Carter Bankshares, Inc. (CARE) - Q3 2025 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025. Carter Bankshares, Inc. is a financial holding company headquartered in Martinsville, Virginia, operating primarily through its wholly-owned subsidiary, Carter Bank & Trust. The Company operates 64 branches in Virginia and North Carolina. During the period, the Company completed the acquisition of two leased branch facilities in North Carolina (Mooresville and Winston-Salem) from First Reliance Bank, acquiring approximately $55.9 million in deposits.
Key Financial Metrics
| Metric | Q3 2025 (Three Months) | Q3 2024 (Three Months) | YTD 2025 (Nine Months) | YTD 2024 (Nine Months) |
|---|---|---|---|---|
| Net Income | $5.4 million | $5.6 million | $22.9 million | $16.2 million |
| Diluted EPS | $0.24 | $0.24 | $1.00 | $0.70 |
| Net Interest Income | $33.7 million | $28.8 million | $96.2 million | $85.3 million |
| Net Interest Margin (GAAP) | 2.86% | 2.58% | 2.78% | 2.57% |
| Provision for Credit Losses | $2.9 million (Expense) | $(0.4) million (Recovery) | $(1.5) million (Recovery) | $0.1 million (Expense) |
| Total Assets | $4.84 billion | $4.56 billion (Dec 2024) | N/A | |
| Total Loans | $3.84 billion | $3.62 billion (Dec 2024) | N/A | |
| Total Deposits | $4.21 billion | $4.15 billion (Dec 2024) | N/A | |
| Nonperforming Loans | $258.6 million | $259.3 million (Dec 2024) | N/A | |
| Allowance for Credit Losses (ACL) | $73.8 million | $75.6 million (Dec 2024) | N/A | |
| Return on Average Assets | 0.45% | 0.49% | 0.64% | 0.48% |
| Return on Average Equity | 5.24% | 5.99% | 7.61% | 5.99% |
Material Changes vs. Prior Period
- Net Interest Income: Increased 17.1% ($4.9 million) for Q3 2025 compared to Q3 2024, driven by loan growth and a decrease in funding costs following Federal Reserve rate cuts. The Net Interest Margin expanded 28 basis points.
- Provision for Credit Losses: Shifted from a recovery of $0.4 million in Q3 2024 to an expense of $2.9 million in Q3 2025. This was primarily due to $3.8 million in general reserves for new loan volume and a $1.2 million specific reserve on a CRE relationship. Conversely, the YTD 2025 period showed a net recovery of $1.5 million compared to a $0.1 million expense in YTD 2024.
- Nonperforming Assets (NPA): Total NPAs decreased slightly to $259.0 million from $260.0 million at year-end 2024. This reduction was driven by $23.4 million in curtailment payments on the Company's largest credit relationship, partially offset by the transfer of $24.1 million in CRE loans to nonaccrual status.
- Loan Portfolio: Total portfolio loans grew 7.8% annualized to $3.84 billion, with growth in Commercial Real Estate (CRE), residential mortgages, and construction loans.
- Noninterest Expense: Increased 4.6% for Q3 2025, driven by higher professional/legal fees (related to the branch acquisition), occupancy expenses, and other expenses related to OREO properties.
Guidance, Outlook, and Risks
- Strategic Focus: Management is shifting from balance sheet restructuring to a prudent growth strategy, focusing on organic growth and opportunistic acquisitions. The Company is executing a brand refresh to enhance market position.
- Large Credit Relationship: The Company's financial results remain significantly impacted by a single large credit relationship ($228.6 million principal balance) placed on nonaccrual in Q2 2023. This relationship represents 88.4% of total nonperforming loans. Management has established a specific reserve of $21.7 million (9.5% of the balance) based on discounted cash flow modeling.
- Interest Rate Risk: The balance sheet is currently liability-sensitive. Earnings simulations indicate a small decrease in net interest income in a rising rate environment and an increase in a declining rate environment.
- Capital and Liquidity: The Company remains "well-capitalized" under regulatory guidelines. Total liquidity sources are $1.22 billion, covering 157.1% of uninsured deposits. The Company has $544 million in available FHLB borrowing capacity.
- Stock Repurchase: The Board authorized a $20.0 million share repurchase program in May 2025. As of September 30, 2025, the Company repurchased 809,601 shares for $14.0 million YTD.
Investor Verification Checklist
- Large Credit Resolution: Verify the status of the $228.6 million nonperforming credit relationship, specifically the timing and sufficiency of future curtailment payments and the accuracy of the $21.7 million specific reserve.
- CRE Concentration: Review the $24.1 million in new CRE loans transferred to nonaccrual in Q3 2025, particularly the $14.6 million office loan in Northern Virginia facing tenant vacancies.
- Deposit Stability: Monitor the composition of deposits, noting that 18.4% are uninsured and 45.3% are Certificates of Deposit (CDs), with significant repricing risk in the next 12 months.
- Expense Management: Assess the sustainability of increased noninterest expenses, specifically those related to the new branch acquisition and OREO property management.
- Securities Portfolio: Review the $59.1 million in gross unrealized losses on the available-for-sale securities portfolio and the Company's intent to hold these to maturity.