Carolina Trust BancShares, Inc. 8-K

Exhibit 99.1

News Release

Contact:

Jerry L. Ocheltree

President and CEO

Carolina Trust BancShares, Inc.

(704) 735-1104

Carolina Trust BancShares, Inc. Reports
Fourth Quarter 2016 Diluted Earnings per Share of $0.07

LINCOLNTON, N.C., January 27, 2017 (GLOBE NEWSWIRE) -- Carolina Trust BancShares, Inc. (NASDAQ - CART) announced today its financial results for the fourth quarter that ended December 31, 2016 (“4Q 2016”). Carolina Trust BancShares, Inc. (the “Company”), the bank holding company for its subsidiary, Carolina Trust Bank (the “Bank”), earned net income of $382,000 in 4Q 2016 as compared to $91,000 for the same period in 2015 (“4Q 2015”), representing an increase of 320%, or $291,000. The Company’s net income for 4Q 2016 was also a 349% increase from the $85,000 in net income previously reported for the quarter ended September 30, 2016 (“the linked quarter”). After deducting the Bank’s preferred stock dividends, net income available to common stockholders in 4Q 2016 was $335,000, a 915% increase from the 4Q 2015 amount, $33,000, and a 1,141% increase from the linked quarter figure, $27,000.

Diluted earnings per share for 4Q 2016 were $0.07, as compared to $0.01 for the same period last year. Annualized return on average total assets was 0.40%, and annualized return on average common shareholder’s equity was 4.55% for 4Q 2016. The 4Q 2016 annualized return on average assets was higher than both 4Q 2015 and the linked quarter at 0.11% and 0.09%, respectively. Similarly, the 4Q 2016 annualized return on average common equity was higher than both 4Q 2015 at 0.46% and the linked quarter at 0.37%.

The $291,000 earnings increase from 4Q 2015 to 4Q 2016 was driven primarily by an adjustment to deferred taxes in 2015 that increased income tax expense by $179,000 in 4Q 2015. This adjustment was related to net operating loss deductions for which the carry forward loss period on tax returns expired. Other items that contributed to or offset the improved net income in 4Q 2016 as compared to 4Q 2015 include the following:

Exhibit 99.1

The 4Q 2016 and 4Q 2015 results included negative provisions for loan losses of $149,000 and $100,000, respectively. Various positive factors, such as continued low loan loss experience, affecting the general allowance for performing loans resulted in a lower allowance for loan losses during both periods.

Net interest income decreased by $47,000, comparing 4Q 2016 to 4Q 2015 but increased by $34,000 compared to the linked quarter. Comparing the 4Q periods, interest expenses rose $237,000, which exceeded the growth in interest income of $189,000. The increase in interest expense from 4Q 2015 to 4Q 2016 was attributed to subordinated debt that was issued by the Company in October 2016. Interest expense on subordinated debt in 4Q 2016 totaled $166,000. The increase in interest income was attributable to loan growth, as average loans outstanding grew by $19 million, or 7%, from 4Q 2015 to 4Q 2016. The weighted average contractual rate on loans at December 31, 2016 was 4.82% as compared to both 4.84% at September 30, 2016 and 4.95% at December 31, 2015.

Noninterest expense decreased by $207,000, or 6%, from 4Q 2015 to 4Q 2016, and was due mostly to the decreases in foreclosed asset expense and the SERP accrual, which were partially offset by an increase in data processing expenses as discussed above. Compared to the linked quarter, noninterest expense was down by 1%.

Jerry L. Ocheltree, President and Chief Executive Officer stated, “Thanks to our teamwork at Carolina Trust BancShares, Inc. and our subsidiary bank, Carolina Trust Bank, we are happy to report net income available to our common shareholders of $335,000 for the fourth quarter and $1.1 million for the year, both of which were significantly higher than 2015.  In addition to net income, our accomplishments in 2016 included formation of a holding company, issuing $10 million in subordinated debt, redemption of preferred stock with a 9% coupon, 6% loan growth, and 12% deposit growth.  In 2016 we were active in building our branch network and in taking steps to be more efficient.  We received approval and are in the process of converting our Mooresville, N.C. loan production office to a full-service branch.  We’ve nearly completed construction of our new Hickory, N.C. branch, where we will be relocating from a leased facility in February. We look forward to serving clients in this open floor plan where our service representatives will stand beside customers in providing traditional teller services from “teller pods” and can easily move to an office for more privacy to discuss accounts and bank services.  In the Lincolnton, N.C. area where we have three branches, we began the process of consolidating our Boger City branch into our main office. 

We look forward to serving our customers and returning profits to our shareholders in 2017 after accomplishing the goals set out in our previous three-year strategic plan.  In December, the board and management worked together to lay groundwork for our new three-year strategic plan for growth, operations, profitability, and capital planning.

Exhibit 99.1

Set forth below are certain selected financial items for the quarter ended December 31, 2016:

CAPITAL LEVELS

Capital for the Bank exceeded “well-capitalized” thresholds for each of the four primary capital levels monitored by state and federal regulators. As of December 31, 2016, the Bank’s common equity tier 1 capital ratio was 11.40%; the tier 1 capital ratio was 11.40%; the total capital ratio was 12.46%; and the tier 1 leverage ratio was 9.64%. The total risk-based capital ratio for the Company is marginally higher than the Bank’s ratio due to $0.8 mm of proceeds from the issue of subordinated debt that was retained at the Company. The subordinated debt qualifies as tier 2 capital for the Company. The Company issued $9.6 million in subordinated debt, net of issuance costs, during the fourth quarter and invested $8.8 million of those proceeds in the Bank’s common stock, which qualifies as tier 1 capital for the Bank.

NET INTEREST INCOME

Net interest income was $3,308,000 in 4Q 2016, down slightly from $3,355,000 in 4Q 2015 but up from $3,274,000 in the linked quarter. The net interest margin (“NIM”) for 4Q 2016 was 3.63%, down 61 basis points (“bp”) from 4.24% for the same period last year. The margin compression was due primarily to the increase in lower yielding overnight funds, as part of a strategy to add liquidity in early 2016. Securities that were called or sold during the last three quarters were replaced by lower yielding securities. The subordinated debt funding in October 2016 also contributed to the margin compression. Compared to the linked quarter, NIM decreased by 4 bp, which was primarily due to the subordinated debt proceeds that were invested in short term investments.

The yield on loans was 5.09% for 4Q 2016 as compared to 5.00% for 4Q2015 and 4.98% for the linked quarter. The 4Q 2016 yield benefited from $57,000 in recoveries of interest on two loans that previously on nonaccrual status. Late fees collected from borrowers, which are included in loan interest income, increased in 4Q 2016 as compared to 4Q 2015 and the linked quarter by $15,000 and $18,000, respectively. The cost of funds for all deposits and borrowings for 4Q 2016 was 0.96%, as compared to 0.80% for 4Q 2015 and 0.82% for the linked quarter. Excluding the subordinated debt interest expense, the cost of funds for 4Q 2016 was 0.79%.

Exhibit 99.1

NONINTEREST INCOME

For 4Q 2016, noninterest income was $282,000, a decrease of $20,000 or 7% when compared to 4Q 2015, as overdraft fee income declined by $21,000. The ratio of noninterest income to average assets was 0.29%, annualized, as compared to 0.36% a year ago and 0.38% in the linked quarter. The linked quarter income included $55,000 from a gain on sale of an investment security.

NONINTEREST EXPENSE

Noninterest expense for 4Q 2016 totaled $3,143,000, down $207,000 or 6% as compared to the $3,350,000 recorded for 4Q 2015. This decrease was attributed mostly to higher 4Q 2015 foreclosed asset expenses and accruals for the SERP, as discussed above.

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., operating nine full service branches in Lincoln, Catawba, Gaston and Rutherford Counties in western North Carolina and a loan production office in Mooresville, N.C.

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: 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.

Exhibit 99.1

Carolina Trust BancShares, Inc.
Selected Financial Highlights

Dollars in thousands, except per share data

(a)       Note: Derived from audited financial statements

Carolina Trust BancShares, Inc.
Comparative Income Statements
For the Three Months Ended

Exhibit 99.1

Carolina Trust BancShares, Inc.
Comparative Income Statements
For the year ended

Dollars in thousands, except per share data

Exhibit 99.1

Carolina Trust BancShares, Inc.

Quarterly Income Statement

Dollars in thousands, except per share data

Exhibit 99.1

Carolina Trust BancShares, Inc.

Selected Financial Highlights

Dollars in thousands, except per share data

Note: Financial information is unaudited.

(*) Note: Capital Ratios are reported for Carolina Trust Bank reported to the Federal Financial Institutions Examination Council on Form FFIEC 041.