February 09, 2012 at 16:17 PM EST
Carolina Trust Bank Reports 4Q, Year-End 2011 Earnings; Declining Property Values Slow Bank Momentum
Improving Fundamentals Overshadowed by Write-Downs as Loan Growth, Net Interest Income and Net Margin Show Gains in 2011

LINCOLNTON, N.C., Feb. 9, 2012 (GLOBE NEWSWIRE) -- Carolina Trust Bank (Nasdaq:CART) today reported a net loss attributable to common shareholders of $1.40 million in the fourth quarter of 2011, or a net loss of $0.30 per diluted common share, as declining real estate values overshadowed gains in loan growth and net interest margin and ongoing improvement in core earnings.

For the full year 2011, the company reported a net loss of $2.30 million, or $0.50 per diluted common share, compared to a 2010 net loss of $57,000, or $0.02 per diluted common share. Excluding payment of dividends on preferred shares, Carolina Trust realized a net loss of $1.37 million in the fourth quarter of 2011 compared to a net loss of $443,000 for the fourth quarter of 2010.

"While the fourth quarter was extremely difficult and disappointing, our fundamentals remain solid," said President and CEO J. Michael Cline. "We believe property values are near the bottom and that at some point in the near future property values will stabilize. In the meantime, we have implemented several key strategies that have already begun to strengthen areas of our balance sheet and that will ultimately prepare us for the other side of this economic cycle."

Financial Highlights

  • Total loans grew $5.80 million during 2011 to $209.90 million at Dec. 31, 2011 compared to $204.10 million at Dec. 31, 2010.
  • Core deposits increased by $7.99 million in 2011 due to Carolina Trust's repositioning strategy to reduce higher-cost, out-of-market deposits and lower funding costs.
  • Net interest income, driven by steady gains in net interest margin, grew $107,000 to $2.38 million in the fourth quarter of 2011 compared to $2.28 million in the third quarter.
  • Net interest margin climbed to 3.79% for the fourth quarter of 2011, an increase of 27 basis points over the third quarter, and 41 and 43 basis points higher than the second and first quarters respectively.
  • Higher-cost, out-of-market deposits continued to be replaced with core deposits, which increased by 3.88% during 2011.
  • Changes to Carolina Trust's deposit mix resulted in a decrease of $559,000 in interest expense in 2011.
  • Total nonperforming assets were $10.57 million at Dec. 31, 2011 compared to $11.97 million in the third quarter as OREOs declined to $4.27 million in the fourth quarter due to significant write-downs.
  • Noninterest expense of $3.22 million in the fourth quarter of 2011 increased by $1.12 million from the third quarter due primarily to OREO write-downs of $1.59 million during the fourth quarter of 2011.
  • Provisions for loan losses in the fourth quarter of 2011 increased to $835,000 compared to $116,000 in the third quarter. For 2011, provisions were up marginally to $2.73 million from $2.68 million in 2010.
  • Net loan charge-offs were $469,000 for the fourth quarter of 2011 compared to $170,000 for the third quarter of 2011 and $436,000 for the fourth quarter of 2010.

As core earnings and other fundamentals continued to improve during 2011, Carolina Trust Bank recorded $1.59 million in real estate write-downs as markets continued to search for a bottom in real estate values. The majority of these write-downs came from five properties which we feel are now aggressively priced to be sold. Currently we have several properties under contract that should close in the first quarter of 2012.

Focus on fundamentals resulted in steady gains in net interest margin, funding costs and loan growth. Net interest margin was 3.79% in the fourth quarter of 2011 as it steadily improved during 2011, from 3.52% in the third quarter, 3.38% in the second quarter and 3.36% in the first quarter.

Carolina Trust's year-long repositioning of its deposit mix reduced funding costs in 2011 with core deposits replacing higher-cost, out-of-market deposits. While overall deposits were down slightly at Dec. 31, 2011 from a year ago, the bank lowered interest expense by $559,000 during 2011. 

Balance Sheet

Total loans grew to $209.90 million at Dec. 31, 2011, up from $204.47 million in the third quarter and $204.10 million at Dec. 31, 2010. Total deposits fell slightly in the fourth quarter of 2011 to $224.21 million on a link-quarter basis as higher-cost deposits were allowed to run off. With a new deposit strategy in place for 2011, core deposits grew by $7.99 million, or 3.88%, year-over-year while out-of-market certificates of deposits declined by $11.42 million, or 43.03%.

Total assets were $266.16 million at Dec. 31 2011, down slightly from $270.09 million at Sept. 30, 2011 and $267.89 million a year ago. Reserves for loan losses were $4.37 million at December 21, 2011 compared to $3.85 million at Dec. 31, 2010. Stockholders' equity was $26.05 million at Dec. 31, 2011 compared to $27.36 million at Sept. 30, 2011 and $22.90 million at Dec. 31, 2010.

Carolina Trust continues to maintain a strong capital position, reporting a Tier 1 capital leverage ratio of 9.32% at Dec. 31, 2011 compared to 9.57% at Sept. 30, 2011 and 8.26% a year ago. Each of the bank's capital ratios, including those based on risk-weighted calculations, meet all regulatory requirements for being "well-capitalized," the highest recognized category based on federal capital guidelines.

Net Interest Income and Expense

Net interest income, driven by gains in net interest margin during 2011, increased by $107,000 to $2.38 million for the fourth quarter of 2011, compared to $2.28 million for the third quarter of 2011 and $2.30 million for the fourth quarter of 2010. Reduced interest expense continued throughout 2011 as core deposits replaced higher-cost, out-of-market deposits. Interest expense was $.85 million for the fourth quarter of 2011 compared to $1.02 million for the third quarter of 2011, $1.07 million for the second quarter of 2011 and $1.10 million for the first quarter of 2011. For the full year of 2011, interest expense decreased to $4.05 million from $4.61 million in 2010.

Noninterest income was $295,000 in the fourth quarter of 2011, a marginal decline from the $316,000 in the third quarter, but higher than the first and second quarters in 2011. Noninterest expenses for the quarter ended Dec. 31, 2011 totaled $3.22 million, up $1.12 million from the previous quarter primarily due to higher write-downs of foreclosed property in the fourth quarter.

Asset Quality

Most credit quality measures improved marginally during the course of the year. Total nonperforming assets – which include foreclosed property and non-accrual loans - were $10.57 million at Dec. 31, 2011, or 3.96% of total assets, compared to $11.97 million, or 4.43% of total assets, in the third quarter. The Bank's 3.96% ratio of nonperforming assets to total assets ranks approximately 1.71 percentage points better than its peer group, consisting of North Carolina Banks with assets greater than $100 million and less than $500 million.

President J. Michael Cline stated, "Although our board and management were disappointed with the fourth quarter loss, we strongly believe the repositioning of our balance sheet along with several recent additions to our staff will help us achieve more normal and sustainable growth and earnings. In the last two quarters we began to see our loan demand increasing and expect it to continue into 2012. We are diligently working to remove problem assets off of our books and feel we are now positioned for renewed profitability."

Carolina Trust Bank, with approximately $266.16 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.

Conference Call

Carolina Trust Bank's executive management team will host a conference call on February 10, 2012, at 10:00 am Eastern Time to discuss the quarter-and year end results. The call can be accessed by dialing (866) 393-1604 and entering conference number 49959357. A replay of the conference call can be accessed until 23:59 on February 17, 2012 by calling (855) 859-2056 and entering conference number 49959357.

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: the rate of delinquencies and amounts of charge-offs, the level of allowance for loan losses, the rates of loan growth or shrinkage, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses, the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized, 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. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the FDIC and available on our website. 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. All subsequent written and oral forward-looking statements concerning Carolina Trust Bank by any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.

Carolina Trust Bank
 (Dollars in thousands)
December 31September 30June 30 March 31December 31
20112011201120112010
Balance Sheet Data:
Total Assets  266,162  270,089  277,392  276,951  267,885
Total Deposits  224,206  226,860  233,229  232,252  227,663
Total Loans  209,900  204,471  206,240  200,810  204,102
Reserve for Loan Loss  4,366  3,909  3,962  3,755  3,850
Total Shareholders Equity  26,045  27,364  26,781  27,250  22,896
(Dollars in thousands, except per share data)
 For the three months ended  Year to Date
December 31September 30June 30 March 31December 31December 31
201120112011201120112010
Income and Per Share Data:
Interest Income  3,238  3,296  3,253  3,231  13,019  14,273
Interest Expense  855  1,020  1,071  1,108  4,055  4,614
Net Interest Income  2,383  2,276  2,182  2,123  8,964  9,659
Provision for Loan Loss  835  116  1,227  551  2,729  2,683
Net Interest Income After Provision  1,548  2,160  955  1,572  6,235  6,976
Non-interest Income  295  316  225  251  1,088  1,181
Non-interest Expense  3,220  2,096  1,902  2,215  9,433  7,936
Income (loss) Before Taxes  (1,377)  380  (722)  (392)  (2,110)  221
Income Tax Expense (benefit)  --  --  --  --
Net Income (loss)  (1,377)  380  (722)  (392)  (2,110)  221
Preferred Stock Dividend  22  21  71  71  186  278
Income available (loss) attributable to common shareholders  (1,399)  359  (793)  (463)  (2,296)  (57)
Net Income (loss) Per Common Share:
Basic  (0.30)  0.08  (0.17)  (0.10)  (0.50)  (0.02)
Diluted  (0.30)  0.08  (0.17)  (0.10)  (0.50)  (0.02)
Average Common Shares Outstanding:
Basic  4,634,262  4,634,262  4,634,262  4,579,140  4,619,568  2,536,828
Diluted  4,634,262  4,634,262  4,634,262  4,579,140  4,619,568  2,536,828
December 31September 30June 30 March 31December 31 
20112011201120112010 
Capital Ratios:
Tier 1 Leverage Ratio 9.32% 9.57% 9.40% 9.73% 8.26%
Tier 1 Risk-based Capital Ratio 11.49% 12.21% 11.95% 12.67% 10.48%
Total Risk-based Capital Ratio 12.75% 13.47% 13.21% 13.93% 11.74%
Tangible Common Equity  20,922  22,631  22,040  22,501  18,139
Common Shares Outstanding  4,634,262  4,634,262  4,634,262  4,634,262  2,846,443
Book Value Per Common Share  4.51  4.88  4.76  4.86  6.37
Performance Ratios:
Return on Average Assets (%) -2.02% 0.55% -0.82% -0.58% -0.60%
Return on Average Equity (%) -19.88% 5.55% -8.26% -5.89% -7.18%
Net Interest Margin (%) 3.79% 3.52% 3.38% 3.36% 3.64%
Asset Quality:
Delinquent Loans ( 30-89 days )  3,571  2,995  5,213  3,160  4,003
Delinquent Loans ( 90 days or more )  2  236  134  --  256
Non-accrual Loans  6,297  5,987  6,432  6,701  4,562
OREO  4,271  5,748  5,713  4,735  4,921
Total Nonperforming Assets  10,570  11,971  12,279  11,436  9,739
Restructured Loans  2,487  2,293  1,359  4,190  847
Nonperforming Assets to Total Assets 3.97% 4.43% 4.43% 4.13% 3.64%
Nonperforming Assets to Equity Capital & ALLL 34.76% 38.28% 39.94% 36.88% 36.41%
Allowance for Loan Losses to Non-performing Assets 41.31% 32.65% 32.27% 32.83% 39.53%
Allowance for Loan Losses to Total Loans 2.08% 1.91% 1.92% 1.87% 1.89%
Net Loan Charge-Offs   469  170  1,020  647  436
Net Loan Charge-Offs to Average Loans (%) 0.23% 0.08% 0.82% 0.32% 0.21%
CONTACT: J. Michael Cline
         President and CEO
         Carolina Trust Bank
         (704) 735-1104
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