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Carter Bankshares, Inc.

CARE
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Business Summary

Carter Bankshares, Inc. (the "Company") operates as a financial holding company, having elected this status in October 2025 , with its primary business conducted through its wholly-owned subsidiary, Carter Bank & Trust (the "Bank"). The Bank is a Virginia state-chartered, FDIC-insured institution, which became a member of the Federal Reserve System on November 13, 2025 . The Company's operations are concentrated in Virginia and North Carolina, with additional market coverage in South Carolina . The Company's common stock trades on the Nasdaq Global Select Market under the ticker symbol "CARE" .

The core business model of the Company involves generating revenue primarily from interest on loans and investment securities, supplemented by fees charged for financial services . Its principal expenses include interest expense on deposits and borrowings, provision for credit losses, and other operating expenses such as salaries, employee benefits, data processing, FDIC insurance assessments, occupancy costs, and income tax provision . The Company's revenue streams are a mix of recurring interest income and transactional fee income. Primary customer segments include both personal and business customers, to whom the Bank offers a full range of commercial banking, consumer banking, mortgage, and other services .

The Bank offers a comprehensive suite of deposit products, including noninterest-bearing and interest-bearing checking accounts, savings accounts, retirement accounts, money market accounts, and certificates of deposit (CD) accounts with varying maturities . All deposit accounts are FDIC-insured up to the maximum amount permitted by law . Lending products encompass commercial lending (secured and unsecured loans, commercial real estate loans, construction and acquisition loans, and commercial and industrial loans) and consumer lending (residential mortgage loans, automobile loans, home improvement loans, education loans, overdraft protection, personal loans, and credit cards) . The Bank also originates residential mortgage loans for which forward sale commitments have been obtained and are expected to be sold shortly after closing . Additional services include safe deposit boxes, direct deposit, debit cards, and a full suite of digital banking services such as online and mobile banking, online account opening, bill payment, electronic statements, mobile deposit, Zelle®, credit monitoring tools, digital wallet access, and access to the MoneyPass® ATM network . Treasury management and corporate cash management services are available to business customers, and the Bank also offers title insurance and other financial institution-related products .

For the fiscal year ended December 31, 2025, the Company reported total interest income of $232.222 million and total interest expense of $101.402 million , resulting in net interest income of $130.820 million . The (recovery) provision for credit losses was $(3.637) million , and the (recovery) provision for unfunded commitments was $(194) thousand . Total noninterest income amounted to $22.404 million , while total noninterest expense was $117.054 million . Income before income taxes was $40.001 million , with an income tax provision of $8.639 million , leading to a net income of $31.362 million . Diluted earnings per share (EPS) for the year was $1.38 . As of December 31, 2025, total assets were $4.851 billion , with portfolio loans, net, of $3.808 billion , and total deposits of $4.210 billion . Federal Home Loan Bank (FHLB) borrowings stood at $178.500 million . The allowance for credit losses (ACL) on portfolio loans totaled $71.491 million .

Comparing 2025 to 2024, net interest income increased by $16.363 million, or 14.3% . The (recovery) provision for credit losses shifted from $(5.039) million in 2024 to $(3.637) million in 2025 . Total noninterest income increased by $1.036 million, or 4.8% , while total noninterest expense rose by $7.052 million, or 6.4% . The income tax provision increased by $2.293 million . Total portfolio loans grew by $254.734 million, or 7.0% , and total deposits increased by $57.468 million, or 1.4% . FHLB borrowings increased by $108.500 million . The ACL to total portfolio loans ratio decreased from 2.09% in 2024 to 1.84% in 2025 . Nonperforming loans (NPLs) declined by $15.367 million to $243.982 million , with the NPLs to total portfolio loans ratio improving from 7.15% to 6.29% .

During 2025, the Company completed the acquisition of two leased branch facilities and associated deposits in Mooresville, North Carolina, and Winston-Salem, North Carolina, from First Reliance Bank, acquiring $55.9 million in deposits . The Company also renovated 47 retail branch locations and seven corporate offices and launched new websites for the Company and the Bank as part of its brand identity initiative . The Company initiated $27.4 million in 1035 exchanges of Bank Owned Life Insurance (BOLI) to transfer proceeds to new insurance carriers for enhanced credit ratings and improved yields . The Company repurchased 1,124,690 shares of its common stock at a total cost of $20.0 million, at a weighted average cost per share of $17.78, fully utilizing its 2025 repurchase program by October 30, 2025 .

Business Outlook

The Company's current three-year strategic plan aims to refine and enhance its brand image and market position, focusing on innovating brand experiences, aligning processes, operations, and systems, and introducing new products and services to increase brand awareness and support future growth . This strategy is primarily focused on organic growth, but the Company will also consider opportunistic acquisitions that align with its strategic vision, supported by its strong capital and liquidity positions . The Company also seeks to increase fee income while closely monitoring operating expenses .

A major growth vector for the Company is its geographic expansion within North Carolina, as evidenced by the acquisition of two leased branch facilities and associated deposits in Mooresville and Winston-Salem from First Reliance Bank in May 2025 . This acquisition brought in $55.9 million in deposits and ten new associates, without acquiring any loans . This expansion is explicitly stated as part of the Company's strategy to expand its footprint in growth markets throughout North Carolina .

The Company's operational outlook includes a focus on managing its liability-sensitive balance sheet position, which is influenced by the short-term nature of its deposit portfolio and FHLB borrowings . Specifically, 71.7% of its CD portfolio and 77.6% of its outstanding FHLB borrowings are set to mature and reprice within the next 12 months . This strategy provides flexibility to manage the structure and pricing of its deposit and borrowing portfolios to potentially reduce future funding costs, especially if the Federal Open Market Committee (FOMC) continues to reduce short-term rates . The Company has already lowered deposit rate offerings on higher-yielding interest-bearing demand, money market, and short-term promotional CD products throughout 2025 in response to FOMC rate reductions that began in September 2024 and continued through December 2025 . The Company also anticipates ongoing fluctuations in the market values of its intermediate and long-term maturity securities as U.S. Treasury yields change .

Planned capital allocation includes a new share repurchase program authorized by the Board on February 2, 2026, to purchase up to $10.0 million of the Company's common stock over a twelve-month period, commencing February 11, 2026 . This program follows the full utilization of the 2025 repurchase program, which saw the Company repurchase 1,124,690 shares at a total cost of $20.0 million . The Company has not historically paid dividends on its common stock, and the Board believes this decision is currently necessary to commit additional resources to regulatory compliance and significant investments in new technology and human resources . Future dividend payments remain subject to the Board's discretion, earnings, financial condition, liquidity, capital requirements, and governmental regulations .

A structural headwind explicitly flagged by management is the ongoing impact of a single large credit relationship, the "Justice Entities," which had an aggregate principal balance of $214.0 million as of December 31, 2025 . These loans were placed on nonaccrual status during the second quarter of 2023 due to loan maturities and failure to pay in full, negatively impacting interest income by $26.1 million in 2025, $35.1 million in 2024, and $30.0 million in 2023, totaling $91.2 million in the aggregate . While the Company received $38.0 million in curtailment payments during 2025, and $87.9 million cumulatively since the loans became nonperforming, there is no assurance as to the timing or amount of future payments or collections . The Company is closely monitoring developments that may impact collateral values or potential recoveries, including claims by other purported creditors .

Risk Factors

The Company faces elevated credit risk due to its relationship exposure to the Justice Entities, with $214.0 million in loans, now reduced to judgments, classified as nonaccrual as of December 31, 2025 , representing 87.7% of nonperforming assets and nonperforming loans . A significant portion of the commercial loan portfolio, approximately 94.4% as of December 31, 2025, is secured by real estate, making the Company vulnerable to adverse changes in real estate market conditions and economic downturns, particularly given concentrations in North Carolina, Virginia, South Carolina, West Virginia, and Georgia, and sectors like retail/restaurant, warehouse, hospitality, multifamily, and office . The hospitality portfolio alone totaled approximately $373.5 million , or 9.6% of total loans, at December 31, 2025, and CRE construction loans amounted to approximately $481.8 million , or 12.4% of total loans . The adequacy of the allowance for credit losses is sensitive to economic forecasts and management judgment, with actual losses potentially differing materially from estimates . Operational risks include reliance on secure and efficient information technology systems and third-party service providers, with potential disruptions from cyberattacks, system failures, or human error . Liquidity risks stem from potential adverse developments in the financial services industry, which could impair access to funding, and reliance on customer deposits and wholesale funding sources like the FHLB of Atlanta, where total borrowing capacity was approximately $1.5 billion , or about 30% of total assets, with $609.4 million available at December 31, 2025 . Regulatory changes, including those from the CFPB and shifts in governmental policy, could increase compliance burdens, affect product offerings, and impact profitability . The development and use of Artificial Intelligence (AI) technologies also present risks related to accuracy, bias, data privacy, intellectual property, and regulatory compliance .

Management Priorities

Management's message to shareholders emphasizes a strategic shift from balance-sheet restructuring to pursuing a prudent growth strategy, primarily organic, but also considering opportunistic acquisitions that align with its strategic vision . This strategy is supported by the Bank's strong capital and liquidity positions . The Company aims to increase fee income while closely monitoring operating expenses . A key strategic priority is the ongoing resolution of nonaccrual loans, particularly the single large credit relationship with the Justice Entities, which had an aggregate principal balance of $214.0 million as of December 31, 2025 . Management believes this credit is well secured based on its net carrying value and has appropriately reserved for expected credit losses . Another strategic priority is the refinement and enhancement of the Company's brand image, which includes a multi-year implementation plan to create a brand tailored to critical growth audiences, focusing on innovating brand experiences and introducing new products and services to increase brand awareness . This initiative was marked by the unveiling of a new brand identity on October 30, 2024, and the renovation of 47 retail branch locations and seven corporate offices in 2025 . Management also highlighted the introduction of new guiding principles in June 2023, including a new purpose statement "To create opportunities for more people and businesses to prosper," supported by core values: Build Relationships, Earn Trust, and Take Ownership . For capital allocation, the Board authorized a new share repurchase program on February 2, 2026, to purchase up to $10.0 million of common stock over twelve months, following the full utilization of the $20.0 million 2025 program .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — General
  2. [2] Item 1, Business — General
  3. [3] Item 1, Note 1 — Summary of Significant Accounting Policies
  4. [4] Item 1, Business — General
  5. [5] Item 1, Business — Operations
  6. [6] Item 1, Business — Operations
  7. [7] Item 1, Business — Operations
  8. [8] Item 1, Business — Operations
  9. [9] Item 1, Business — Operations
  10. [10] Item 1, Business — Operations
  11. [11] Item 1, Business — Operations
  12. [12] Item 1, Business — Operations
  13. [13] Item 1, Business — Operations
  14. [14] Item 8, Consolidated Statements of Income
  15. [15] Item 8, Consolidated Statements of Income
  16. [16] Item 8, Consolidated Statements of Income
  17. [17] Item 8, Consolidated Statements of Income
  18. [18] Item 8, Consolidated Statements of Income
  19. [19] Item 8, Consolidated Statements of Income
  20. [20] Item 8, Consolidated Statements of Income
  21. [21] Item 8, Consolidated Statements of Income
  22. [22] Item 8, Consolidated Statements of Income
  23. [23] Item 8, Consolidated Statements of Income
  24. [24] Item 8, Consolidated Statements of Income
  25. [25] Item 8, Consolidated Balance Sheets
  26. [26] Item 8, Consolidated Balance Sheets
  27. [27] Item 8, Consolidated Balance Sheets
  28. [28] Item 8, Consolidated Balance Sheets
  29. [29] Item 8, Consolidated Balance Sheets
  30. [30] Item 7, MD&A — Earnings Summary 2025 Highlights
  31. [31] Item 7, MD&A — Earnings Summary 2025 Highlights
  32. [32] Item 7, MD&A — Earnings Summary 2025 Highlights
  33. [33] Item 7, MD&A — Earnings Summary 2025 Highlights
  34. [34] Item 7, MD&A — Earnings Summary 2025 Highlights
  35. [35] Item 7, MD&A — Earnings Summary 2025 Highlights
  36. [36] Item 7, MD&A — Earnings Summary 2025 Highlights
  37. [37] Item 7, MD&A — Earnings Summary 2025 Highlights
  38. [38] Item 7, MD&A — Earnings Summary 2025 Highlights
  39. [39] Item 7, MD&A — Earnings Summary 2025 Highlights
  40. [40] Item 7, MD&A — Earnings Summary 2025 Highlights
  41. [41] Item 7, MD&A — The Company's Business and Strategy
  42. [42] Item 7, MD&A — The Company's Business and Strategy
  43. [43] Item 7, MD&A — Financial Condition December 31, 2025
  44. [44] Item 7, MD&A — Stock Repurchase Plan
  45. [45] Item 7, MD&A — The Company's Business and Strategy
  46. [46] Item 7, MD&A — The Company's Business and Strategy
  47. [47] Item 7, MD&A — The Company's Business and Strategy
  48. [48] Item 7, MD&A — The Company's Business and Strategy
  49. [49] Item 7, MD&A — The Company's Business and Strategy
  50. [50] Item 7, MD&A — The Company's Business and Strategy
  51. [51] Item 7, MD&A — Net Interest Income
  52. [52] Item 7, MD&A — Net Interest Income
  53. [53] Item 7, MD&A — Net Interest Income
  54. [54] Item 7, MD&A — Net Interest Income
  55. [55] Item 7, MD&A — Securities
  56. [56] Item 7, MD&A — Stock Repurchase Plan
  57. [57] Item 7, MD&A — Stock Repurchase Plan
  58. [58] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  59. [59] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  60. [60] Item 7, MD&A — The Company's Business and Strategy
  61. [61] Item 7, MD&A — The Company's Business and Strategy
  62. [62] Item 7, MD&A — The Company's Business and Strategy
  63. [63] Item 7, MD&A — The Company's Business and Strategy
  64. [64] Item 1A, Risk Factors — Risks Related to Credit
  65. [65] Item 1A, Risk Factors — Risks Related to Credit
  66. [66] Item 1A, Risk Factors — Risks Related to Credit
  67. [67] Item 1A, Risk Factors — Risks Related to Credit
  68. [68] Item 1A, Risk Factors — Risks Related to Credit
  69. [69] Item 1A, Risk Factors — Risks Related to Credit
  70. [70] Item 1A, Risk Factors — Risks Related to Credit
  71. [71] Item 1A, Risk Factors — Risks Related to Credit
  72. [72] Item 1A, Risk Factors — Risks Related to Credit
  73. [73] Item 1A, Risk Factors — Risks Related to Credit
  74. [74] Item 1A, Risk Factors — Risks Related to Credit
  75. [75] Item 1A, Risk Factors — Risks Related to Credit
  76. [76] Item 1A, Risk Factors — Risks Related to the Company’s Operations, Cybersecurity and Technology
  77. [77] Item 1A, Risk Factors — Risks Related to Liquidity
  78. [78] Item 1A, Risk Factors — Risks Related to Liquidity
  79. [79] Item 1A, Risk Factors — Risks Related to Liquidity
  80. [80] Item 1A, Risk Factors — Risks Related to Liquidity
  81. [81] Item 1A, Risk Factors — Risks Related to Regulatory Compliance and Legal Matters
  82. [82] Item 1A, Risk Factors — Risks Related to Regulatory Compliance and Legal Matters
  83. [83] Item 7, MD&A — The Company's Business and Strategy
  84. [84] Item 7, MD&A — The Company's Business and Strategy
  85. [85] Item 7, MD&A — The Company's Business and Strategy
  86. [86] Item 7, MD&A — The Company's Business and Strategy
  87. [87] Item 7, MD&A — The Company's Business and Strategy
  88. [88] Item 7, MD&A — The Company's Business and Strategy
  89. [89] Item 7, MD&A — The Company's Business and Strategy
  90. [90] Item 7, MD&A — The Company's Business and Strategy
  91. [91] Item 7, MD&A — The Company's Business and Strategy
  92. [92] Item 7, MD&A — Stock Repurchase Plan
  93. [93] Item 7, MD&A — Stock Repurchase Plan
  94. [94] Item 7, MD&A — Stock Repurchase Plan

Analysis on 5/20/2026