One-time charge results in 2Q loss, but sets stage for future improvement; Bank management optimistic about final six months of 2013
Loan production, net interest margin improve; asset quality best in 3 years
LINCOLNTON, N.C., July 19, 2013 (GLOBE NEWSWIRE) -- Carolina Trust Bank (Nasdaq:CART) today reported a net loss of $1.49 million for the quarter ended June 30, 2013, or $0.32 per diluted common share attributable to common shareholders. Second quarter results were influenced by a one-time charge to non-interest expense that was tied to the unexpected closing of a commercial customer in late December 2012.
Excluding payment of dividends on preferred shares, the bank realized a net loss of $1.44 million for the second quarter of 2013. Results compared to net income of $301,000 for the same period in 2012, or $0.07 per diluted common share available to common shareholders. On a link-quarter basis, second quarter results compared to a profit of $32,000 for the quarter ended March 31, 2013, or $0.01 per diluted common share available to common shareholders.
"While we are disappointed with the quarterly loss, we are encouraged by the fundamentals of our business," said Mike Cline, president and CEO. "We continue to see solid progress in loan growth, improvement in asset quality, and ongoing strength in core earnings. We're optimistic about the remaining six months of 2013."
In the second quarter of 2013, Carolina Trust booked $16.14 million in new loans, including $9.10 million in the month of May, its second largest monthly production total in 24 months. Total nonperforming assets at June 30, 2013, were their lowest in more than three years and non-accrual loans fell dramatically in the second quarter of 2013. Core earnings and total revenues remained healthy as net interest income and net interest margin improved year-over-year and on a link-quarter basis.
Following the closing of the commercial business, bank management moved quickly to dispose of equipment held as collateral and clean its balance sheet of the one-time event. Losses from the sale of equipment represented an increase of $1.23 million in non-interest expense from the previous quarter.
Second Quarter 2013 Financial Highlights
Balance Sheet
- Total assets were $265.10 million at June 30, 2013, compared to $275.60 million at March 31, 2013, and $283.83 million at June 30, 2012.
- Deposits totaled $232.62 million at June 30, 2013, compared to $240.59 million at March 31, 2013, and $239.88 million at June 30, 2012.
- Total loans were $216.06 million at June 30, 2013, compared to $216.00 million at March 31, 2013, and $223.36 million at June 30, 2012.
- Total Shareholders' Equity was $22.52 million at June 30, 2013, compared to $24.87 million at March 31, 2013, and $27.00 million at June 30, 2012.
Income Statement
- Total revenues, less interest expense, were $2.89 million in the second quarter of 2013, compared to $2.76 million for the quarter ended March 31, 2013, and $2.94 million for the quarter ended June 30, 2012.
- Net interest income was $2.62 million for the second quarter of 2013, compared to $2.51 million for the quarter ended March 31, 2013, and $2.60 million for the quarter ended June 30, 2012.
- Interest expense for the second quarter of 2013 was $538,000, compared to $588,000 for the quarter ended March 31, 2013, and $742,000 for the quarter ended June 30, 2012.
- Net Interest margin was 4.09% for the quarter ended June 30, 2013, compared to 4.00% for the quarter ended March 31, 2013, and 3.99% for the quarter ended June 30, 2012.
Credit Quality
- Total nonperforming assets were $8.70 million at June 30, 2013, compared to $12.65 million at March 31, 2013, and $11.62 million at June 30, 2012.
- Nonperforming assets to total assets were 3.28% at June 30, 2013, compared to 4.59% at March 31, 2013, and 4.09% at June 30, 2012.
- Non-accrual loans were $3.89 million at June 30, 2013, compared to $9.11 million at March 31, 2013, and $6.74 million at June 30, 2012.
- Net loan charge-offs were $1.61 million for the quarter ended June 30, 2013, compared to $350,000 for the quarter ended March 13, 2013, and $355,000 for the quarter ended June 30, 2012.
Review of Balance Sheet
Total deposits of $232.62 million fell from levels reported at March 31, 2031, and June 30, 2012, due largely to management's decision to steadily reduce higher-priced brokered deposits, which declined $4.26 million from the first quarter of 2013 and $7.81 million from June 30, 2012. However, the bank's core deposits – typically consisting of checking, savings and certificate of deposit accounts from local customers – remained strong. Total assets of $265.10 million at June 30, 2013, declined $10.49 million from March 31, 2013, and $18.73 million from June 30, 2012, the result of reducing low yielding cash balances due from other banks.
Total loans were up slightly at June 30, 2013 when compared to March 31, 2013, but down $7.30 million from June 30, 2012, chiefly due to the elimination of problem loans from the company's portfolio. In the first six months of 2013, the bank booked 332 new loans in the amount of $28.45 million.
Carolina Trust Bank continues to maintain strong capital levels that exceed regulatory requirements for being "well-capitalized." At June 30, 2013, the bank reported Tier 1 Leverage Ratio of 8.24%, Tier 1 Risk-based Capital Ratio of 9.80%, and Total Risk-based Capital Ratio of 11.06%.
Review of Income Statement
Despite a challenging low rate environment, net interest income for the second quarter of 2013 rose by $117,000 when compared to the first quarter of 2013 to $2.62 million and by $27,000 when compared to the quarter ended June 30, 2012. However, increases in net interest income were offset by increases in loan loss provisions of $422,000 when compared to the quarter ended March 31, 2013, and $364,000 when compared to the quarter ended June 30, 2012. Total revenues less interest expense of $2.89 million for the second quarter remained moderately stable compared to the previous quarter and the same period a year ago.
Interest expense declined for the 14th straight quarter to $538,000, contributing to an improvement in net interest margin to 4.09% for the second quarter of 2013 compared to 4.00% for the quarter ended March 31, 2013, and 3.99% for the quarter ended June 30, 2012.
Non-interest income for the second quarter of 2013 was up $17,000 when compared to the first quarter of 2013, but declined $74,000 when compared to the quarter ended June 30, 2012. Non-interest expense for the second quarter of 213 increased by $1.23 million when compared to the first quarter of 2013, primarily due to a one-time charge related to the liquidation and loss on the sale of equipment held as collateral against a business that unexpectedly closed.
Review of Credit Quality
Asset quality ratios improved to levels not seen since March 2010. Credit quality improved significantly in nearly every measurement, specifically in total nonperforming assets, nonperforming assets to total assets, adversely classified assets to capital and classified assets to total assets.
Total nonperforming assets of $8.70 million at June 30, 2013, were the lowest in more than three years. Non-accrual loans also improved dramatically in the second quarter of 2013, falling to $3.89 million, a decrease of $5.22 million from March 31, 2013, and $2.85 million from June 30, 2012. Loans 30 to 89 days past due increased moderately to $3.58 million at June 30, 2013 from $2.84 million at March 31, 2013, but decreased by $1.02 million from the $4.60 million reported at June 30, 2012.
Charge-offs increased to $1.61 million for the quarter ended June 30, 2013, compared to $350,000 for the quarter ended March 31, 2013, and $355,000 for the quarter ended June 30, 2012. However, loan charge-offs to average loans remained under 1% with the Bank reporting ratios of 0.73% for the quarter ended June 30, 2013, compared to 0.16% for both quarters ended March 31, 2013, and June 30, 2012.
The bank's former loan production office in Forest City was converted to a full-service branch during the second quarter, giving the Lincolnton, N.C.-based state chartered bank seven full service branches in Lincoln, Catawba, Gaston and Rutherford Counties in western North Carolina. It also maintains a loan production office in Hickory, N.C.
Forward-Looking Statement;
This news release contains forward-looking statements. Words such as "anticipates," " believes," "estimates," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements reflect management's current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand and asset quality, including real estate and other collateral values; changes in banking regulations and accounting principles, policies or guidelines; and the impact of competition from traditional or new sources. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Carolina Trust Bank takes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.
| Carolina Trust Bank | |||||
| (Dollars in thousands) | |||||
| June 30 | March 31 | December 31 | September 30 | June 30 | |
| 2013 | 2013 | 2012 | 2012 | 2012 | |
| Balance Sheet Data: | |||||
| Total Assets | 265,103 | 275,597 | 271,051 | 283,164 | 283,829 |
| Total Deposits | 232,621 | 240,589 | 233,861 | 241,140 | 239,883 |
| Total Loans | 216,055 | 215,984 | 221,480 | 223,717 | 223,357 |
| Reserve for Loan Loss | 4,060 | 4,836 | 4,773 | 4,383 | 4,534 |
| Total Shareholders Equity | 22,523 | 24,871 | 24,935 | 26,977 | 27,004 |
| (Dollars in thousands, except per share data) | |||||
| For the three months ended | |||||
| June 30 | March 31 | December 31 | September 30 | June 30 | |
| 2013 | 2013 | 2012 | 2012 | 2012 | |
| Income and Per Share Data: | |||||
| Interest Income | 3,162 | 3,095 | 3,324 | 3,374 | 3,339 |
| Interest Expense | 538 | 588 | 648 | 695 | 742 |
| Net Interest Income | 2,624 | 2,507 | 2,676 | 2,679 | 2,597 |
| Provision for Loan Loss | 835 | 413 | 1,100 | 572 | 471 |
| Net Interest Income After Provision | 1,789 | 2,094 | 1,576 | 2,107 | 2,126 |
| Non-interest Income | 268 | 251 | 348 | 332 | 342 |
| Non-interest Expense | 3,500 | 2,268 | 2,593 | 2,511 | 2,094 |
| Income (loss) Before Taxes | (1,443) | 77 | (669) | (72) | 374 |
| Income Tax Expense (benefit) | -- | -- | -- | -- | -- |
| Net Income (loss) | (1,443) | 77 | (669) | (72) | 374 |
| Preferred Stock Dividend | 48 | 45 | (97) | 73 | 73 |
| Income available (loss) attributable to common shareholders | (1,491) | 32 | (572) | (145) | 301 |
| Net Income (loss) Per Common Share: | |||||
| Basic | (0.32) | 0.01 | (0.12) | (0.03) | 0.07 |
| Diluted | (0.32) | 0.01 | (0.12) | (0.03) | 0.07 |
| Average Common Shares Outstanding: | |||||
| Basic | 4,634,482 | 4,634,482 | 4,634,482 | 4,634,286 | 4,634,286 |
| Diluted | 4,634,482 | 4,637,422 | 4,634,482 | 4,634,286 | 4,634,286 |
| June 30 | March 31 | December 31 | September 30 | June 30 | |
| 2013 | 2013 | 2012 | 2012 | 2012 | |
| Capital Ratios: | |||||
| Tier 1 Leverage Ratio | 8.24% | 8.71% | 8.61% | 9.14% | 9.33% |
| Tier 1 Risk-based Capital Ratio | 9.80% | 10.79% | 10.60% | 11.16% | 11.20% |
| Total Risk-based Capital Ratio | 11.06% | 12.05% | 11.86% | 12.41% | 12.46% |
| Tangible Common Equity | 19,188 | 21,529 | 21,581 | 22,262 | 22,285 |
| Common Shares Outstanding | 4,634,482 | 4,634,482 | 4,634,482 | 4,634,482 | 4,634,482 |
| Book Value Per Common Share | 4.14 | 4.65 | 4.66 | 4.80 | 4.81 |
| Performance Ratios: | |||||
| Return on Average Assets (%) | -2.12% | 0.11% | -0.95% | -0.10% | 5.40% |
| Return on Average Equity (%) | -23.20% | 1.24% | -9.93% | -1.04% | 5.57% |
| Net Interest Margin (%) | 4.09% | 4.00% | 4.27% | 4.14% | 3.99% |
| Asset Quality: | |||||
| Delinquent Loans ( 30-89 days ) | 3,581 | 2,835 | 3,639 | 2,751 | 4,599 |
| Delinquent Loans ( 90 days or more ) | -- | -- | -- | -- | -- |
| Non-accrual Loans | 3,891 | 9,107 | 8,494 | 5,957 | 6,739 |
| OREO and repossessed property | 4,811 | 3,542 | 4,169 | 4,127 | 4,876 |
| Total Nonperforming Assets | 8,702 | 12,649 | 12,663 | 10,084 | 11,615 |
| Restructured Loans | 4,465 | 4,711 | 4,983 | 3,413 | 3,229 |
| Nonperforming Assets to Total Assets | 3.28% | 4.59% | 4.67% | 3.56% | 4.09% |
| Nonperforming Assets to Equity Capital & ALLL | 32.74% | 42.58% | 42.62% | 32.16% | 36.83% |
| Allowance for Loan Losses to Non-performing Assets | 46.66% | 38.23% | 37.69% | 43.46% | 39.04% |
| Allowance for Loan Losses to Total Loans | 1.88% | 2.24% | 2.16% | 1.96% | 2.03% |
| Net Loan Charge-Offs | 1,609 | 350 | 773 | 761 | 355 |
| Net Loan Charge-Offs to Average Loans (%) | 0.73% | 0.16% | 0.35% | 0.34% | 0.16% |
| Note: Financial information is unaudited. | |||||