 26,387 | ||||||
| Additional Paid-in Capital | 143,457 | 143,244 | ||||||
| Retained Earnings | 254,611 | 251,669 | ||||||
| Accumulated Other Comprehensive Income | 15,721 | 13,507 | ||||||
| Total Shareholders’ Equity | 440,174 | 434,807 | ||||||
| Total Liabilities and Shareholders’ Equity | 4,134,063 | $ | 4,179,179 | $ | 4,134,125 | |||
| PERFORMANCE RATIOS | ||||||||
| Return on Average Assets (Annualized) | % | (1.12) | % | (1.59) | % | |||
| Return on Average Shareholders' Equity (Annualized) | % | (9.78) | % | (13.43) | % | |||
| Portfolio Loan to Deposit Ratio | % | 79.99 | % | 82.63 | % | |||
| Allowance to Total Portfolio Loans | % | 1.83 | % | 1.67 | % | |||
| CAPITALIZATION RATIOS | ||||||||
| Shareholders' Equity to Assets | % | 10.53 | % | 10.52 | % | |||
| Tier 1 Leverage Ratio | % | 10.26 | % | 10.12 | % | |||
| Risk-Based Capital - Tier 1 | % | 13.08 | % | 13.08 | % | |||
| Risk-Based Capital - Total | % | 14.33 | % | 14.33 | % |
All values are in US Dollars.
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
INCOME STATEMENTS
| Quarter-to-Date | Year-to-Date | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands, except per share data) | September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||
| Interest Income | $ | 34,913 | $ | 33,094 | $ | 33,986 | $ | 100,964 | $ | 107,439 | |||||
| Interest Expense | 5,512 | 5,891 | 8,550 | 17,831 | 28,477 | ||||||||||
| NET INTEREST INCOME | 29,401 | 27,203 | 25,436 | 83,133 | 78,962 | ||||||||||
| Provision for Credit Losses | (413) | 967 | 2,914 | 2,411 | 13,185 | ||||||||||
| Provision for Unfunded Commitments | (60) | (603) | — | (945) | — | ||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 29,874 | 26,839 | 22,522 | 81,667 | 65,777 | ||||||||||
| NONINTEREST INCOME | |||||||||||||||
| Gains on Sales of Securities, net | 1,341 | 1,499 | 2,388 | 6,450 | 5,923 | ||||||||||
| Service Charges, Commissions and Fees | 1,660 | 1,489 | 1,205 | 4,958 | 3,045 | ||||||||||
| Debit Card Interchange Fees | 1,751 | 1,874 | 1,559 | 5,456 | 4,270 | ||||||||||
| Insurance Commissions | 427 | 378 | 482 | 1,099 | 2,123 | ||||||||||
| Bank Owned Life Insurance Income | 349 | 342 | 351 | 1,031 | 1,054 | ||||||||||
| Other Real Estate Owned Income | 7 | 4 | 58 | 82 | 279 | ||||||||||
| Commercial Loan Swap Fee Income | 1,096 | 742 | 1,572 | 2,057 | 3,120 | ||||||||||
| Other | 284 | 910 | 360 | 1,972 | 1,177 | ||||||||||
| TOTAL NONINTEREST INCOME | 6,915 | 7,238 | 7,975 | 23,105 | 20,991 | ||||||||||
| NONINTEREST EXPENSE | |||||||||||||||
| Salaries and Employee Benefits | 12,816 | 13,686 | 13,036 | 39,084 | 39,106 | ||||||||||
| Occupancy Expense, net | 3,333 | 3,451 | 3,413 | 10,298 | 10,077 | ||||||||||
| FDIC Insurance Expense | 582 | 657 | 547 | 1,882 | 1,628 | ||||||||||
| Other Taxes | 825 | 718 | 809 | 2,305 | 2,343 | ||||||||||
| Advertising Expense | 196 | 220 | 404 | 586 | 1,410 | ||||||||||
| Telephone Expense | 519 | 588 | 578 | 1,707 | 1,725 | ||||||||||
| Professional and Legal Fees | 1,244 | 1,440 | 1,474 | 3,908 | 3,310 | ||||||||||
| Data Processing | 1,018 | 954 | 836 | 2,893 | 1,917 | ||||||||||
| Losses on Sales and Write-downs of Other Real Estate Owned, net | 608 | 2,603 | 1,305 | 3,423 | 1,357 | ||||||||||
| Losses on Sales and Write-downs of Bank Premises, net | 7 | 64 | 17 | 114 | 88 | ||||||||||
| Debit Card Expense | 700 | 713 | 764 | 2,045 | 1,989 | ||||||||||
| Tax Credit Amortization | 427 | 427 | 272 | 1,281 | 816 | ||||||||||
| Unfunded Loan Commitment Expense | — | — | (348) | — | 251 | ||||||||||
| Other Real Estate Owned Expense | 84 | 142 | 94 | 280 | 411 | ||||||||||
| Goodwill Impairment Expense | — | — | 62,192 | — | 62,192 | ||||||||||
| Other | 2,326 | 2,096 | 1,907 | 6,243 | 6,314 | ||||||||||
| TOTAL NONINTEREST EXPENSE | 24,685 | 27,759 | 87,300 | 76,049 | 134,934 | ||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 12,104 | 6,318 | (56,803) | 28,723 | (48,166) | ||||||||||
| Income Tax Provision | 931 | 886 | 875 | 2,743 | 634 | ||||||||||
| NET INCOME (LOSS) | $ | 11,173 | $ | 5,432 | $ | (57,678) | $ | 25,980 | $ | (48,800) | |||||
| Shares Outstanding, at End of Period | 26,461,426 | 26,466,748 | 26,386,901 | 26,461,426 | 26,386,901 | ||||||||||
| Average Shares Outstanding-Diluted | 26,348,488 | 26,344,104 | 26,385,189 | 26,339,930 | 26,377,626 | ||||||||||
| PER SHARE DATA | |||||||||||||||
| Basic Earnings (Loss) Per Common Share | $ | 0.42 | $ | 0.21 | $ | (2.19) | $ | 0.98 | $ | (1.85) | |||||
| Diluted Earnings (Loss) Per Common Share | $ | 0.42 | $ | 0.21 | $ | (2.19) | $ | 0.98 | $ | (1.85) | |||||
| Book Value | $ | 15.34 | $ | 15.08 | $ | 16.48 | $ | 15.34 | $ | 16.48 | |||||
| Market Value | $ | 14.22 | $ | 12.51 | $ | 6.65 | $ | 14.22 | $ | 6.65 | |||||
| PROFITABILITY RATIOS (non-GAAP) | |||||||||||||||
| Net Interest Margin (FTE)3 | 2.96 | % | 2.79 | % | 2.67 | % | 2.84 | % | 2.83 | % | |||||
| Core Efficiency Ratio4 | 70.66 | % | 75.24 | % | 75.53 | % | 73.06 | % | 74.65 | % |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
NET INTEREST MARGIN (FTE) (QTD AVERAGES)
(Unaudited)
| September 30, 2021 | June 30, 2021 | September 30, 2020 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | Average <br>Balance | Income/<br>Expense | Rate | Average <br>Balance | Income/<br>Expense | Rate | Average <br>Balance | Income/<br>Expense | Rate | |||||||||
| ASSETS | ||||||||||||||||||
| Interest-Bearing Deposits with Banks | $ | 191,047 | $ | 76 | 0.16 | % | $ | 190,851 | $ | 56 | 0.12 | % | $ | 124,886 | $ | 32 | 0.10 | % |
| Tax-Free Investment Securities3 | 26,849 | 221 | 3.27 | % | 33,027 | 273 | 3.32 | % | 54,541 | 456 | 3.33 | % | ||||||
| Taxable Investment Securities | 836,957 | 3,163 | 1.50 | % | 765,286 | 3,138 | 1.64 | % | 693,330 | 3,150 | 1.81 | % | ||||||
| Total Securities | 863,806 | 3,384 | 1.55 | % | 798,313 | 3,411 | 1.71 | % | 747,871 | 3,606 | 1.92 | % | ||||||
| Tax-Free Loans3 | 174,680 | 1,350 | 3.07 | % | 197,393 | 1,565 | 3.18 | % | 302,351 | 2,397 | 3.15 | % | ||||||
| Taxable Loans | 2,755,595 | 30,403 | 4.38 | % | 2,782,802 | 28,417 | 4.10 | % | 2,694,747 | 28,511 | 4.21 | % | ||||||
| Total Loans | 2,930,275 | 31,753 | 4.30 | % | 2,980,195 | 29,982 | 4.04 | % | 2,997,098 | 30,908 | 4.10 | % | ||||||
| Federal Home Loan Bank Stock | 3,215 | 30 | 3.70 | % | 3,215 | 31 | 3.87 | % | 5,093 | 39 | 3.05 | % | ||||||
| Total Interest-Earning Assets | 3,988,343 | 35,243 | 3.51 | % | 3,972,574 | 33,480 | 3.38 | % | 3,874,948 | 34,585 | 3.55 | % | ||||||
| Noninterest Earning Assets | 169,554 | 170,885 | 299,992 | |||||||||||||||
| Total Assets | $ | 4,157,897 | $ | 4,143,459 | $ | 4,174,940 | ||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||
| Interest-Bearing Demand | $ | 424,517 | $ | 278 | 0.26 | % | $ | 404,084 | $ | 234 | 0.23 | % | $ | 330,402 | $ | 238 | 0.29 | % |
| Money Market | 420,946 | 307 | 0.29 | % | 351,820 | 305 | 0.35 | % | 200,303 | 211 | 0.42 | % | ||||||
| Savings | 668,436 | 176 | 0.10 | % | 657,803 | 169 | 0.10 | % | 616,414 | 168 | 0.11 | % | ||||||
| Certificates of Deposit | 1,435,716 | 4,623 | 1.28 | % | 1,512,923 | 5,052 | 1.34 | % | 1,801,535 | 7,815 | 1.73 | % | ||||||
| Total Interest-Bearing Deposits | 2,949,615 | 5,384 | 0.72 | % | 2,926,630 | 5,760 | 0.79 | % | 2,948,654 | 8,432 | 1.14 | % | ||||||
| Federal Home Loan Bank Borrowings | 30,000 | 89 | 1.18 | % | 30,000 | 91 | 1.22 | % | 35,000 | 101 | 1.15 | % | ||||||
| Other Borrowings | 3,437 | 39 | 4.50 | % | 3,514 | 40 | 4.57 | % | 1,183 | 17 | 5.72 | % | ||||||
| Total Borrowings | 33,437 | 128 | 1.52 | % | 33,514 | 131 | 1.57 | % | 36,183 | 118 | 1.30 | % | ||||||
| Total Interest-Bearing Liabilities | 2,983,052 | 5,512 | 0.73 | % | 2,960,144 | 5,891 | 0.80 | % | 2,984,837 | 8,550 | 1.14 | % | ||||||
| Noninterest-Bearing Liabilities | 769,871 | 790,537 | 696,273 | |||||||||||||||
| Shareholders' Equity | 404,974 | 392,778 | 493,830 | |||||||||||||||
| Total Liabilities and Shareholders' Equity | $ | 4,157,897 | $ | 4,143,459 | $ | 4,174,940 | ||||||||||||
| Net Interest Income3 | $ | 29,731 | $ | 27,589 | $ | 26,035 | ||||||||||||
| Net Interest Margin3 | 2.96 | % | 2.79 | % | 2.67 | % |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
NET INTEREST MARGIN (FTE) (YTD AVERAGES)
(Unaudited)
| September 30, 2021 | September 30, 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | Average <br>Balance | Income/<br>Expense | Rate | Average <br>Balance | Income/<br>Expense | Rate | ||||||
| ASSETS | ||||||||||||
| Interest-Bearing Deposits with Banks | $ | 185,603 | $ | 182 | 0.13 | % | $ | 98,283 | $ | 268 | 0.36 | % |
| Tax-Free Investment Securities3 | 37,064 | 906 | 3.27 | % | 41,922 | 1,076 | 3.43 | % | ||||
| Taxable Investment Securities | 770,636 | 9,288 | 1.61 | % | 696,954 | 11,246 | 2.16 | % | ||||
| Total Securities | 807,700 | 10,194 | 1.69 | % | 738,876 | 12,322 | 2.23 | % | ||||
| Tax-Free Loans3 | 198,185 | 4,703 | 3.17 | % | 320,914 | 7,620 | 3.17 | % | ||||
| Taxable Loans | 2,771,860 | 86,965 | 4.19 | % | 2,644,031 | 88,885 | 4.49 | % | ||||
| Total Loans | 2,970,045 | 91,668 | 4.13 | % | 2,964,945 | 96,505 | 4.35 | % | ||||
| Federal Home Loan Bank Stock | 3,739 | 98 | 3.50 | % | 4,869 | 170 | 4.66 | % | ||||
| Total Interest-Earning Assets | 3,967,087 | 102,142 | 3.44 | % | 3,806,973 | 109,265 | 3.83 | % | ||||
| Noninterest Earning Assets | 174,194 | 289,672 | ||||||||||
| Total Assets | $ | 4,141,281 | $ | 4,096,645 | ||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Interest-Bearing Demand | $ | 402,663 | $ | 727 | 0.24 | % | $ | 308,617 | $ | 926 | 0.40 | % |
| Money Market | 361,204 | 877 | 0.32 | % | 179,546 | 692 | 0.51 | % | ||||
| Savings | 657,101 | 507 | 0.10 | % | 590,534 | 470 | 0.11 | % | ||||
| Certificates of Deposit | 1,522,384 | 15,328 | 1.35 | % | 1,855,027 | 26,076 | 1.88 | % | ||||
| Total Interest-Bearing Deposits | 2,943,352 | 17,439 | 0.79 | % | 2,933,724 | 28,164 | 1.28 | % | ||||
| Federal Funds Purchased | — | — | — | % | 73 | 1 | 1.83 | % | ||||
| Federal Home Loan Bank Borrowings | 31,282 | 276 | 1.18 | % | 29,161 | 260 | 1.19 | % | ||||
| Other Borrowings | 3,090 | 116 | 5.02 | % | 1,303 | 52 | 5.33 | % | ||||
| Total Borrowings | 34,372 | 392 | 1.52 | % | 30,537 | 313 | 1.37 | % | ||||
| Total Interest-Bearing Liabilities | 2,977,724 | 17,831 | 0.80 | % | 2,964,261 | 28,477 | 1.28 | % | ||||
| Noninterest-Bearing Liabilities | 767,207 | 646,924 | ||||||||||
| Shareholders' Equity | 396,350 | 485,460 | ||||||||||
| Total Liabilities and Shareholders' Equity | $ | 4,141,281 | $ | 4,096,645 | ||||||||
| Net Interest Income3 | $ | 84,311 | $ | 80,788 | ||||||||
| Net Interest Margin3 | 2.84 | % | 2.83 | % |
LOANS AND LOANS HELD-FOR-SALE
(Unaudited)
| (Dollars in Thousands) | September 30,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | |||
|---|---|---|---|---|---|---|
| Commercial | ||||||
| Commercial Real Estate | $ | 1,346,953 | $ | 1,453,799 | $ | 1,417,164 |
| Commercial and Industrial | 387,402 | 557,164 | 611,561 | |||
| Total Commercial Loans | 1,734,355 | 2,010,963 | 2,028,725 | |||
| Consumer | ||||||
| Residential Mortgages | 449,118 | 472,170 | 490,343 | |||
| Other Consumer | 44,953 | 57,647 | 66,177 | |||
| Total Consumer Loans | 494,071 | 529,817 | 556,520 | |||
| Construction | 297,337 | 406,390 | 400,676 | |||
| Other5 | 358,394 | — | — | |||
| Total Portfolio Loans | $ | 2,884,157 | $ | 2,947,170 | $ | 2,985,921 |
| Loans Held-for-Sale | 4,889 | 25,437 | 32,104 | |||
| Loans Held-for-Sale in Connection with Sale of Bank Branches, at the lower of cost or fair value | — | 9,835 | — | |||
| Total Loans | $ | 2,889,046 | $ | 2,982,442 | $ | 3,018,025 |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
ASSET QUALITY DATA
(Unaudited)
| (Dollars in Thousands) | September 30,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Nonperforming Loans | |||||||||
| Commercial Real Estate | $ | 606 | $ | 224 | $ | 235 | |||
| Commercial and Industrial | 547 | 456 | 159 | ||||||
| Construction | 1,920 | 2,012 | 3,748 | ||||||
| Residential Mortgages | 2,500 | 4,135 | 3,310 | ||||||
| Other Consumer | 77 | 191 | 152 | ||||||
| Other | — | — | — | ||||||
| Total Nonperforming Loans | 5,650 | 7,018 | 7,604 | ||||||
| Nonperforming Troubled Debt Restructurings | |||||||||
| Commercial Real Estate | 146 | 21,667 | 28,599 | ||||||
| Commercial and Industrial | — | — | — | ||||||
| Construction | 3,071 | 3,319 | 4,249 | ||||||
| Residential Mortgages | — | — | — | ||||||
| Other Consumer | — | — | — | ||||||
| Other | — | — | — | ||||||
| Total Nonperforming Troubled Debt Restructurings | 3,217 | 24,986 | 32,848 | ||||||
| Total Nonperforming Loans and Troubled Debt Restructurings | 8,867 | 32,004 | 40,452 | ||||||
| Other Real Estate Owned | 13,265 | 15,722 | 16,410 | ||||||
| Total Nonperforming Assets | $ | 22,132 | $ | 47,726 | $ | 56,862 | |||
| For the Periods Ended | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in Thousands) | September 30,<br>2021 | December 31,<br>2020 | September 30,<br>2020 | ||||||
| Nonperforming Loans | $ | 8,867 | $ | 32,004 | $ | 40,452 | |||
| Other Real Estate Owned | 13,265 | 15,722 | 16,410 | ||||||
| Total Nonperforming Assets | 22,132 | 47,726 | 56,862 | ||||||
| Troubled Debt Restructurings (Nonaccruing) | 3,217 | 24,986 | 32,848 | ||||||
| Troubled Debt Restructurings (Accruing) | 175,991 | 109,250 | 110,320 | ||||||
| Total Troubled Debt Restructurings | $ | 179,208 | $ | 134,236 | $ | 143,168 | |||
| Nonperforming Loans to Total Portfolio Loans | 0.31 | % | 1.09 | % | 1.35 | % | |||
| Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned | 0.76 | % | 1.61 | % | 1.89 | % | |||
| Allowance for Credit Losses to Total Portfolio Loans | 3.44 | % | 1.83 | % | 1.67 | % | |||
| Allowance for Credit Losses to Nonperforming Loans and Troubled Debt Restructurings | 1119.82 | % | 168.96 | % | 123.52 | % | |||
| Net Loan Charge-offs (Recoveries) QTD | $ | 9,612 | $ | 712 | $ | 354 | |||
| Net Loan Charge-offs (Recoveries) YTD | $ | 18,833 | $ | 2,694 | $ | 1,982 | |||
| Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans QTD | 1.30 | % | 0.09 | % | 0.05 | % | |||
| Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans YTD | 0.85 | % | 0.09 | % | 0.09 | % |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
ALLOWANCE FOR CREDIT LOSSES
(Unaudited)
| Quarter-to-Date | Year-to-Date | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in Thousands) | September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | |||||
| Balance Beginning of Period | $ | 109,319 | $ | 116,872 | $ | 47,405 | $ | 54,074 | $ | 38,762 |
| Impact of CECL Adoption | — | — | — | 61,642 | — | |||||
| Provision for Credit Losses | (413) | 967 | 2,914 | 2,411 | 13,185 | |||||
| Charge-offs: | ||||||||||
| Commercial Real Estate | 9,187 | 8,238 | — | 17,425 | 40 | |||||
| Commercial and Industrial | 188 | 7 | — | 196 | 46 | |||||
| Construction | — | — | — | — | — | |||||
| Residential Mortgages | 56 | 22 | — | 273 | 20 | |||||
| Other Consumer | 424 | 539 | 680 | 1,833 | 3,301 | |||||
| Total Charge-offs | 9,855 | 8,806 | 680 | 19,727 | 3,407 | |||||
| Recoveries: | ||||||||||
| Commercial Real Estate | 9 | 140 | — | 149 | 707 | |||||
| Commercial and Industrial | 3 | 1 | 119 | 5 | 121 | |||||
| Construction | 32 | — | — | 93 | — | |||||
| Residential Mortgages | 1 | 1 | 1 | 168 | 1 | |||||
| Other Consumer | 198 | 144 | 206 | 479 | 596 | |||||
| Total Recoveries | 243 | 286 | 326 | 894 | 1,425 | |||||
| Total Net Charge-offs | 9,612 | 8,520 | 354 | 18,833 | 1,982 | |||||
| Balance End of Period | $ | 99,294 | $ | 109,319 | $ | 49,965 | $ | 99,294 | $ | 49,965 |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
(Unaudited)
(Dollars in Thousands, except per share data)
DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:
| 1 Pre-tax Pre-provision Income (Non-GAAP) | Quarter-to-Date | Year-to-Date | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | ||||||||||||||||||
| Net Interest Income | $ | 29,401 | $ | 27,203 | $ | 25,436 | $ | 83,133 | $ | 78,962 | ||||||||||||
| Noninterest Income | 6,915 | 7,238 | 7,975 | 23,105 | 20,991 | |||||||||||||||||
| Noninterest Expense | 24,685 | 27,759 | 87,300 | 76,049 | 134,934 | |||||||||||||||||
| Pre-tax Pre-provision Income (Loss) | $ | 11,631 | $ | 6,682 | $ | (53,889) | $ | 30,189 | $ | (34,981) | ||||||||||||
| Gains on Sales of Securities, net | (1,341) | (1,499) | (2,388) | (6,450) | (5,923) | |||||||||||||||||
| Losses on Sales and Write-downs of Bank Premises, net | 7 | 64 | 17 | 114 | 88 | |||||||||||||||||
| Losses on Sales and Write-downs of Other Real Estate Owned, net | 608 | 2,603 | 1,305 | 3,423 | 1,357 | |||||||||||||||||
| Branch Consolidation Severance and Expenses | 39 | 523 | — | 566 | — | |||||||||||||||||
| Non-recurring Fees6 | (1,289) | (163) | (73) | (1,898) | (73) | |||||||||||||||||
| Other Real Estate Owned Income | (7) | (4) | (58) | (82) | (279) | |||||||||||||||||
| Gain on Sale of Branches | — | (506) | — | (506) | — | |||||||||||||||||
| Goodwill Impairment | — | — | 62,192 | — | 62,192 | |||||||||||||||||
| Core Pre-tax Pre-provision Income (Non-GAAP) | $ | 9,648 | $ | 7,700 | $ | 7,106 | $ | 25,356 | $ | 22,381 | 2 Core Net Income (Non-GAAP) | Quarter-to-Date | Year-to-Date | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | ||||||||||||||||||
| Net Income (Loss) | $ | 11,173 | $ | 5,432 | $ | (57,678) | $ | 25,980 | $ | (48,800) | ||||||||||||
| Gains on Sales of Securities, net | (1,341) | (1,499) | (2,388) | (6,450) | (5,923) | |||||||||||||||||
| Losses on Sales and Write-downs of Bank Premises, net | 7 | 64 | 17 | 114 | 88 | |||||||||||||||||
| Losses on Sales and Write-downs of Other Real Estate Owned, net | 608 | 2,603 | 1,305 | 3,423 | 1,357 | |||||||||||||||||
| Branch Consolidation Severance and Expenses | 39 | 523 | — | 566 | — | |||||||||||||||||
| Non-recurring Fees6 | (1,289) | (163) | (73) | (1,898) | (73) | |||||||||||||||||
| Other Real Estate Owned Income | (7) | (4) | (58) | (82) | (279) | |||||||||||||||||
| Gain on Sale of Branches | — | (506) | — | (506) | — | |||||||||||||||||
| Total Tax Effect | 416 | (214) | 251 | 1,015 | 1,014 | |||||||||||||||||
| Goodwill Impairment | — | — | 62,192 | — | 62,192 | |||||||||||||||||
| Core Net Income (Non-GAAP) | $ | 9,606 | $ | 6,236 | $ | 3,568 | $ | 22,162 | $ | 9,576 | ||||||||||||
| Average Shares Outstanding - diluted | 26,348,488 | 26,344,104 | 26,385,189 | 26,339,930 | 26,377,626 | |||||||||||||||||
| Core Earnings Per Common Share (diluted) (Non-GAAP) | $ | 0.36 | $ | 0.24 | $ | 0.14 | $ | 0.84 | $ | 0.36 |
3 Net interest income has been computed on a fully taxable equivalent basis ("FTE") using a 21% federal income tax rate for the 2021 and 2020 periods.
| Net Interest Income (FTE) (Non-GAAP) | Quarter-to-Date | Year-to-Date | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | |||||||||||
| Interest Income | $ | 34,913 | $ | 33,094 | $ | 33,986 | $ | 100,964 | $ | 107,439 | |||||
| Interest Expense | 5,512 | 5,891 | 8,550 | 17,831 | 28,477 | ||||||||||
| Net Interest Income | 29,401 | 27,203 | 25,436 | 83,133 | 78,962 | ||||||||||
| Tax Equivalent Adjustment3 | 330 | 386 | 599 | 1,178 | 1,826 | ||||||||||
| NET INTEREST INCOME (FTE) (Non-GAAP) | $ | 29,731 | $ | 27,589 | $ | 26,035 | $ | 84,311 | $ | 80,788 | |||||
| Net Interest Income (Annualized) | 117,955 | 110,659 | 103,574 | 112,723 | 107,914 | ||||||||||
| Average Earning Assets | 3,988,343 | 3,972,574 | 3,874,948 | 3,967,087 | 3,806,973 | ||||||||||
| NET INTEREST MARGIN (FTE) (Non-GAAP) | 2.96 | % | 2.79 | % | 2.67 | % | 2.84 | % | 2.83 | % |
CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
(Unaudited)
(Dollars in Thousands, except per share data)
| 4 Core Efficiency Ratio (Non-GAAP) | Quarter-to-Date | Year-to-Date | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2021 | June 30,<br>2021 | September 30,<br>2020 | September 30,<br>2021 | September 30,<br>2020 | |||||||||||
| NONINTEREST EXPENSE | $ | 24,685 | 27,759 | 87,300 | 76,049 | 134,934 | |||||||||
| Less: Losses on Sales and Write-downs of Other Real Estate Owned, net | (608) | (2,603) | (1,305) | (3,423) | (1,357) | ||||||||||
| Less: Losses on Sales and Write-downs of Bank Premises, net | (7) | (64) | (17) | (114) | (88) | ||||||||||
| Less: Branch Consolidation Severance and Expenses | (39) | (523) | — | (566) | — | ||||||||||
| Less: Goodwill Impairment | — | — | (62,192) | — | (62,192) | ||||||||||
| CORE NONINTEREST EXPENSE (Non-GAAP) | $ | 24,031 | $ | 24,569 | $ | 23,786 | $ | 71,946 | $ | 71,297 | |||||
| NET INTEREST INCOME | $ | 29,401 | $ | 27,203 | $ | 25,436 | $ | 83,133 | $ | 78,962 | |||||
| Plus: Taxable Equivalent Adjustment3 | 330 | 386 | 599 | 1,178 | 1,826 | ||||||||||
| NET INTEREST INCOME (FTE) (Non-GAAP) | $ | 29,731 | 27,589 | 26,035 | 84,311 | 80,788 | |||||||||
| Less: Gains on Sales of Securities, net | (1,341) | (1,499) | (2,388) | (6,450) | (5,923) | ||||||||||
| Less: Non-recurring Fees6 | (1,289) | (163) | (73) | (1,898) | (73) | ||||||||||
| Less: Other Real Estate Owned Income | (7) | (4) | (58) | (82) | (279) | ||||||||||
| Less: Gain on Sale of Branches | — | (506) | — | (506) | — | ||||||||||
| Noninterest Income | 6,915 | 7,238 | 7,975 | 23,105 | 20,991 | ||||||||||
| CORE NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME | $ | 34,009 | 32,655 | 31,491 | 98,480 | 95,504 | |||||||||
| CORE EFFICIENCY RATIO (Non-GAAP) | 70.66 | % | 75.24 | % | 75.53 | % | 73.06 | % | 74.65 | % |
5 The break-out of “Other” loans totaled $358.4 million consisting of $132.8 million of CRE, $76.0million of C&I, $40.9 million of residential mortgages and $108.7 million of construction. Results for the periods for “Other” loans beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
6 The Non-recurring fees include PPP related fees except for $0.9 million of loan late charges.