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Carter Bank & Trust

As I wrote in a previous post, the financial sector has been hit hard by the sub-prime debacle, CDOs and other risky credit ventures. Unfortunately, many smaller bank stock prices in this sector have tanked along with the sector, even though they have absolutely no sub-prime exposure. I believe this presents a great buying opportunity for some of these banks.

Carter Bank & Trust
One of my holdings, Carter Bank & Trust (CARE) is such an example. CARE is a private bank corporation which was born from a merger of ten individual banks located in the southwest part of the State of Virginia. With the merger completed a little over a year ago, CARE has become the largest independent state chartered commercial bank headquartered in Virginia. It operates 124 branches located in Virginia and North Carolina.

Although CARE is a private bank, it’s stock does trade OTC. However, it isn’t required to file statements with the SEC, so finding free information about its financials is difficult. Carter Bank & Trust also does not, and probably will not because of their business philosophy, have a website in the near future. They’re “old school” bankers and believe in keeping things local, doing business face-to-face, and keeping things on a personal level.

But, because I own stock registered in my name, CARE sends me (along with my dividends) periodic updates and earnings reports. I’ve posted the most recent report to share with anyone who’s interested (Shareholder Letter).

In summary, their Statement of Income shows that they earned $0.53 per share for year 2007, their first full year after the merger. The bank is still in the process of completing some mergers changes, including conversion of a computer system and incorporation of Bank Building Corporation, which should boost their bottom line.

What’s important to note is the bank’s statement about the subprime debacle. According this this report:

“From your bank’s standpoint, we did not participate in any way in the sub-prime mortgage market, do not have any mortgage-backed securities backed by sub-prime mortgages nor do we hold any securities whose value is based on any insurance company’s guaranty. We also do not have any significant and/or unusual off balance sheet liabilities.”

Carter Bank & Trust’s stock is currently trading around $9.00 per share, about 25% less that what I paid for my shares, and IMO, significantly at a discount to it’s true value and growth potential.

I closed my Vanguard brokerage account at the end of last year and used the money to pay off my mortgage. I’m in the process of opening a less-costly brokerage account, and as soon as I do, I’ll be boosting my stake in Carter Bank & Trust, and the other micro-cap bank shares that I own.

Comments 4

  1. Mike wrote:

    According to the Statement of Income that I received in the mail today (along with a $0.10/share dividend check), Carter Bank and Trust only managed to squeak out a $0.09 per share profit for the first quarter of 2008.

    This is much less than the $0.14 per share profit for the same period last year.

    According to an excerpt from the Statement of Income, Worth Harris Carter, Jr., the Chairman of the Board & President writes:

    “..With the Fed continuing to reduce interest rates, the income from our investment portfolio declined $2.4 million. At the same time our interest income on loans increased $1 million as a result of increased volume. Our net interest income declined $1.4 million. Interest expense, however, increased $1 million and our net interest income declined $2.4 million. Non-interest income increased $500,000 while non-interest expense only increased $300,000. As a result, our income before taxes declined $2.2 million. Net income after taxes was down $1.275 million.”

    Posted 02 May 2008 at 5:57 pm
  2. Mike wrote:

    Carter Bank & Trust posted a 123 percent increase in first-quarter 2009 after-tax earnings, Worth H. Carter Jr., board chairman and president of Carter Bank & Trust, said at the annual shareholders meeting.

    Bank’s earnings soar for 1st quarter

    “We made almost as much as last year in the first five months of this year,” Carter told 43 shareholders and directors at the meeting. The bank also has posted increases in its investments, net loans and deposits through May.

    In fiscal 2008, Carter Bank had total assets of $2.8 billion, compared with $2.7 billion in fiscal 2007. Its liabilities totaled $2.5 billion in 2008, compared with $2.4 billion in 2007. Net income was $9.7 million or 37 cents per share in 2008, compared with $13.2 million or 53 cents per share in 2007.

    Posted 01 Jul 2009 at 8:43 am
  3. doug holmes wrote:

    i plan to move my ira funds from wachovia, paying less than 1%, to carter paying over 2% on a 12-month cd

    Posted 04 Sep 2009 at 5:52 am
  4. Guzzo wrote:

    Carter Bank and Trust recently posted their 2009 Annual Report online at their website and they report fantastic results. Here are some excerpts -

    Summary of Operations – net income for 2009 equaled $17,774,000 or $0.68 per share compared to net income for 2008 of $9,708,000 or $0.37 per share. Net income for 2007 equaled $13,169,000 or $0.53 per share.

    Deposits increased $583 million over the prior year. The increases occurred in all types of deposits with the largest increase occurring in certificates of deposits where our customers sought higher rates.

    Your bank did not experience any liquidity pressures in 2009. To the contrary, we have continued to maintain a very liquid position and a very conservative balance sheet during these very difficult economic times.

    As the Statement of Income for the years ended 2009, 2008 and 2007 reflects your bank experienced its best year ever.

    Total interest income increased $8.1 million while interest expense declined $4.9 million over the prior year. This resulted in a $13 million dollar or 20% increase in net interest income. The major increase in FDIC assessments of $4.1 million over the prior year impacted our increase in total non-interest expense. Had it not been for the FDIC assessment increase our total non-interest expenses would have declined $500,000 dollars. Our income before income taxes increased $8.2 million. Income tax expense was up only slightly as a result of an increase in interest received on municipal investments. The bank’s
    net income increased $8.1 million dollars or 83%.

    In your Board’s opinion, these are extremely gratifying results. It is also noteworthy that the bank’s net losses on loans in 2009 were only $590,000 an extremely low level considering the banks $1.787 billion dollars in loans.

    Online banking is currently being tested by our employees and we anticipate rolling this new product out to our customer base in the second half of the year.

    IMO, considering that this is only their third year in existence, a $0.68 per share profit is FANTASTIC, especially considering that they started a banking business during one of the worst economic periods in recent history, and have only been in business for three years.

    Shhh.. don’t tell anyone that CARE is only trading at $8.00/share.

    Posted 03 Jun 2010 at 8:16 am

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