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Carolina Trust Bancshares, Inc. (CART) SEC Filing 10-Q Quarterly report for the period ending Saturday, March 31, 2018

Carolina Trust Bancshares, Inc.

CIK: 1676667 Ticker: CART

Exhibit 99.1
 

 
News Release
For Immediate Release
 
Contact:
Jerry L. Ocheltree
President and CEO
Carolina Trust BancShares, Inc.
(704) 735-1104
 
Carolina Trust BancShares, Inc. Reports 1st Quarter 2018 Results
 
Ø
$0.12 Net Income Per Diluted Share for the first quarter of 2018 as compared to $0.04 Net Income Per Diluted Share in the first quarter of 2017
 
LINCOLNTON, N.C., April 26, 2018 (GLOBE NEWSWIRE) -
Carolina Trust BancShares, Inc. (the “Company”) (NASDAQ - CART) reported its financial results today for the most recently completed fiscal quarter.  In the first quarter that ended March 31, 2018 (“1Q18”), the Company’s net income was $581,000 or $0.12 per diluted share as compared to $211,000 or $0.04 per diluted share in the quarter ended March 31, 2017 (“1Q17”), an increase of $370,000 (175%) or $0.08 per diluted share.
 
The table below summarizes the key components of net income for 1Q17 and 1Q18.
 
$ in thousands
 
For the 3 months ended
             
   
March 31, 2017
   
March 31, 2018
   
Increase
(Decrease)
   
% Change
 
Interest income
 
$
4,077
   
$
4,827
   
$
750
     
18
%
Interest expense
   
823
     
1,060
     
237
     
29
%
Net interest income
   
3,254
     
3,767
     
513
     
16
%
Provision for loan loss
   
151
     
252
     
101
     
67
%
Noninterest income
   
292
     
405
     
113
     
39
%
Noninterest expense
   
3,076
     
3,171
     
95
     
3
%
Pre-tax income
   
319
     
749
     
430
     
135
%
Income tax expense
   
108
     
168
     
60
     
56
%
Net income
 
$
211
   
$
581
   
$
370
     
175
%
                                 
Pre-tax pre-provision income
 
$
470
   
$
1,001
   
$
531
     
113
%
                                 
Return on assets
   
0.23
%
   
0.55
%
   
0.32
%
       
Pre-tax pre-provision return on assets
   
0.51
%
   
0.94
%
   
0.43
%
       
Return on equity
   
2.92
%
   
8.00
%
   
5.08
%
       
Net interest margin
   
3.72
%
   
3.79
%
   
0.07
%
       
Efficiency ratio
   
87
%
   
76
%
   
(11
%)
       
Average assets
 
$
377,069
   
$
430,727
   
$
53,658
     
14
%
Average loans
 
$
310,578
   
$
360,518
   
$
49,940
     
16
%
Average deposits
 
$
318,420
   
$
357,259
   
$
38,839
     
12
%
 
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Exhibit 99.1
The $370,000 increase in net income was due to increases in net interest income of $513,000 (16%) and noninterest income of $113,000 (39%) that were partially offset by increases in noninterest expenses of $95,000 (3%) and loan loss provision $101,000 (67%).  Income taxes increased by $60,000 (56%), proportionately less than the increase in pre-tax income $430,000 (135%), due to the decrease in the Company’s marginal federal tax rate from 34% to 21%, effective January 1, 2018.

Net interest income increased from $3,254,000 in 1Q17 to $3,767,000 in 1Q18, primarily due to loan growth and net interest margin expansion.  Average loans increased by $49.9 million (16%) from 1Q17 to 1Q18.  Over 80% of the growth was contributed by the Mooresville, Hickory and Denver, NC offices.

The net interest margin increased by 7 basis points from 3.72% in 1Q17 to 3.79% in 1Q18.  The margin expansion was due in part to higher loan yields and to an increase in the percentage of earning assets that were invested in loans from 87.5% in 1Q17 to 89.5% in 1Q18.  The loan yield increased from 5.04% in 1Q17 to 5.15% in 1Q18.  Several factors affected loan yields including fed funds rate increases of 25 basis points each in March 2017, June 2017, December 2017 and March 2018.  The margin expansion from loan growth and yields was partially offset by an 11 basis point increase in the cost of funds, including the cost of subordinated debt, from 0.97% in 1Q17 to 1.08% in 1Q18.

Noninterest income increased from $292,000 in 1Q17 to $405,000 in 1Q18.  The increase was mostly due to overdraft fees on deposits which were $56,000 (67%) higher and to an unrealized gain in value of equity securities that was $38,000 in 1Q18 as compared to $0 in 1Q17.  The growing Hickory office that relocated to a newly constructed building during 1Q17 accounted for most of the increase in overdraft fees.  Under generally accepted accounting principles, or GAAP, beginning in 2018, the changes in fair value of equity securities are required to be recorded in income.  Previously, the changes in values were recorded through accumulated other comprehensive income in the equity section of the balance sheet.

Noninterest expenses increased from $3,076,000 in 1Q17 to $3,171,000 in 1Q18.  The largest increases were in salaries, $120,000 (7%) higher, and other operating expenses, $46,000 (46%) higher, and were partially offset by a decrease in data processing expense, $66,000 (25%) lower.  Salaries were higher due to increases in incentive accruals, annual merit increases, and 2 additional full-time equivalent employees at the end of March 2018 as compared to March 2017.  Other expenses were higher due to higher accruals for state franchise taxes and regulatory expenses.

During the first quarter of 2018, assets grew by $40 million (9.8%) and were funded mostly by deposit growth of $32 million (9.5%).  In March 2018, the Company also obtained a $3 million secured term loan, most of which was invested in the subsidiary Bank’s capital to increase regulatory capital ratios and support the Bank’s asset growth.  The asset growth since December 31, 2017 was mostly in loans, up $18 million (5.3%) and interest-earning deposits with banks, up $14 million (386.4%).  Commercial real estate loans grew by $20 million (9.5%), with most of that increase being in owner-occupied commercial real estate loans and non-owner occupied commercial real estate that increased by $9 million (10.1%) and $6 million (7.9%), respectively.  Loans collateralized by other commercial real estate categories including acquisition and development of commercial properties and multifamily properties increased by smaller amounts.
 
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Exhibit 99.1
The Company grew deposits in all categories during 1Q18 including time deposits, up $20 million (13.2%), noninterest-earning demand deposits, up $6 million (12.4%) , interest-earning demand deposits (including checking and money market), up $4 million (3.9%), and savings, up $1 million (6.2%).  Management implemented a deposit incentive plan during the quarter to increase all four deposit categories in each branch and continued to emphasize the importance of our borrowers also having deposit accounts with the Bank.  The additional growth in time deposits can be attributed partially to promotional rates that the Bank offered to depositors with at least one checking account to strengthen customer relationships and to add liquidity.

Asset quality remained stable during the first quarter of 2018.  The ratio of non-performing assets (“NPAs”) to total assets was 0.75% on March 31, 2018 as compared to 0.87% on December 31, 2017, as a decline in nonaccrual loans was mostly offset by an increase in the balance of foreclosed properties.  The annualized ratio of net charge-offs (net recoveries) to average assets was 0.08% for 1Q18 as compared to (0.03%) for 1Q17.  The ratio of allowance for loan and lease losses remained unchanged at 1.03% at March 31, 2018 as compared to December 31, 2017.  The ratio of general allowance for non-impaired loans to total non-impaired loans was 0.97% at March 31, 2018 as compared to 0.98% at December 31, 2017.  The specific reserves for impaired loans increased by $7,000 during the first quarter of 2018.

Regulatory capital ratios for the subsidiary Bank increased following a $2.6 million investment by the Company from proceeds of the secured term loan closed in March 2018.  The Bank’s total risk-based capital ratio at March 31, 2018 was 11.41%, an increase from 11.08% at December 31, 2017.

In April 2018, after reviewing its capital requirements to support plans for continued growth and general corporate purposes, the Company initiated and completed a follow-on public offering of 2,310,000 shares of common stock at $8.00 per share for aggregate proceeds of $18.5 million.  The offering closed on April 23, 2018.  After deducting the underwriting discount and estimated offering expenses, the Company expects the net proceeds to be approximately $17.1 million.

About Carolina Trust BancShares, Inc.
Carolina Trust BancShares, Inc. is a bank holding company and the parent company of Carolina Trust Bank.  Carolina Trust Bank is a full service, state-chartered bank headquartered in Lincolnton, N.C.  The bank operates in the Western Piedmont and Mountain Regions of North Carolina in nine full-service branch offices in Lincoln, Catawba, Gaston, Iredell and Rutherford Counties and a loan production office in Rowan County.

Caution Regarding Forward-Looking Statements: 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: the impact of the Tax Cuts and Jobs Act, including any changes in the estimated revaluation of our tax assets and liabilities; 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 BancShares, Inc. undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.
 
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Exhibit 99.1
Note Regarding Use of Non-GAAP Financial Measures:  This news release presents certain non-GAAP financial measures.  The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP.  The Company considers these adjustments to be relevant to ongoing operating results.  The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for the period-to-period comparisons, which will assist the regulators, investors, and analysts in analyzing the operating results or financial position of the Company.  The non-GAAP financial measures are used by management to assess the performance of the Company’s business, including for presentations of Company performance to investors.  The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management.  Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited.  Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
 
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Exhibit 99.1
Dollars in thousands, except share and per share data

Carolina Trust BancShares, Inc.
Selected Financial Highlights

   
Unaudited
3/31/18
   
(a)
12/31/17
   
Unaudited
9/30/17
   
Unaudited
6/30/17
   
Unaudited
3/31/17
 
Balance Sheet Data:
                             
Total Assets
 
$
446,610
   
$
406,618
   
$
400,297
   
$
390,168
   
$
382,481
 
Total Loans
   
367,039
     
348,679
     
340,038
     
324,349
     
311,609
 
Reserve for Loan Loss
   
3,780
     
3,599
     
3,423
     
3,213
     
3,471
 
Total Deposits
   
372,902
     
340,653
     
337,589
     
330,893
     
323,179
 
Total Shareholders’ Equity
   
29,379
     
29,119
     
29,765
     
29,573
     
29,361
 

Comparative Income Statements
For the Three Months Ended

   
Unaudited
3/31/18
   
Unaudited
3/31/17
   
Variance
$
   
Variance
%
 
Income and Per Share Data:
                       
Interest Income
 
$
4,827
   
$
4,077
   
$
750
     
18
%
Interest Expense
   
1,060
     
823
     
237
     
29
%
Net Interest Income
   
3,767
     
3,254
     
513
     
16
%
Provision for Loan Loss
   
252
     
151
     
101
     
67
%
Net Interest Income After Provision
   
3,515
     
3,103
     
412
     
13
%
Non-interest Income
   
405
     
292
     
113
     
39
%
Non-interest Expense
   
3,171
     
3,076
     
95
     
3
%
Income Before Taxes
   
749
     
319
     
430
     
135
%
Income Tax Expense
   
168
     
108
     
60
     
56
%
Net Income Available to Common Shareholders
 
$
581
   
$
211
     
370
     
175
%
                                 
Net Income Per Common Share:
                               
Basic
 
$
0.12
   
$
0.05
                 
Diluted
 
$
0.12
   
$
0.04
                 
Average Common Shares Outstanding:
                               
Basic
   
4,660,325
     
4,654,386
                 
Diluted
   
4,764,724
     
4,734,010
                 
 
(a)
Note:  Derived from audited financial statements
 
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Exhibit 99.1
Carolina Trust BancShares, Inc.
Quarterly Income Statement
Dollars in thousands, except share and per share data

   
For the three months ended:
 
Income and Per Share Data:
 
Unaudited
3/31/18
   
Unaudited
12/31/17
   
Unaudited
9/30/17
   
Unaudited
6/30/17
   
Unaudited
3/31/17
 
Interest Income
 
$
4,827
   
$
4,672
   
$
4,434
   
$
4,266
   
$
4,077
 
Interest Expense
   
1,060
     
916
     
894
     
846
     
823
 
Net Interest Income
   
3,767
     
3,756
     
3,540
     
3,420
     
3,254
 
Provision for (Recovery of) Loan Loss
   
252
     
149
     
340
     
64
     
151
 
Net Interest Income After Provision
   
3,515
     
3,607
     
3,200
     
3,356
     
3,103
 
Non-interest Income
   
405
     
379
     
367
     
338
     
292
 
Non-interest Expense
   
3,171
     
3,114
     
3,046
     
3,409
     
3,076
 
Income Before Taxes
   
749
     
872
     
521
     
285
     
319
 
Income Tax Expense
   
168
     
1,226
     
170
     
89
     
108
 
Net Income (Loss)
   
581
     
(354
)
   
351
     
196
     
211
 
Preferred Stock Dividend
   
-0-
     
-0-
     
-0-
     
-0-
     
-0-
 
Net Income Available to Common Shareholders
   
581
   
(354
)
 
$
351
   
$
196
   
$
211
 
                                         
Net Income (Loss) Per Common Share:
                                       
Basic
 
$
0.12
   
(0.08
)
 
$
0.08
   
$
0.04
   
$
0.05
 
Diluted
 
$
0.12
   
(0.08
)
 
$
0.07
   
$
0.04
   
$
0.04
 
Average Common Shares Outstanding:
                                       
Basic
   
4,660,325
     
4,657,304
     
4,654,880
     
4,654,880
     
4,654,386
 
Diluted
   
4,764,274
     
4,752,961
     
4,470,660
     
4,722,607
     
4,734,010
 
 
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Exhibit 99.1
Carolina Trust BancShares, Inc.
Selected Financial Highlights
Dollars in thousands, except share and per share data

   
3/31/18
   
12/31/17
   
9/30/17
   
6/30/17
   
3/31/17
 
Capital Ratios:
                             
Common equity tier 1 capital ratio*
   
10.43
%
   
10.10
%
   
10.31
%
   
10.89
%
   
11.23
%
Tier 1 capital ratio*
   
10.43
%
   
10.10
%
   
10.31
%
   
10.89
%
   
11.23
%
Total capital ratio*
   
11.41
%
   
11.08
%
   
11.26
%
   
11.83
%
   
12.28
%
Tier 1 leverage ratio*
   
9.49
%
   
9.22
%
   
9.54
%
   
9.75
%
   
9.87
%
                                         
Tangible Common Equity (a)
 
$
29,315
   
$
29,046
   
$
29,682
   
$
29,479
   
$
29,255
 
Common Shares Outstanding
   
4,660,987
     
4,657,880
     
4,654,880
     
4,654,880
     
4,654,880
 
Book Value per Common Share
 
$
6.30
   
$
6.25
   
$
6.39
   
$
6.35
   
$
6.31
 
Tangible Book Value per Common Share (a)
 
$
6.29
   
$
6.24
   
$
6.38
   
$
6.33
   
$
6.28
 
                                         
Performance Ratios for the 3 Months Ended (annualized):
                                       
Return on Average Assets
   
0.55
%
   
(0.35
%)**
   
0.35
%
   
0.20
%
   
0.23
%
Return on Average Common Equity
   
8.00
%
   
(4.71
%)**
   
4.67
%
   
2.64
%
   
2.92
%
Net Interest Margin
   
3.79
%
   
3.91
%
   
3.80
%
   
3.80
%
   
3.72
%
                                         
Asset Quality:
                                       
Delinquent Loans (30-89 days accruing interest)
 
$
430
   
$
649
   
$
2,170
   
$
2,615
   
$
911
 
Delinquent Loans (90 days or more and accruing)
   
-0-
   
$
82
     
-0-
   
$
181
     
-0-
 
Non-accrual Loans
   
1,125
     
2,664
     
2,142
     
2,715
     
2,937
 
OREO and Repossessed property
   
2,215
     
789
     
467
     
583
     
880
 
Total Nonperforming Assets
 
$
3,340
   
$
3,453
   
$
2,609
   
$
3,479
   
$
3,817
 
                                         
Restructured Loans
 
$
4,096
   
$
4,163
   
$
4,363
   
$
4,428
   
$
3,701
 
Nonperforming Assets / Total Assets
   
0.75
%
   
0.87
%
   
0.65
%
   
0.89
%
   
1.00
%
Nonperforming Assets / Equity Capital & ALLL
   
10.07
%
   
10.75
%
   
7.86
%
   
10.61
%
   
11.63
%
Allowance for Loan Losses / Nonperforming Assets
   
113.15
%
   
101.80
%
   
131.20
%
   
92.36
%
   
90.94
%
Allowance for Loan Losses  / Total Loans
   
1.03
%
   
1.03
%
   
1.01
%
   
0.99
%
   
1.11
%
Net Loan Charge-offs (Recoveries)
 
$
71
   
(26
)
 
$
130
   
$
323
   
$
73
 
Net Loan Charge-offs (Recoveries) / Average Loans (%) (annualized)
   
0.08
%
   
(0.03
%)
   
0.16
%
   
0.41
%
   
0.10
%
 
Note:  Financial information is unaudited.

*Note:  Capital ratios are presented for Carolina Trust Bank which reports these ratios to the Federal Financial Institutions Examination Council on form FFIEC 051.

**Note:  For the three months ended December 31, 2017, the Adjusted Return on Assets and Adjusted Return on Equity that  excluded the impact of the deferred tax asset revaluation from the Job Cuts and Tax Act were 0.57% and 7.68%, respectively.
 
(a) Note
 
Reconciliation of GAAP to non-GAAP:
 
3/31/18
   
12/31/17
   
9/30/17
   
6/30/17
   
3/31/17
 
Shareholders’ equity (GAAP)
 
$
29,379
   
$
29,119
   
$
29,765
   
$
29,573
   
$
29,361
 
Less:  Core deposit intangible
   
64
     
73
     
83
     
94
     
106
 
Tangible Common Equity (non-GAAP)
   
29,315
     
29,046
     
29,682
     
29,479
     
29,255
 
Common Shares Outstanding
   
4,660,987
     
4,657,880
     
4,654,880
     
4,654,880
     
4,654,880
 
Tangible Book Value per Common Share (non-GAAP)
 
$
6.29
   
$
6.24
   
$
6.38
   
$
6.33
   
$
6.28
 
 
 
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The following information was filed by Carolina Trust Bancshares, Inc. (CART) on Friday, April 27, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Condensed Consolidated Balance Sheets (unaudited) (parenthetical)
Condensed Consolidated Statements Of Cash Flows (unaudited)
Condensed Consolidated Statements Of Changes In Stockholders' Equity (unaudited)
Condensed Consolidated Statements Of Changes In Stockholders' Equity (unaudited) (parenthetical)
Condensed Consolidated Statements Of Comprehensive Income (unaudited)
Condensed Consolidated Statements Of Operations (unaudited)
Earnings Per Share
Earnings Per Share (details)
Earnings Per Share (tables)
Fair Value Measurements
Fair Value Measurements (tables)
Fair Value Measurements, Assets And Liabilities Recorded At Fair Value On A Recurring Basis (details)
Fair Value Measurements, Assets Measured At Fair Value On A Nonrecurring Basis (details)
Fair Value Measurements, Carrying Amounts And Estimated Fair Values Of Financial Instruments (details)
Fair Value Measurements, Foreclosed Assets (details)
Fair Value Measurements, Impaired Loans (details)
Fair Value Measurements, Quantitative Information About Level 3 (details)
Foreclosed Assets
Foreclosed Assets (details)
Foreclosed Assets (tables)
Investment Securities
Investment Securities (tables)
Investment Securities, Amortized Cost, Fair Values, And Unrealized Gains And Losses Of Securities (details)
Investment Securities, Contractual Maturity (details)
Investment Securities, Securities In Continuous Unrealized Loss Position (details)
Loans
Loans (tables)
Loans, Allocation Of Allowance For Loan Losses (details)
Loans, Allowance For Loan Losses (details)
Loans, Analysis Of Past Due Loans (details)
Loans, Credit Quality Indicators (details)
Loans, Impaired Loans (details)
Loans, Non-accrual And Past Due Loans (details)
Loans, Related Party Loan Activity (details)
Loans, Summary Of Loans (details)
Loans, Troubled Debt Restructurings (details)
Loans, Types Of Modifications (details)
Off-balance Sheet Risk And Commitments
Off-balance Sheet Risk And Commitments (details)
Off-balance Sheet Risk And Commitments (tables)
Preferred Stock
Preferred Stock (details)
Presentation Of Financial Statements
Recent Accounting Pronouncements
Recent Accounting Pronouncements (details)
Recent Accounting Pronouncements (policies)
Stock Option Plans
Stock Option Plans (details)
Stock Option Plans (tables)
Stock Option Plans, Restricted Stock Awards (details)
Stock Option Plans, Stock Option Awards (details)
Stock Option Plans, Stock-based Compensation (details)
Subsequent Events
Subsequent Events (details)

Material Contracts, Statements, Certifications & more

Carolina Trust Bancshares, Inc. provided additional information to their SEC Filing as exhibits

Ticker: CART
CIK: 1676667
Form Type: 10-Q Quarterly Report
Accession Number: 0001140361-18-023117
Submitted to the SEC: Mon May 14 2018 7:31:46 AM EST
Accepted by the SEC: Mon May 14 2018
Period: Saturday, March 31, 2018
Industry: State Commercial Banks

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