Quarterly Report (10-q)

Date : 08/13/2019 @ 8:10PM
Source : Edgar (US Regulatory)
Stock : Carolina Trust BancShares Formation of a Holding Company (CART)
Quote : 11.42  0.0 (0.00%) @ 12:00AM

Quarterly Report (10-q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2019

COMMISSION FILE NUMBER 000-55683

CAROLINA TRUST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

NORTH CAROLINA
(State or other jurisdiction of incorporation or organization)

81-2019652
(I.R.S. Employer Identification No.)

901 EAST MAIN STREET
LINCOLNTON, NORTH CAROLINA 28092
(Address of Principal Executive Offices) (Zip Code)

(704) 735-1104
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
Common stock, par value $2.50 per share
 
CART
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405   of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer , smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer , “accelerated filer ,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
Accelerated Filer
       
Non-accelerated Filer
Smaller Reporting Company
       
   
Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).      Yes      No

The number of shares of the registrant’s common stock outstanding as of August 12, 2019 was 9,305,214.



TABLE OF CONTENTS

Part I.
FINANCIAL INFORMATION
 
     
Item 1 -
Financial Statements (Unaudited)
 
 
 
 
2
 

 
 
3
 

 
 
4
 

 
 
5
 

 
 
6
 

 
 
7
 

 
 
8
 

 
 
9
 
 
 
 
10
     
Item 2 -
39
     
Item 4 -
49
     
Part II.
OTHER INFORMATION
 
     
Item 6 -
50

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except share and per share data)

   
June 30,
2019
   
December 31,
2018*
 
Assets
           
Cash and due from banks
 
$
13,547
   
$
10,918
 
Interest-earning deposits with banks
   
17,014
     
21,022
 
Cash and cash equivalents
   
30,561
     
31,940
 
                 
Certificates of deposit with banks
   
2,344
     
1,498
 
Investment securities available for sale, at fair value (amortized cost $66,320 and $32,677)
   
67,414
     
31,960
 
Equity securities
   
879
     
617
 
Federal Home Loan Bank stock
   
1,272
     
1,050
 
Loans
   
485,435
     
393,282
 
Less:  Allowance for loan losses
   
(4,146
)
   
(3,978
)
Net Loans
   
481,289
     
389,304
 
                 
Bank-owned life insurance
   
11,033
     
7,393
 
Accrued interest receivable
   
1,870
     
1,259
 
Bank premises, equipment and software
   
8,895
     
6,093
 
Foreclosed assets
   
1,351
     
1,157
 
Goodwill
   
5,665
     
-
 
Core deposit intangibles, net of accumulated amortization of $1,030 and $744 at June 30, 2019 and December 31, 2018, respectively
   
2,584
     
40
 
Other assets
   
2,266
     
2,793
 
Total Assets
 
$
617,423
   
$
475,104
 
                 
Liabilities and Stockholders’ Equity
               
Noninterest-earning demand deposits
 
$
96,010
   
$
61,120
 
Interest-earning demand deposits
   
191,311
     
142,899
 
Savings
   
38,872
     
22,693
 
Time deposits
   
189,960
     
168,437
 
Total deposits
   
516,153
     
395,149
 
                 
Finance lease obligation
   
106
     
141
 
Federal Home Loan Bank advances
   
17,200
     
16,100
 
Long term subordinated debt
   
9,793
     
9,753
 
Accrued interest payable
   
571
     
421
 
Other liabilities
   
3,703
     
3,279
 
Total liabilities
   
547,526
     
424,843
 
                 
Common stock warrant
   
-
     
426
 
Common stock, $2.50 par value; 20,000,000 and 10,000,000 shares authorized as of June 30, 2019 and December 31, 2018, respecitvely; 9,301,575 and 7,156,987 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
   
23,254
     
17,892
 
Additional paid-in capital
   
36,370
     
25,211
 
Retained earnings
   
9,436
     
7,281
 
Accumulated other comprehensive income (loss)
   
837
     
(549
)
Total stockholders’ equity
   
69,897
     
50,261
 
Total Liabilities and Stockholders’ Equity
 
$
617,423
   
$
475,104
 

*Derived from Carolina Trust BancShares, Inc.’s audited financial statements included in its 2018 Annual Report on Form 10-K
 
See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except share and per share data)

   
Three Months Ended June 30,
 
   
2019
   
2018
 
Interest Income
           
Interest on investment securities
 
$
483
   
$
217
 
Interest and fees on loans
   
6,781
     
4,846
 
Other interest income
   
139
     
135
 
Total interest income
   
7,403
     
5,198
 
                 
Interest Expense
               
Interest expense non-maturity deposits
   
363
     
166
 
Interest expense time deposits
   
891
     
702
 
Interest expense borrowed funds
   
98
     
80
 
Interest expense on subordinated debt
   
194
     
191
 
Interest expense, other
   
2
     
16
 
Total interest expense
   
1,548
     
1,155
 
Net interest income
   
5,855
     
4,043
 
Provision for loan losses
   
76
     
88
 
Net interest income after loan loss provision
   
5,779
     
3,955
 
                 
Noninterest income
               
Overdraft fees on deposits
   
150
     
141
 
Interchange fee income, net
   
116
     
52
 
Service charges on deposits
   
29
     
16
 
Mortgage fee income
   
124
     
27
 
Customer service fees
   
26
     
14
 
ATM income
   
15
     
7
 
Bank-owned life insurance income
   
67
     
49
 
Unrealized gain on equity securities
   
128
     
50
 
Other income
   
9
     
10
 
Total noninterest income
   
664
     
366
 
                 
Noninterest expense
               
Salaries & benefits expense
   
2,301
     
1,834
 
Occupancy expense
   
221
     
186
 
Furniture, fixture & equipment expense
   
215
     
153
 
Data processing expense
   
278
     
188
 
Office supplies expense
   
39
     
21
 
Professional fees
   
133
     
112
 
Advertising and marketing
   
40
     
27
 
Insurance
   
101
     
92
 
Foreclosed asset expense, net
   
79
     
300
 
Loan expense
   
52
     
58
 
Stockholder expense
   
89
     
35
 
Directors fees and expenses
   
92
     
66
 
Telephone expense
   
92
     
69
 
Amortization of core deposit intangibles
   
125
     
8
 
Merger expenses
   
49
     
323
 
Other operating expense
   
202
     
148
 
Total noninterest expense
   
4,108
     
3,620
 
Pre-tax income
   
2,335
     
701
 
Income tax expense
   
517
     
191
 
Net income
 
$
1,818
   
$
510
 
                 
Earnings per share
               
Basic earnings per common share
 
$
0.20
   
$
0.08
 
Diluted earnings per common share
 
$
0.19
   
$
0.08
 
Weighted average common shares outstanding
   
9,297,142
     
6,583,719
 
Diluted average common shares outstanding
   
9,366,814
     
6,671,626
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except share and per share data)

   
Six Months Ended June 30,
 
   
2019
   
2018
 
Interest Income
           
Interest on investment securities
 
$
993
   
$
424
 
Interest and fees on loans
   
13,201
     
9,424
 
Other interest income
   
289
     
177
 
Total interest income
   
14,483
     
10,025
 
                 
Interest Expense
               
Interest expense non-maturity deposits
   
704
     
312
 
Interest expense time deposits
   
1,700
     
1,310
 
Interest expense borrowed funds
   
174
     
190
 
Interest expense on subordinated debt
   
386
     
382
 
Interest expense, other
   
6
     
21
 
Total interest expense
   
2,970
     
2,215
 
Net interest income
   
11,513
     
7,810
 
Provision for loan losses
   
153
     
340
 
Net interest income after loan loss provision
   
11,360
     
7,470
 
                 
Noninterest income
               
Overdraft fees on deposits
   
350
     
281
 
Interchange fee income, net
   
196
     
98
 
Service charges on deposits
   
66
     
31
 
Mortgage fee income
   
249
     
42
 
Customer service fees
   
48
     
29
 
ATM income
   
23
     
13
 
Bank-owned life insurance income
   
133
     
98
 
Unrealized gain on equity securities
   
196
     
88
 
Other income
   
23
     
16
 
Total noninterest income
   
1,284
     
696
 
                 
Noninterest expense
               
Salaries & benefits expense
   
4,720
     
3,697
 
Occupancy expense
   
452
     
414
 
Furniture, fixture & equipment expense
   
419
     
310
 
Data processing expense
   
523
     
390
 
Office supplies expense
   
75
     
41
 
Professional fees
   
245
     
223
 
Advertising and marketing
   
86
     
59
 
Insurance
   
137
     
186
 
Foreclosed asset expense, net
   
102
     
326
 
Loan expense
   
133
     
86
 
Stockholder expense
   
134
     
69
 
Directors fees and expenses
   
199
     
140
 
Telephone expense
   
189
     
140
 
Amortization of core deposit intangibles
   
286
     
17
 
Merger expenses
   
1,771
     
323
 
Other operating expense
   
428
     
295
 
Total noninterest expense
   
9,899
     
6,716
 
Pre-tax income
   
2,745
     
1,450
 
Income tax expense
   
590
     
359
 
Net income
 
$
2,155
   
$
1,091
 
                 
Earnings per share
               
Basic earnings per common share
 
$
0.23
   
$
0.19
 
Diluted earnings per common share
 
$
0.23
   
$
0.19
 
Weighted average common shares outstanding
   
9,293,994
     
5,667,619
 
Diluted average common shares outstanding
   
9,366,779
     
5,763,824
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)

   
Three Months Ended June 30,
 
   
2019
   
2018
 
             
Net income
 
$
1,818
   
$
510
 
                 
Other comprehensive income (loss):
               
Unrealized gain (loss) on investment securities:
               
Unrealized holding gains (losses) arising during period
   
929
     
(163
)
Deferred income tax benefit (expense)
   
(218
)
   
38
 
Total other comprehensive income (loss)
   
711
     
(125
)
                 
Total comprehensive income
 
$
2,529
   
$
385
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Dollars in thousands)

   
Six Months Ended June 30,
 
   
2019
   
2018
 
             
Net income
 
$
2,155
   
$
1,091
 
                 
Other comprehensive income (loss):
               
Unrealized gain (loss) on investment securities:
               
Unrealized holding gains (losses) arising during period
   
1,810
     
(603
)
Deferred income tax benefit (expense)
   
(424
)
   
141
 
Total other comprehensive income (loss)
   
1,386
     
(462
)
                 
Total comprehensive income
 
$
3,541
   
$
629
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(Dollars in thousands)

         
Common Stock
                         
   
Warrant
   
Shares
   
Amount
   
Additional
paid-in
capital
   
Retained
earnings
   
Accumulated
other
comprehensive
income (loss)
   
Total
 
                                           
Balances at March 31, 2018
 
$
426
     
4,660,987
   
$
11,652
   
$
13,016
   
$
4,910
   
$
(626
)
 
$
29,378
 
Net income
   
-
     
-
     
-
     
-
     
510
     
-
     
510
 
Issuance of common stock
   
-
     
2,496,000
     
6,240
     
12,198
     
-
     
-
     
18,438
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(125
)
   
(125
)
Balance at June 30, 2018
 
$
426
     
7,156,987
   
$
17,892
   
$
25,214
   
$
5,420
   
$
(751
)
 
$
48,201
 
                                                         
Balances at March 31, 2019
 
$
-
     
9,296,977
   
$
23,243
   
$
36,392
   
$
7,618
   
$
126
   
$
67,379
 
Net income
   
-
     
-
     
-
     
-
     
1,818
     
-
     
1,818
 
Exercise of stock options
   
-
     
4,598
     
11
     
6
     
-
     
-
     
17
 
Acquisition of Clover Community     Bankshares, Inc.
   
-
     
-
     
-
     
(28
)
   
-
     
-
     
(28
)
Other comprehensive income
   
-
     
-
     
-
     
-
     
-
     
711
     
711
 
Balance at June 30, 2019
 
$
-
     
9,301,575
   
$
23,254
   
$
36,370
   
$
9,436
   
$
837
   
$
69,897
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(Dollars in thousands)

         
Common Stock
                         
   
Warrant
   
Shares
   
Amount
   
Additional
paid-in
capital
   
Retained
earnings
   
Accumulated
other
comprehensive
income (loss)
   
 
Total
 
                                           
Balances at December 31, 2017
 
$
426
     
4,657,880
   
$
11,645
   
$
13,008
   
$
4,772
   
$
(732
)
 
$
29,119
 
Net income
   
-
     
-
     
-
     
-
     
1,091
     
-
     
1,091
 
Exercise of stock options
   
-
     
3,107
     
7
     
7
     
-
     
-
     
14
 
Stock based compensation
   
-
     
-
     
-
     
1
     
-
     
-
     
1
 
Issuance of common stock
   
-
     
2,496,000
     
6,240
     
12,198
     
-
     
-
     
18,438
 
Reclassification of certain tax effects
   
-
     
-
     
-
     
-
     
(443
)
   
443
     
-
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
-
     
(462
)
   
(462
)
Balance at June 30, 2018
 
$
426
     
7,156,987
   
$
17,892
   
$
25,214
   
$
5,420
   
$
(751
)
 
$
48,201
 
                                                         
Balances at December 31, 2018
 
$
426
     
7,156,987
   
$
17,892
   
$
25,211
   
$
7,281
   
$
(549
)
 
$
50,261
 
Net income
   
-
     
-
     
-
     
-
     
2,155
     
-
     
2,155
 
Exercise of stock options
   
-
     
6,855
     
17
     
6
     
-
     
-
     
23
 
Acquisition of Clover Community     Bankshares, Inc.
   
-
     
2,123,858
     
5,310
     
10,762
     
-
     
-
     
16,072
 
Exercise of warrant
   
(426
)
   
13,875
     
35
     
391
     
-
     
-
     
-
 
Other comprehensive income
   
-
     
-
     
-
     
-
     
-
     
1,386
     
1,386
 
Balance at June 30, 2019
 
$
-
     
9,301,575
   
$
23,254
   
$
36,370
   
$
9,436
   
$
837
   
$
69,897
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

   
Six Months Ended June 30,
 
   
2019
   
2018
 
Cash flows from operating activities
           
Net income
 
$
2,155
   
$
1,091
 
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:
               
Provision for loan losses
   
153
     
340
 
Depreciation and amortization of bank premises, equipment and software, and operating lease right-of-use assets
   
367
     
231
 
Acquired loan accretion
   
(249
)
   
(3
)
Accretion of time deposit discount and amortization of core deposit intangibles
   
308
     
17
 
Net amortization of bond premiums/discounts
   
180
     
68
 
Amortization of long-term subordinated debt issuance costs
   
40
     
37
 
Unrealized gain on equity securities
   
(196
)
   
(88
)
Stock compensation expense
   
-
     
1
 
Increase in value of bank-owned life insurance
   
(133
)
   
(98
)
Net losses and impairment write-downs on foreclosed assets
   
55
     
226
 
Deferred tax provision
   
699
     
(107
)
Decrease (increase) in other assets
   
(751
)
   
91
 
Increase in accrued interest receivable
   
(107
)
   
(62
)
Increase in accrued interest payable
   
116
     
68
 
Decrease in other liabilities
   
(1,792
)
   
(44
)
Net cash and cash equivalents provided by operating activities
   
845
     
1,768
 
                 
Cash flows from investing activities
               
Net cash received from acquisition
   
8,741
     
-
 
Net increase in loans
   
(27,923
)
   
(27,057
)
Maturities of certificates of deposit with banks
   
494
     
-
 
Proceeds from the sale of foreclosed assets
   
784
     
210
 
Purchase of available for sale securities
   
(533
)
   
-
 
Net purchases of bank premises, equipment and software
   
(241
)
   
(23
)
Proceeds from maturities, calls and pay-downs of available for sale securities
   
6,235
     
1,613
 
Redemptions (purchases) of Federal Home Loan Bank stock
   
(222
)
   
291
 
Net cash and cash equivalents used in investing activities
   
(12,665
)
   
(24,966
)
                 
Cash flows from financing activities
               
Increase in deposits
   
9,353
     
52,626
 
Increase (decrease) in Federal Home Loan Bank advances
   
1,100
     
(7,500
)
Finance lease payments
   
(35
)
   
(33
)
Issuance of long term debt
   
-
     
3,000
 
Repayment of long term debt
   
-
     
(3,000
)
Net proceeds from the issuance of common stock
   
23
     
18,453
 
Net cash and cash equivalents provided by financing activities
   
10,441
     
63,546
 
Net increase (decrease) in cash and cash equivalents
   
(1,379
)
   
40,348
 
                 
Cash and cash equivalents, beginning
   
31,940
     
9,056
 
Cash and cash equivalents, ending
 
$
30,561
   
$
49,404
 
                 
Supplemental disclosure of cash flow information
               
Cash paid during the period for taxes
 
$
30
   
$
466
 
Cash paid during the period for interest
 
$
3,058
   
$
2,147
 
                 
Noncash financing and investing activities
               
Unrealized gain (loss) on investment securities available-for-sale, net of taxes
 
$
1,386
   
$
(462
)
Transfer of loans to foreclosed assets
 
$
73
   
$
1,618
 
Fair value of assets acquired
 
$
115,193
   
$
-
 
Fair value of liabilities assumed
 
$
113,500
   
$
-
 
Initial recognition of operating lease right-of-use assets
 
$
457
   
$
-
 
Initial recognition of operating lease liabilities
 
$
443
   
$
-
 

See accompanying notes to Condensed Consolidated Financial Statements.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

(1)
Presentation of Financial Statements

The consolidated financial statements include the accounts of Carolina Trust BancShares, Inc. (the “Company”), its subsidiary, Carolina Trust Bank (the “Bank”), and the Bank’s wholly owned subsidiary, Western Carolina Holdings, LLC, which owns certain Bank assets. All significant intercompany balances and transactions have been eliminated in consolidation. On August 16, 2016, the Company announced that it had consummated a statutory share exchange pursuant to which it became the parent company of the Bank.  Shares of the Bank’s common stock were exchanged for shares of the Company’s common stock at a one-for-one exchange rate.  The Company is a North Carolina business corporation that operates as a registered bank holding company under the Bank Holding Company Act of 1956.  The Bank is the only subsidiary of the Company.

In management’s opinion, the financial information, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for fair presentation of the financial information as of June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.  Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019.

Information regarding the organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the consolidated financial statements filed as part of the Company’s 2018 Annual Report on Form 10-K.  This quarterly report should be read in conjunction with the Annual Report.

(2)
Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which amended the Leases topic of the Accounting Standards Codification to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. ASU 2016-02 was effective for the Company on January 1, 2019. The standard provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption with the option to elect certain practical expedients. The Company has elected to apply the standard as of the beginning of the period of adoption (January 1, 2019) and did not restate comparative periods. The Company has adopted all the optional practical expedients available under ASU 2016-02.

The operating leases of the Company relate to office space and bank branches. As a result of implementing ASU 2016-02, we recognized an operating lease right-of-use (“ROU”) asset of $457,000 and an operating lease liability of $443,000 on January 1, 2019, with no impact on net income or stockholders’ equity. The ROU asset and operating lease liability are recorded in bank premises, equipment and software and other liabilities, respectively, in the consolidated balance sheet as of June 30, 2019. See Note 12 - Leases for additional information.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments . The new standard introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows.  The Company has formed a management committee including those responsible for credit analysis and review, accounting and finance, information technology and lending to develop an understanding of the requirements and plan implementation. The Company has adopted a software model for the ALLL model that has add-on functionality for compliance with the new standard. The Company has also contracted with a vendor to help with the development of the ALLL model for the new standard. Based on the FASB’s July 17, 2019 meeting, an exposure draft is expected that, once finalized, could change implementation dates for many companies.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Changes to the Disclosure Requirements for Fair Value Measurement. These amendments remove the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 fair value measurement methodologies, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the impact this standard will have on its disclosures.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

(3)
Business Combination

Acquisition of Clover Community Bankshares, Inc.

On January 1, 2019 the Company acquired Clover Community Bankshares, Inc. (“Clover”), the parent holding company for Clover Community Bank, Clover, South Carolina.  Pursuant to the Agreement and Plan of Merger and Reorganization between the Company and Clover dated June 14, 2018, Clover merged with and into the Company, with the Company being the surviving corporation in the merger. Immediately following the parent merger, Clover Community Bank was merged with and into the Bank, also effective January 1, 2019. Pursuant to the merger agreement, each share of Clover capital stock was converted into either 2.7181 shares of the Company’s common stock or $22.00 in cash and subject to a prescribed allocation in the merger agreement that provided that 80% of Clover’s shares would be converted to the stock consideration and 20% of Clover’s shares would be converted into the cash consideration.  Overall, the Company issued 2,123,858 shares of its common stock in exchange for 80% of the Clover shares and paid $3,008 in lieu of fractional shares that would otherwise have been issued. The cash merger consideration paid for 20% of the Clover’s shares totaled $4,298,360.  The stock consideration was valued at $7.58 per share, based on the most recent closing price reported on The Nasdaq Stock Market for a share of the Company’s common stock on the date immediately preceding the merger date. In accordance with the merger agreement, cash in lieu of fractional shares was valued at a rate of $7.63 per share, based on the 20-day average closing price for a share of the Company’s common stock for the 20-trading days immediately preceding the merger date.  The total purchase price paid was $20.4 million.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The transaction was accounted for using the purchase method of accounting for business combinations. Under the purchase method of accounting, the assets and liabilities of Clover were recorded based on estimates of fair values as of January 1, 2019. In the second quarter of 2019, there were some additional adjustments to the fair value of assets acquired. An increase in the amount of $76,000 was made to the fair value adjustments of loans acquired due to a correction on the valuation of interest only loans. A decrease of $330,000 to Core deposit intangible was recorded due to correction of the FHLB offering rates used in the valuation calculation. An offsetting entry was made to the deferred tax asset, which is included in other assets, for $96,000. The remaining $310,000 was recorded as an increase to goodwill.

The following table summarizes the allocation of the purchase price to the assets acquired and the liabilities assumed based on their estimated fair value:

(Dollars in thousands)
 
As
Recorded by
Clover
   
Fair
Value
Adjustments
   
As
Recorded by
the Company
 
Assets
                 
Cash and cash equivalents
 
$
13,042
   
$
-
   
$
13,042
 
Certificates of deposit with banks
   
1,340
     
-
     
1,340
 
Securities
   
39,637
     
(45
)
   
39,592
 
Loans
   
66,343
     
(2,294
)
   
64,049
 
Allowance for loan losses
   
(1,452
)
   
1,452
     
-
 
Bank premises, equipment and software
   
1,827
     
644
     
2,471
 
Core deposit intangible
   
-
     
2,830
     
2,830
 
Other assets
   
5,854
     
(943
)
   
4,911
 
Total
 
$
126,591
   
$
1,644
   
$
128,235
 
                         
Liabilities
                       
Deposits
 
$
111,675
   
$
(46
)
 
$
111,629
 
Other liabilities
   
1,438
     
433
     
1,871
 
Total
 
$
113,113
   
$
387
   
$
113,500
 
                         
Net identifiable assets acquired
                 
$
14,735
 
                         
Total cost of acquisition
                       
Value of stock issued
         
$
16,099
         
Cash paid in the acquisition
           
4,301
         
Total cost of acquisition
                   
20,400
 
                         
Goodwill recorded
                 
$
5,665
 

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The following table presents the purchased credit impaired (“PCI”) and non-PCI loans receivable at the acquisition date. The amounts include principal only and do not reflect accrued interest as of the date of the acquisition or beyond:

Dollars in thousands
 
PCI loans
   
Non-PCI
loans
   
Total loans
acquired
 
January 1, 2019
                 
Gross contractual amount receivable
 
$
5,246
   
$
61,097
   
$
66,343
 
Fair value adjustments
   
(1,318
)
   
(976
)
   
(2,294
)
Fair value of loans receivable
 
$
3,928
   
$
60,121
   
$
64,049
 

Goodwill recorded for Clover represents future revenues to be derived, including efficiencies that are expected to result from combining operations, and other non-identifiable intangible assets. None of the goodwill is expected to be deductible for tax purposes.

The following pro forma financial information presents the combined results of the Company and Clover as if the acquisition had occurred as of January 1, 2018. The pro forma results are adjusted for acquisition-related expense and are not necessarily indicative of the results of operations that would have occurred had the acquisition actually taken place on January 1, 2018, nor of future results of operations.

Pro forma income statement line items
 
Three Months Ended June 30,
 
   
2019
   
2018
 
Dollars in thousands
           
Net interest income
 
$
5,821
   
$
5,276
 
Noninterest income
   
664
     
684
 
Total revenue
   
6,485
     
5,960
 
                 
Net income available to common shareholders
 
$
1,851
*
 
$
751
 

Pro forma income statement line items
 
Six Months Ended June 30,
 
   
2019
   
2018
 
Dollars in thousands
           
Net interest income
 
$
11,462
   
$
10,388
 
Noninterest income
   
1,284
      1,319
 
Total revenue
   
12,746
     
11,707
 
                 
Net income available to common shareholders
 
$
3,514
*
 
$
1,570
 

*Pro forma net income for the three months and six months ended June 30, 2019 excludes $49,000 and $1,771,000, respectively, in nonrecurring merger related expenses that were recognized during the periods.  Net of tax, the amounts excluded for the three months and six months ended June 30, 2019 were $41,000 and $1,369,000, respectively.  Merger related expenses include payments to Clover employees for severance contracts, data processing conversion expenses, investment banker fees, consulting and auditing fees.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

(4)
Earnings Per Share

Basic Earnings per Common Share
Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits and dividends.
 
Diluted Earnings per Common Share
The computation of diluted earnings per common share is similar to the computation of basic earnings per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. These additional common shares would include employee equity share options, nonvested shares and similar equity instruments granted to employees, as well as the shares associated with the common stock warrants issued to the U.S. Treasury Department as   part of the preferred stock transaction completed in February 2009.  Diluted earnings per common share are based upon the actual number of options or shares granted and not yet forfeited unless doing so would be antidilutive. The numerator is adjusted for any changes in income or loss that would result from the assumed conversion of those potential common shares.

The following table summarizes earnings per share and the shares utilized in the computations for the three and six months ended June 30, 2019 and 2018, respectively:

Dollars in thousands, except per share data
 
Net Income
   
Weighted
Average
Common
Shares
   
Per Share
Amount
 
Three months ended June 30, 2019
                 
Basic earnings per common share
 
$
1,818
     
9,297,142
   
$
0.20
 
Effect of dilutive stock securities
   
-
     
69,672
     
(0.01
)
Diluted earnings per common share
 
$
1,818
     
9,366,814
   
$
0.19
 
                         
Three months ended June 30, 2018
                       
Basic earnings per common share
 
$
510
     
6,583,719
   
$
0.08
 
Effect of dilutive stock securities
   
-
     
73,084
     
-
 
Effect of dilutive stock warrants
   
-
     
14,823
     
-
 
Diluted earnings per common share
 
$
510
     
6,671,626
   
$
0.08
 

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

Dollars in thousands, except per share data
 
 
Net Income
   
Weighted
Average
Common
Shares
   
 
 
Per Share
Amount
 
Six months ended June 30, 2019
                 
Basic earnings per common share
 
$
2,155
     
9,293,994
   
$
0.23
 
Effect of dilutive stock securities
   
-
     
70,235
      -  
Effect of dilutive stock warrants
   
-
     
2,550
      -  
Diluted earnings per common share
 
$
2,155
     
9,366,779
   
$
0.23
 
                         
Six months ended June 30, 2018
                       
Basic earnings per common share
 
$
1,091
     
5,667,619
   
$
0.19
 
Effect of dilutive stock securities
   
-
     
77,027
      -  
Effect of dilutive stock warrants
   
-
     
19,178
      -  
Diluted earnings per common share
 
$
1,091
     
5,763,824
   
$
0.19
 

For the three and six months ended June 30, 2019 and June 30, 2018, there were no anti-dilutive shares.

(5)
Fair Value Measurements

The Company is required to disclose the estimated fair value of financial instruments, both assets and liabilities on and off the balance sheet, for which it is practicable to estimate fair value. These fair value estimates are made at each reporting date, based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price a liability could be settled for. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The methodologies for financial assets and financial liabilities are discussed below:

Cash and Due from Banks and Interest-Earning Deposits with Banks

The carrying amounts for cash and due from banks and interest-earning deposits with banks approximate fair value because of the short maturities of those instruments.

Certificates of Deposit with Banks

The fair value of certificates of deposit with banks is estimated by discounting expected cash flows using the rates currently offered for instruments of similar remaining maturities.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

Investment and Equity Securities

Fair value for investment and equity securities equals the quoted market price if such information is available. If a quoted market price is not available in active markets for identical securities (Level 1), fair value may be estimated using observable inputs such as quoted prices for similar securities, interest rates and yield curves, implied volatilities and credit spreads (Level 2).  Otherwise, unobservable inputs such as independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating on similar securities, prepayment assumptions and other factors such as credit loss assumptions (Level 3).  The fair value would be based on an exit price between market participants that may include adjustments for liquidity and credit.

Loans

The fair value of loans is estimated based on exit price. These cash flows include assumptions for prepayment estimates over each loan’s remaining life, considerations for the current interest rate environment compared to the weighted average rate of each portfolio and a credit risk component based on the historical and expected performance of each portfolio. The calculation also includes market liquidity and credit adjustments.

Accrued Interest Receivable and Payable

The carrying amount is a reasonable estimate of fair value.

Deposits

The fair value of demand deposits, savings, money market and negotiable order of withdrawal (NOW) accounts is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting expected cash flows using the rates currently offered for instruments of similar remaining maturities.

Finance Lease Obligation, Federal Home Loan Bank Advances and Long Term Subordinated Debt

The fair value of borrowings is based upon discounted expected cash flows using current rates at which borrowings of similar maturity could be obtained.

Financial Instruments with Off-Balance Sheet Risk

With regard to commitments to extend credit discussed in Note 10, the fair value amounts are not material.
 
CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The carrying amounts and estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are as follows at June 30, 2019 and December 31, 2018:

         
Fair Value Measurements at June 30, 2019 using
 
         
Quoted Prices in
Active Markets for
Identical Assets
   
Significant
Other
Observable
Inputs
   
Significant
Unobservable
Inputs
       
Dollars in thousands
 
Carrying
Value
   
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
ASSETS
                             
Cash and due from banks
 
$
13,547
   
$
13,547
   
$
-
   
$
-
   
$
13,547
 
Interest-earning deposits with banks
   
17,014
     
17,014
     
-
     
-
     
17,014
 
Certificates of deposit with banks
   
2,344
     
-
     
2,363
     
-
     
2,363
 
Federal Home Loan Bank stock
   
1,272
     
-
     
1,272
     
-
     
1,272
 
Investment securities available for sale
   
67,414
     
-
     
66,436
     
978
     
67,414
 
Equity securities
   
879
     
879
     
-
     
-
     
879
 
Net loans
   
481,289
     
-
     
-
     
468,078
     
468,078
 
Accrued interest receivable
   
1,870
     
-
     
1,870
     
-
     
1,870
 
                                         
LIABILITIES
                                       
Deposits
 
$
516,153
   
$
-
   
$
515,661
   
$
-
   
$
515,661
 
Finance lease obligation
   
106
     
-
     
106
     
-
     
106
 
Federal Home Loan Bank Advances
   
17,200
     
-
     
17,302
     
-
      17,302  
Long term subordinated debt
   
9,793
     
-
      9,785
     
-
     
9,785
 
Accrued interest payable
   
571
     
-
      571      
-
     
571
 

         
Fair Value Measurements at December 31, 2018 using
 
         
Quoted Prices in
Active Markets for
Identical Assets
   
Significant
Other
Observable
Inputs
   
Significant
Unobservable
Inputs
       
Dollars in thousands
 
Carrying
Value
   
Level 1
   
Level 2
   
Level 3
   
Total Fair
Value
 
ASSETS
                             
Cash and due from banks
 
$
10,918
   
$
10,918
   
$
-
   
$
-
   
$
10,918
 
Interest-earning deposits with banks
   
21,022
     
21,022
     
-
     
-
     
21,022
 
Certificates of deposit with banks
   
1,498
     
-
     
1,484
     
-
     
1,484
 
Federal Home Loan Bank stock
   
1,050
     
-
     
1,050
     
-
     
1,050
 
Investment securities available for sale
   
31,960
     
-
     
31,960
     
-
     
31,960
 
Equity securities
   
617
     
617
     
-
     
-
     
617
 
Net loans
   
389,304
     
-
     
-
     
378,675
     
378,675
 
Accrued interest receivable
   
1,259
     
-
     
1,259
     
-
     
1,259
 
                                         
LIABILITIES
                                       
Deposits
 
$
395,149
   
$
-
   
$
389,493
   
$
-
   
$
389,493
 
Capital lease obligation
   
141
     
-
     
141
     
-
     
141
 
Federal Home Loan Bank Advances
   
16,100
     
-
     
16,053
     
-
     
16,053
 
Long term subordinated debt
   
9,753
     
-
     
9,946
     
-
     
9,946
 
Accrued interest payable
   
421
     
-
     
421
     
-
     
421
 

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.


Level 1
Valuation based upon quoted prices for identical instruments traded in active markets.


Level 2
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.


Level 3
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured on a recurring basis.

   
Total
   
Level 1
   
Level 2
   
Level 3
 
Dollars in thousands
                       
June 30, 2019
                       
Available-for-Sale Securities
                       
U.S. Government and federal agency
 
$
19,276
   
$
-
   
$
19,276
   
$
-
 
Mortgage-backed securities*
   
29,048
     
-
     
29,048
     
-
 
Municipal securities
   
18,112
     
-
     
18,112
     
-
 
Corporate debt securities
   
978
     
-
     
-
     
978
 
Total available-for-sale securities
   
67,414
     
-
     
66,436
     
978
 
Equity securities
   
879
     
879
     
-
     
-
 
Total
 
$
68,293
   
$
879
   
$
66,436
   
$
978
 
                                 
December 31, 2018
                               
Available-for-Sale Securities
                               
U.S. Government and federal agency
 
$
10,789
   
$
-
   
$
10,789
   
$
-
 
Mortgage-backed securities*
   
20,541
     
-
     
20,541
     
-
 
Municipal securities
   
630
     
-
     
630
     
-
 
Total available-for-sale securities
   
31,960
     
-
     
31,960
     
-
 
Equity securities
   
617
     
617
     
-
     
-
 
Total
 
$
32,577
   
$
617
   
$
31,960
   
$
-
 

*All of the Company’s mortgage-backed securities are issued either by the U.S. Government, which includes GNMA pools, or by government-sponsored enterprises such as FNMA and FHLMC.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The Company did not have any transfers of assets between Levels 1, 2 or 3 during the periods ended June 30, 2019 and December 31, 2018.

The tables below present the changes during the three and six months ended June 30, 2019 in the amount of Level 3 assets measured on a recurring basis.

   
Three months ended
June 30, 2019
 
Dollars in thousands
     
Balance, beginning of period
 
$
965
 
Additions
   
-
 
Change in valuation recognized in OCI
   
13
 
Balance, end of period
 
$
978
 

   
Six months ended
June 30, 2019
 
Dollars in thousands
     
Balance, beginning of period
 
$
-
 
Additions
   
956
 
Change in valuation recognized in OCI
   
22
 
Balance, end of period
 
$
978
 

The Company did not have any Level 3 assets measured on a recurring basis as of June 30, 2018.

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures it for impairment. The fair value of impaired loans is estimated using one of several methods, including collateral value, a loan’s observable market price and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value exceeds the recorded investments in such loans. At June 30, 2019, the discounted cash flows method was used in determining the fair value of eight loans totaling $1.2 million and the fair value of the collateral method was used in the other twenty-six loans totaling $2.4 million. At December 31, 2018, the discounted cash flows method was used in determining the fair value of nine loans totaling $1.7 million and the fair value of the collateral method was used in the other twenty-two loans totaling $2.4 million. Impaired loans where an allowance is established based on the fair value of collateral and also when written down with the discounted cash flow method require classification in the fair value hierarchy. The fair value of the collateral for an impaired loan is classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable inputs will need to be used in assessing the value.  When the discounted cash flows method is used, the Company records the impaired loan as nonrecurring Level 3. There have been no changes in valuation techniques for the period ended June 30, 2019. Valuation techniques are consistent with techniques used in prior periods.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The following table presents impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses based upon the fair value of the underlying collateral or discounted cash flows during the six months ended June 30, 2019 and 2018.

   
June 30
 
Dollars in thousands
 
2019
   
2018
 
Carrying value of impaired loans before allocations
 
$
1,266
   
$
1,685
 
Specific valuation allowance allocations
   
(208
)
   
(249
)
Carrying value of impaired loans after allocations
 
$
1,058
   
$
1,436
 

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. The fair value of foreclosed assets is classified as Level 3. Although appraisals of these properties are frequently based on comparable properties, they are not identical. Significant unobservable inputs will need to be used in assessing the value.

The carrying value of foreclosed assets is periodically reviewed and written down to fair value. Any loss is included in earnings. For the three months ended June 30, 2019 and 2018, there were no assets that were written down prior to foreclosure. For the six months ended June 30, 2019 there were no assets that were written down prior to foreclosure and for the six months ended June 30, 2018, foreclosed assets in the amount of $1,158,000 were written down by $180,000 to $978,000 prior to foreclosure.  For the three and six months ended June 30, 2019, foreclosed assets with a carrying value of $231,000 were written down by $37,000 to $194,000 subsequent to foreclosure. For the three and six months ended June 30, 2018, foreclosed assets with a carrying value of $978,000 were written down by $248,000 to $730,000 subsequent to foreclosure.

Assets measured at fair value on a nonrecurring basis are included in the table below.

   
Total
   
Level 1
   
Level 2
   
Level 3
 
Dollars in thousands
                       
June 30, 2019
                       
Foreclosed assets
 
$
194
   
$
-
   
$
-
   
$
194
 
Impaired loans
   
1,058
     
-
     
-
     
1,058
 
Total
 
$
1,252
   
$
-
   
$
-
   
$
1,252
 
                                 
December 31, 2018
                               
Foreclosed assets
 
$
942
   
$
-
   
$
-
   
$
942
 
Impaired loans
   
1,487
     
-
     
-
     
1,487
 
Total
 
$
2,429
   
$
-
   
$
-
   
$
2,429
 

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

Quantitative information about level 3 fair value measurements:

   
Fair
Value
 
Valuation
Technique
 
Unobservable
Input
 
Range
   
Weighted
Average
 
Dollars in thousands
                       
June 30, 2019
                       
Impaired loans
 
$
1,058
 
Discounted cash flows
 
Discount rate
   
4.75% - 8.50
%
   
6.46
%
Foreclosed assets
   
194
 
Discounted appraisals
 
Appraisal adjustments
   
21.88 – 71.11
%
   
26.10
%
                               
December 31, 2018
                             
Impaired loans
 
$
122
 
Discounted appraisals
 
Appraisal adjustments
   
15.00
%
   
15.00
%
     
1,365
 
Discounted cash flows
 
Discount rate
   
4.75 – 8.50
%
   
7.05
%
                               
Foreclosed assets
   
942
 
Discounted appraisals
 
Appraisal adjustments
   
8.00% - 15.00
%
   
9.68
%

(6)
Investment Securities

The amortized cost and fair value of investment securities, with gross unrealized gains and losses, is as follows:

 
In thousands
 
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
Losses
   
Fair Value
 
June 30, 2019
                       
Available-for-sale:
                       
U.S. Government and federal agency
 
$
18,972
   
$
328
   
$
(24
)
 
$
19,276
 
Mortgage-backed securities *
   
28,789
     
407
     
(148
)
   
29,048
 
Municipal securities
   
17,603
     
509
     
-
     
18,112
 
Corporate debt securities
   
956
     
22
     
-
     
978
 
Total available-for-sale securities
   
66,320
     
1,266
     
(172
)
   
67,414
 
Equity securities
   
1,271
     
-
     
(392
)
   
879
 
Total
 
$
67,591
   
$
1,266
   
$
(564
)
 
$
68,293
 
                                 
December 31, 2018
                               
Available-for-sale:
                               
U.S. Government and federal agency
 
$
11,036
   
$
6
   
$
(253
)
 
$
10,789
 
Mortgage-backed securities *
   
21,010
     
36
     
(505
)
   
20,541
 
Municipal securities
   
631
     
1
     
(2
)
   
630
 
Total available-for-sale securities
   
32,677
     
43
     
(760
)
   
31,960
 
Equity securities
   
1,204
     
-
     
(587
)
   
617
 
Total
 
$
33,881
   
$
43
   
$
(1,347
)
 
$
32,577
 

* All mortgage-backed securities are issued either by the U.S. Government through GNMA or by government sponsored enterprises FNMA or FHLMC.

CAROLINA TRUST BANCSHARES, INC.
Notes to Condensed Consolidated Financial Statements

The amortized cost and fair values of securities available for sale at June 30, 2019 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   
Amortized
Cost
   
Fair Value
 
Dollars in thousands
           
Due within one year
 
$
935
   
$
938
 
Due after one but within five years
   
12,186
     
12,318
 
Due after five but within ten years
   
18,083
     
18,436
 
Due after ten years
   
35,116
     
35,722
 
   
$
66,320
   
$
67,414
 

The following table details unrealized losses and related fair values in the Company’s available for sale investment security portfolio.  This information is aggregated by the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2019 and December 31, 2018, respectively.

   
Temporarily Impaired Securities in Available-for-Sale Portfolio
 
       
   
Less than 12 Months
   
Greater than 12 Months
   
Total
 
                                     
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
Dollars in thousands
                                   
June 30, 2019
                                   
                                     
U.S. Government and federal agency
 
$
1,517
   
$
(2
)
 
$
2,807
   
$
(22
)
 
$
4,324
   
$
(24
)
Mortgage-backed securities *
   
575
     
(2
)
   
12,528
     
(146
)
   
13,103
     
(148
)
Municipal Securities
   
-
     
-
     
-
     
-
     
-
     
-
 
Total temporarily impaired securities
 
$
2,092
   
$
(4
)
 
$
15,335
   
$
(168
)
 
$
17,427
   
$
(172
)
                                                 
December 31, 2018
                                               
                                                 
U.S. Government and federal agency
 
$
-
   
$
-
   
$
10,657
   
$
(253
)
 
$
10,657
   
$
(253
)
Mortgage-backed securities *
   
2,885
     
(10
)
   
13,644
     
(495
)
   
16,529
     
(505
)
Municipal Securities
   
-
     
-
     
290
     
(2
)