8-K: Carter Bankshares Reports Strong Deposit Growth and Improved Liquidity in Q3 2024

Carter Bankshares, Inc. announced strong deposit growth and an improved liquidity position in its third quarter 2024 investor presentation.

Summary

• Carter Bankshares reported a strong third quarter in 2024, with a 20.9% annualized deposit growth.
• The company's available liquidity to uninsured deposits was 207.8%, indicating a strong liquidity position.
• Approximately 78.5% of the deposit base is from retail customers, and 82.7% of deposits, including collateralized municipal deposits, are FDIC insured.
• The bank has a diversified loan portfolio with a focus on commercial real estate, residential mortgages, and construction.
• Net income increased by 17.2% quarter-over-quarter and 55.2% year-over-year.
• Shareholders' equity increased by 6.2% quarter-over-quarter and 17.0% year-over-year.
• The company's CET1 ratio is 10.83%, and the ACL coverage is 2.25%.
• Total available liquidity is $1.5 billion.
• The company has repurchased 3.8 million shares since December 2021 at an average cost of $15.95 per share.
• The bank's bond portfolio has an average life of 5.5 years and an effective duration of 4.1 years, with a book yield of 3.52%.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong deposit growth and improved liquidity, but the high non-performing loan ratio and increased net charge-offs are concerning. The company is taking steps to improve its financial position and is well-capitalized.

Positives

• The bank has a strong and improving liquidity position.
• The deposit base is diversified and granular, with a high percentage of retail customers.
• A significant portion of deposits are FDIC insured.
• The bank is expanding its branch network in strategic growth markets.
• The company is well-capitalized with a strong CET1 ratio.
• The bank has a strong financial credit performance culture.
• The company is focused on enhancing technology and operational efficiency.
• The bank has a strong liquidity position with $1.5 billion in total available liquidity.
• The company has a shorter maturity profile in its bond portfolio, reducing interest rate risk.
• The company has a strong regulatory capital position in excess of regulatory thresholds.

Negatives

• The company has a large non-performing loan relationship that significantly impacts asset quality metrics.
• Net charge-offs increased significantly in the quarter.
• The company has a high efficiency ratio.
• The company has a significant concentration of loans secured by commercial real estate.
• The company has a large exposure to hospitality loans.

Risks

• The company is exposed to market interest rate fluctuations and their impact on economic conditions.
• Inflation and monetary fluctuations could affect the company's performance.
• Changes in government policies and regulations could impact the financial services industry.
• Cybersecurity threats and technological changes pose risks to the company.
• The company faces risks related to resolving nonperforming assets and securing collateral.
• Concentrations of loans secured by real estate, particularly commercial real estate, pose a risk.
• The company is exposed to the potential adverse effects of unusual events such as weather-related disasters and geopolitical conflicts.
• The company faces increasing price and product/service competition.
• The company is exposed to the risk of material increases in costs and expenses.
• The company is exposed to the risk of a significant weakening of the local economies in which it operates.
• The company is exposed to the risk of changes in customer behaviors, including consumer spending, borrowing and saving habits.
• The company is exposed to the risk of a deterioration of the housing market and reduced demand for mortgages.
• The company is exposed to the risk of re-emergence of turbulence in significant portions of the global financial and real estate markets.

Future Outlook

The company will continue to focus on enhancing technology, operations, customer experience, and expanding in strategic growth markets. They will also focus on deepening existing relationships and acquiring new relationships in current markets.

Management Comments

• Management will use the attached investor presentation with investors, analysts, and other interested parties to assist in their understanding of Carter Bankshares, Inc.

Industry Context

This announcement reflects the ongoing challenges and opportunities in the banking sector, including managing interest rate risk, maintaining asset quality, and growing deposits in a competitive environment. The focus on technology and operational efficiency is consistent with industry trends.

Comparison to Industry Standards

• The company's nonperforming loan ratio of 8.00% is significantly higher than the peer average of 0.58%, when including the largest NPL relationship.
• Excluding the largest NPL relationship, the company's nonperforming loan ratio is 0.19%, which is better than the peer average of 0.58%.
• The company's delinquency ratio of 0.08% is better than the peer average of 0.31%, when excluding the largest NPL relationship.
• The company's bond portfolio has a higher than peer book yield of 3.52%.

Stakeholder Impact

• Shareholders will benefit from the increased net income and shareholder equity.
• Employees will benefit from investments in human capital strategies.
• Customers will benefit from enhanced technology and customer experience initiatives.
• Communities will benefit from the company's corporate and social responsibility initiatives.

Next Steps

• The company will continue to invest in human capital strategies to enhance the associate experience.
• The company will continue to drive efficiency and process improvement across all levels of the organization, leveraging technology and automation.
• The company will make significant investments in the new brand strategy working on updating and enhancing the image and reputation of the Bank.
• The company will continue to enhance the transformational work that has been done over the past five years.
• The company will focus on initiatives around enhancing technology, operations, customer experience, C&I, corporate & social responsibility, channel delivery, and product development.
• The company will strengthen change management systems and leverage the Boards ERM Committee.
• The company will continue strategies to deepen existing relationships and acquire new relationships in current markets.
• The company will focus on increasing market share in target growth markets.
• The company will focus on expanding through organic growth and opportunistic acquisition.

Key Dates

Keywords

bank, deposits, loans, liquidity, capital, asset quality, commercial real estate, financial performance, nonperforming loans, interest rates