July 25, 2011 at 17:29 PM EDT
Carolina Trust Bank Reports 2Q Loss as It Aggressively Disposes of Bad Debt
Loan demand strongest in two years; net loans increase by $9.6 million

LINCOLNTON, N.C., July 25, 2011 /PRNewswire/ -- Carolina Trust Bank (NASDAQ: CART) today reported a net loss of $722,000 for the second quarter of 2011. After preferred dividends of $71,000, the net loss attributable to common shareholders was $793,000 or  $0.17 per common share, after significantly raising its loan loss provision even as credit quality trends remain stable.

Second quarter 2011 results compares to a net loss after preferred dividends of $463,000, or a net loss attributable to common shareholders of $0.10 per share, for the previous quarter and net income after preferred dividends available to common shareholders of $414,000, or diluted net income per common share of $0.16 for the quarter ended June 30, 2010.

The bank raised its second quarter provision for loan losses to $1.23 million, as it aggressively charged-off $1.67 million in bad debt. Income was also impacted by an additional $262,000 in losses related to real estate write-downs and the sale of foreclosed property.

"It hasn't been an easy past 12 months, but we've made significant progress in identifying and resolving many of our problem assets," said Carolina Trust Bank President and CEO Michael Cline. "We were particularly aggressive this quarter in removing troubled credits off our balance sheet. Our credit team has done a good job identifying problems the past two years. Not much has surfaced since."

As the bank continues to take a hard line on troubled assets, Carolina Trust's strong capital position enabled the company to book $9.59 million in new loans in the second quarter, its strongest loan demand in two years. Approximately 75 percent of new loans originated in the second quarter were made to small businesses.

While many banks either report weak loan demand or remain cautious due to liquidity concerns, Carolina Trust's ability to lend has resulted in an increase in net new loans in five of the past six months. For the first six months of 2011, the bank realized a net increase in new loans of $10.79 million. The bank's recent hire of an experienced commercial lender from Hickory, N.C. has spurred loan activity in several adjoining North Carolina counties.

"If you have the capital and deposits that we have, then you simply have to look for a way to find good loans, or else it's not doing the bank any good," Cline said. "Our liquidity is the best it has been since we opened (in 2000).

"No doubt we have benefitted from having an experienced lender from the Hickory market," he said. "Still, you must have a group of lenders who will work smart and hard and we have that."

Non-accrual loans – loans 90 days past due and no longer earning interest - declined by $269,000 at June 30, 2011, to $6.43 million, helped by the recovery of $1.10 million in proceeds from the sale of two nonperforming loans. Provision for loan losses in the second quarter increased by $676,000 from the previous quarter.

Balance Sheet

Total loans were $206.24 million at June 30, 2011, compared to $200.81 million at March 31, 2011. Carolina Trust Bank originated 193 loans totaling $17.90 million in the second quarter, compared to 165 loans totaling $11.58 million in the previous quarter. Total deposits increased to $233.23 million at June 30, 2011, compared to $232.25 million at March 31, 2011. Core deposits grew year-over-year by $10.66 million, or 5.37%, reducing higher cost brokered deposits by $9.25 million, or 27.90%. On a link quarter basis, core deposits increased by $3.61 million, or 1.76%.

Reserves for loan losses increased to $3.96 million from $3.75 million at March 31, 2011. Total shareholder equity was $26.78 million at June 30, 2011 compared to $27.25 million at March 31, 2011 and $22.98 million at June 30, 2010.

Carolina Trust Bank's Tier 1 capital leverage ratio of 9.40% at June 30, 2011, is among the strongest of the state's community banks. Each of the bank's capital ratios, including those based on risk-weighted calculations, improved significantly following its stock offering in the first quarter. The bank meets all regulatory requirements for being "well-capitalized," the highest recognized category based on federal capital guidelines.

Net Interest Income and Expense

Net interest income of $2.18 million at June 30, 2011, remained stable compared to the previous quarter of $2.12 million. Interest expense declined to $1.07 million versus $1.11 million in the previous quarter. Net interest margin improved by two basis points to 3.38% on a linked quarter basis due in part to lower borrowing costs and an increase in earning assets. Noninterest income of $225,000 was relatively stable, compared to $251,000 in the 2011 first quarter.

The Bank's management continued to effectively manage operational expenses downward to $1.90 million in the second quarter from $2.22 million for the quarter ended March 31, 2011.

Asset Quality

Nonperforming assets realized a slight increase to $12.28 million at June 30, 2011 from $11.44 million at March 31, 2011. Despite a nominal increase in nonperformers, the bank's 4.43% ratio of nonperforming assets to total assets the 9.24% for its' North Carolina peer group.

Foreclosed real estate owned by the bank increased by $978,000 from the previous quarter to $5.71 million, but non-accrual loans declined by $269,000. Allowance for loan losses was 1.92 % of total loans compared to 1.87% in the previous quarter.

Past due loans as a percentage to total loans were 4.72% at June 30, 2011, compared to 3.82% in the previous quarter. Past due ratios have remained steady since 2009 where they had reached highs of 11.01% and 9.82% during the year.

Carolina Trust Bank, with $277.39 million in assets, is a full service state chartered bank headquartered in Lincolnton, N.C., operating six full service branches in Lincoln, Catawba and Gaston Counties and a loan production office in Rutherford County.

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


2011

2011

2010

2010

2010

Balance Sheet Data:






Total Assets

277,392

276,951

267,885

268,905

274,503

Total Deposits

233,229

232,252

227,663

226,721

231,816

Total Loans

206,240

200,810

204,102

211,462

213,015

Reserve for Loan Loss

3,962

3,755

3,850

3,516

3,206

Total Shareholders Equity

26,781

27,250

22,896

22,617

22,978


















(Dollars in thousands, except per share data)



For the three months ended

Year to Date



June 30

March 31

December 31

June 30

June 30



2011

2011

2010

2011

2010

Income and Per Share Data:






Interest Income

3,253

3,231

3,408

6,484

7,297

Interest Expense

1,071

1,108

1,112

2,179

2,370

Net Interest Income

2,182

2,123

2,296

4,305

4,927

Provision for Loan Loss

1,227

551

771

1,778

789

Net Interest Income After Provision

955

1,572

1,525

2,527

4,138

Other Income

225

251

325

476

567

Other Expense

1,902

2,215

2,263

4,117

3,769

Income (loss) Before Taxes

(722)

(392)

(413)

(1,114)

936

Income Tax Expense (benefit)

-

-

-



Net Income (loss)

(722)

(392)

(413)

(1,114)

936







Preferred Stock Dividend

71

71

70

142

139







Income available (loss) attributable to common shareholders

(793)

(463)

(483)

(1,256)

797







Net Income (loss) Per Share:






Basic

(0.17)

(0.10)

(0.19)

(0.27)

0.31

Diluted

(0.17)

(0.10)

(0.19)

(0.27)

0.31

Average Shares Outstanding:






Basic

4,634,262

4,579,140

2,544,442

4,604,630

2,534,262

Diluted

4,634,262

4,579,140

2,544,442

4,604,630

2,534,262






June 30

  March 31

December 31

September 30

June 30



2011

2011

2010

2010

2010

Capital Ratios:






Tier 1 Leverage Ratio

9.40%

9.73%

8.26%

7.98%

8.09%

Tier 1 Risk-based Capital Ratio

11.95%

12.67%

10.48%

9.92%

9.89%

Total Risk-based Capital Ratio

13.21%

13.93%

11.74%

11.18%

11.14%








Tangible Common Equity

22,040

22,501

18,139

17,849

18,197

Common Shares Outstanding

4,634,262

4,634,262

2,846,443

2,534,262

2,534,262

Book Value Per Common Share

4.76

4.86

6.37

7.04

7.18








Performance Ratios:






Return on Average Assets (%)

-0.82%

-0.58%

0.08%

0.31%

0.69%

Return on Average Equity (%)

-8.26%

-5.89%

0.97%

3.73%

8.37%

Net Interest Margin (%)

3.38%

3.36%

3.82%

3.88%

3.92%








Asset Quality:






Delinquent Loans ( 30-89 days )

5,213

3,160

4,003

2,736

2,042








Delinquent Loans ( 90 days or more )

134

-

256

5

-

Non-accrual Loans

6,432

6,701

4,562

4,650

5,768

Restructured Loans

1,359

4,190

847

648

1,998

OREO

5,713

4,735

4,921

5,298

4,741


Total Nonperforming Assets

13,638

15,626

10,586

10,601

12,507








Nonperforming Assets to Total Assets

4.92%

5.64%

3.95%

3.94%

4.56%

Nonperforming Assets to Equity Capital & ALLL

44.36%

50.40%

39.58%

40.57%

47.77%

Allowance for Loan Losses to Non-performing Assets

29.05%

24.03%

36.37%

33.17%

25.63%

Allowance for Loan Losses to Total Loans

1.92%

1.87%

1.89%

1.66%

1.51%

Net Loan Charge-Offs

1,666

647

2,045

1,609

796

Net Loan Charge-Offs to Average Loans (%)

0.82%

0.32%

0.96%

0.75%

0.37%



SOURCE Carolina Trust Bank

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