Carter Bankshares' Q3 Net Income Dips, YTD Soars on Loan Growth, Branch Acquisition

TL;DR

**CARE's Q3 was a mixed bag with a slight profit dip, but strong year-to-date growth and strategic expansion make it a buy for long-term regional bank exposure.**

AI Summary

Carter Bankshares, Inc. (CARE) reported a net income of $5.419 million for the three months ended September 30, 2025, a decrease from $5.629 million in the same period of 2024. However, net income for the nine months ended September 30, 2025, significantly increased to $22.882 million from $16.243 million in 2024. Total interest income rose to $59.170 million for the quarter, up from $56.595 million year-over-year, driven by an increase in loan interest income to $51.018 million. Net interest income after provision for credit losses increased to $30.488 million for the quarter, compared to $29.039 million in the prior year. The company completed the acquisition of two branch facilities in North Carolina from First Reliance Bankshares, Inc. on May 23, 2025, acquiring approximately $55.9 million in deposits and recording $1.1 million in core deposit intangible, along with $1.193 million in goodwill. Total assets grew to $4.840 billion at September 30, 2025, from $4.659 billion at December 31, 2024, while total deposits increased to $4.210 billion from $4.153 billion over the same period. Federal Home Loan Bank borrowings increased substantially to $175.5 million from $70.0 million, indicating increased reliance on wholesale funding.

Why It Matters

This filing reveals Carter Bankshares' strategic expansion into growth markets in North Carolina through its recent branch acquisition, which could enhance its competitive position against regional banks. The significant increase in year-to-date net income and total assets suggests a positive trajectory, but the rise in Federal Home Loan Bank borrowings indicates a potential shift in funding strategy or liquidity management that investors should monitor. For employees, this expansion could mean new opportunities, while customers in the acquired branches will experience a transition to Carter Bank & Trust. The broader market will watch how CARE integrates these new operations and leverages its expanded footprint in a competitive banking landscape.

Risk Assessment

Risk Level: medium — The risk level is medium due to the substantial increase in Federal Home Loan Bank Borrowings from $70.0 million at December 31, 2024, to $175.5 million at September 30, 2025, indicating increased reliance on potentially more expensive wholesale funding. Additionally, while the overall allowance for credit losses decreased from $75.600 million to $73.762 million, the provision for credit losses for the three months ended September 30, 2025, was $2.896 million, compared to a recovery of $432 thousand in the prior year, suggesting a potential increase in credit risk.

Analyst Insight

Investors should consider CARE's long-term growth potential, driven by its strategic branch acquisition and strong year-to-date financial performance. However, they should closely monitor the bank's funding mix, particularly the increased reliance on Federal Home Loan Bank borrowings, and assess its impact on net interest margin in future quarters. A deeper dive into the loan portfolio quality and future credit loss provisions is also warranted.

Financial Highlights

debt To Equity

N/A

revenue

$59,170,000

operating Margin

N/A

total Assets

$4,840,119,000

total Debt

$175,500,000

net Income

$5,419,000

eps

$0.24

gross Margin

N/A

cash Position

$106,948,000

revenue Growth

+4.6%

Revenue Breakdown

Key Numbers

• $5.419M — Net Income (Q3 2025) (Decreased from $5.629M in Q3 2024)
• $22.882M — Net Income (YTD Q3 2025) (Increased from $16.243M in YTD Q3 2024)
• $4.840B — Total Assets (Sept 30, 2025) (Increased from $4.659B at Dec 31, 2024)
• $4.210B — Total Deposits (Sept 30, 2025) (Increased from $4.153B at Dec 31, 2024)
• $175.5M — Federal Home Loan Bank Borrowings (Sept 30, 2025) (Increased from $70.0M at Dec 31, 2024)
• $55.9M — Deposits Acquired (Acquired from First Reliance Bankshares, Inc. on May 23, 2025)
• $1.193M — Goodwill Recognized (Resulting from the May 23, 2025 branch acquisition)
• $1.101M — Core Deposit Intangible (Recognized from the May 23, 2025 branch acquisition)
• $2.896M — Provision for Credit Losses (Q3 2025) (Compared to a recovery of $432K in Q3 2024)
• 22,087,044 — Shares Outstanding (As of October 29, 2025)

Key Players & Entities

• Carter Bankshares, Inc. (company) — registrant
• Carter Bank & Trust (company) — wholly owned subsidiary of Carter Bankshares, Inc.
• First Reliance Bankshares, Inc. (company) — seller of two branch facilities
• Mooresville, North Carolina (location) — location of acquired branch facility
• Winston-Salem, North Carolina (location) — location of acquired branch facility
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• Nasdaq Global Select Market (market) — exchange where Common Stock is registered
• Bloomberg (company) — financial news organization

FAQ

Risk Factors

• Interest Rate Sensitivity [medium — financial]: Changes in interest rates can impact net interest income and the fair value of investment securities. For the nine months ended September 30, 2025, net interest income increased significantly, but a substantial rise in Federal Home Loan Bank borrowings to $175.5 million from $70.0 million indicates increased reliance on potentially volatile wholesale funding, which is sensitive to rate changes.
• Acquisition Integration Risks [medium — operational]: The acquisition of two branch facilities from First Reliance Bankshares, Inc. on May 23, 2025, introduced $1.193 million in goodwill and $1.1 million in core deposit intangibles. Successful integration of these branches and their associated deposits ($55.9 million) is crucial to realizing the expected benefits and avoiding operational disruptions.
• Regulatory Compliance [high — regulatory]: As a financial institution, Carter Bankshares is subject to extensive federal and state regulations. Changes in regulatory requirements, capital adequacy standards, or compliance failures could lead to increased costs, penalties, or reputational damage.
• Economic Downturn Impact [medium — market]: A general economic slowdown or recession could negatively affect loan demand, increase credit risk, and reduce fee income. The provision for credit losses increased to $2.896 million in Q3 2025 from a recovery of $432K in Q3 2024, suggesting a more cautious outlook on credit quality.

Industry Context

Carter Bankshares operates within the highly competitive U.S. banking industry, characterized by increasing consolidation and evolving customer expectations. Trends include a focus on digital transformation, competition from non-bank financial institutions, and a dynamic interest rate environment. Banks are increasingly leveraging acquisitions to gain scale and market share, as demonstrated by CARE's recent branch purchase.

Regulatory Implications

The banking sector faces stringent regulatory oversight concerning capital adequacy, liquidity, consumer protection, and cybersecurity. Carter Bankshares must navigate evolving compliance requirements, including potential changes in capital requirements or lending standards, which could impact profitability and operational flexibility.

What Investors Should Do

1. Monitor the integration of the acquired branches.
2. Analyze the increased reliance on FHLB borrowings.
3. Evaluate the trend in provision for credit losses.
4. Assess the year-to-date net income growth against quarterly performance.

Key Dates

• 2025-05-23: Acquisition of two branch facilities from First Reliance Bankshares, Inc. — Expanded the company's physical footprint and deposit base by approximately $55.9 million, adding goodwill and core deposit intangibles.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a slight decrease in quarterly net income but a significant increase year-to-date, alongside growth in assets and deposits.
• 2025-10-29: Date of shares outstanding disclosure — Provides the most current share count (22,087,044) for per-share calculations and market capitalization.

Glossary

Core Deposit Intangible

An intangible asset representing the value of a bank's core deposits (e.g., checking, savings, money market accounts) that are considered stable and low-cost funding. It is recognized when a bank acquires another financial institution. (Carter Bankshares recorded $1.1 million in core deposit intangibles from the recent branch acquisition, reflecting the value of the acquired stable funding.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. It represents factors like brand reputation, customer loyalty, and synergies. (The acquisition of branches resulted in $1.193 million in goodwill, indicating the premium paid over the fair value of acquired net assets.)

Federal Home Loan Bank Borrowings

Short-term and long-term loans obtained by member institutions from the Federal Home Loan Banks (FHLB). These are a source of wholesale funding for banks. (A substantial increase in FHLB borrowings to $175.5 million from $70.0 million indicates a greater reliance on wholesale funding, which can be more sensitive to market conditions than core deposits.)

Provision for Credit Losses

An expense recognized by a financial institution to account for potential losses on loans and other credit exposures. An increase in provision indicates a more conservative view of credit quality. (The increase in provision for credit losses to $2.896 million in Q3 2025 from a recovery in Q3 2024 suggests potential concerns about loan portfolio quality.)

Year-Over-Year Comparison

Compared to the prior year's filings, Carter Bankshares shows a mixed performance. While total assets have grown to $4.84 billion and year-to-date net income has significantly increased to $22.88 million, the third quarter of 2025 saw a slight dip in net income to $5.42 million from $5.63 million in Q3 2024. A notable shift is the increased reliance on Federal Home Loan Bank borrowings, which more than doubled to $175.5 million, indicating a change in funding structure. The provision for credit losses has also shifted from a recovery in Q3 2024 to a significant expense of $2.896 million in Q3 2025, suggesting a more cautious outlook on credit quality.

Key Financial Figures

• $1 — ange on which registered Common Stock, $1 par value CARE Nasdaq Global Select Mar

Filing Documents

• care-20250930.htm (10-Q) — 4421KB
• a3q25exhibit311.htm (EX-31.1) — 10KB
• a3q25exhibit312.htm (EX-31.2) — 10KB
• a3q25exhibit32.htm (EX-32) — 5KB
• 0001829576-25-000068.txt ( ) — 20125KB
• care-20250930.xsd (EX-101.SCH) — 64KB
• care-20250930_cal.xml (EX-101.CAL) — 156KB
• care-20250930_def.xml (EX-101.DEF) — 355KB
• care-20250930_lab.xml (EX-101.LAB) — 842KB
• care-20250930_pre.xml (EX-101.PRE) — 648KB
• care-20250930_htm.xml (XML) — 5420KB

- Financial Information

Part I - Financial Information Item 1.

Financial Statements

Financial Statements 3 Consolidated Balance Sheets - Se ptember 30, 2025 (unaudited) and December 31, 2024 (audited) 3 Consolidated Statements of Income - Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 5 Consolidated Statements of Changes in Shareholders' Equity - Three and Nine Months Ended September 30, 2025 and 2024 (unaudited) 6 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2025 and 2024 (unaudited) 7 Notes to Unaudited Consolidated Financial Statements 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 41 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 69 Item 4 .

Controls and Procedures

Controls and Procedures 71 P art II - Other Information Item 1.

Legal Proceedings

Legal Proceedings 71 Item 1A.

Risk Factors

Risk Factors 71 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 72 Item 3. Defaults Upon Senior Securities 72 Item 4. Mine Safety Disclosures 72 Item 5. Other Information 73 Item 6. Exhibits 73

Signatures

Signatures 74 Table of Contents CARTER BANKSHARES, INC. AND SUBSIDIARIES PART 1 - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Item 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (Dollars in Thousands Except per Share Data) September 30, 2025 December 31, 2024 (unaudited) (audited) ASSETS Cash and Due From Banks, including Interest-Bearing Deposits of $ 64,391 at September 30, 2025 and $ 91,563 at December 31, 2024 $ 106,948 $ 131,171 Securities Available-for-Sale, at Fair Value (amortized cost of $ 786,629 and $ 800,741 , respectively) 727,903 718,400 Equity Securities 10,269 10,041 Loans Held-for-Sale 478 — Portfolio Loans 3,835,653 3,624,826 Allowance for Credit Losses ( 73,762 ) ( 75,600 ) Portfolio Loans, net 3,761,891 3,549,226 Bank Premises and Equipment, net 71,653 74,329 Goodwill 1,193 — Core Deposit Intangible 1,007 — Other Real Estate Owned, net 330 659 Federal Home Loan Bank Stock, at Cost 11,598 6,487 Bank Owned Life Insurance 51,649 59,588 Other Assets 95,200 109,288 Total Assets $ 4,840,119 $ 4,659,189 LIABILITIES Deposits: Noninterest-Bearing Demand $ 606,203 $ 634,436 Interest-Bearing Demand 809,527 726,947 Money Market 552,564 512,162 Savings 335,502 355,506 Certificates of Deposit 1,906,551 1,924,370 Total Deposits 4,210,347 4,153,421 Federal Home Loan Bank Borrowings 175,500 70,000 Reserve for Unfunded Loan Commitments 3,072 3,186 Other Liabilities 38,362 48,269 Total Liabilities 4,427,281 4,274,876 Commitment and Contingencies - see NOTE 10. SHAREHOLDERS' EQUITY Common Stock, Par Value $ 1.00 Per Share, Authorized 100,000,000 Shares; Outstanding - 22,406,406 shares at September 30, 2025, and 23,069,175 shares at December 31, 2024 22,406 23,069 Additional Paid-in Capital 79,997 92,159 Retained Earnings 356,488 333,606 Accumulated Other Comprehensive Loss ( 46,053 ) ( 64,521 ) Total Shareholders' Equity 412,838 384,313 Total Liabilities and Shareholders' Equity $ 4,840,119 $ 4,659,189 See accompanying notes to unaudited Consolidated Financial Statements. 3 Table of Contents CARTER BANKSHARES, INC. AND SUBSI

FINANCIAL STATEMENTS - (continued)

ITEM 1. FINANCIAL STATEMENTS - (continued) CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in Thousands Except per Share Data) 2025 2024 2025 2024 INTEREST INCOME Loans, including fees Taxable $ 51,018 $ 47,813 $ 148,365 $ 138,025 Non-Taxable 550 643 1,730 2,027 Investment Securities Taxable 6,672 7,266 20,123 22,730 Non-Taxable 66 67 199 202 Federal Reserve Bank Excess Reserves 659 560 1,939 1,277 Interest on Bank Deposits 61 36 172 74 Dividend Income 144 210 396 892 Total Interest Income 59,170 56,595 172,924 165,227 Interest Expense Interest Expense on Deposits 24,025 25,518 73,107 68,958 Interest on Other Borrowings 1,426 2,279 3,601 10,960 Total Interest Expense 25,451 27,797 76,708 79,918 NET INTEREST INCOME 33,719 28,798 96,216 85,309 Provision (Recovery) for Credit Losses 2,896 ( 432 ) ( 1,459 ) 75 Provision (Recovery) for Unfunded Commitments 335 191 ( 114 ) ( 88 ) Net Interest Income After Provision (Recovery) for Credit Losses 30,488 29,039 97,789 85,322 NONINTEREST INCOME Gains on Sales of Securities, net — — — 36 Service Charges, Commissions and Fees 1,860 1,820 5,499 5,547 Debit Card Interchange Fees 1,942 1,907 5,988 5,926 Insurance Commissions 1,004 1,063 2,062 2,611 Bank Owned Life Insurance Income 357 375 1,055 1,088 Other 207 257 2,575 792 Total Noninterest Income 5,370 5,422 17,179 16,000 NONINTEREST EXPENSE Salaries and Employee Benefits 14,023 14,603 41,762 43,019 Occupancy Expense, net 4,582 3,944 13,284 11,485 FDIC Insurance Expense 1,450 1,529 4,316 4,782 Other Taxes 867 878 2,736 2,680 Advertising Expense 669 585 2,288 1,470 Telephone Expense 312 324 923 1,083 Professional and Legal Fees 1,852 1,193 5,003 4,248 Data Processing 1,367 1,337 4,206 3,462 Debit Card Expense 959 889 2,942 2,453 Other 2,623 2,151 8,590 6,454 Total Noninterest Expense 28,704 27,433 86,050 81,136 Income Before Income Taxes 7,154 7,028 28,918 20,186

FINANCIAL STATEMENTS - (continued)

ITEM 1. FINANCIAL STATEMENTS - (continued) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in Thousands) 2025 2024 2025 2024 Net Income $ 5,419 $ 5,629 $ 22,882 $ 16,243 Other Comprehensive Income: Net Unrealized Gains on Securities Available-for-Sale: Net Unrealized Gains Arising during the Period 7,968 20,910 23,615 23,279 Reclassification Adjustment for Gains included in Net Income — — — ( 36 ) Tax Effect ( 1,771 ) ( 4,582 ) ( 5,147 ) ( 5,109 ) Net Unrealized Gains Recognized in Other Comprehensive Income 6,197 16,328 18,468 18,134 Other Comprehensive Income: 6,197 16,328 18,468 18,134 Comprehensive Income $ 11,616 $ 21,957 $ 41,350 $ 34,377 See accompanying notes to unaudited Consolidated Financial Statements. 5 Table of Contents CARTER BANKSHARES, INC. AND SUBSIDIARIES

FINANCIAL STATEMENTS - (continued)

ITEM 1. FINANCIAL STATEMENTS - (continued) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) Three Months Ended September 30, 2025 (Dollars in Thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at June 30, 2025 $ 22,670 $ 84,146 $ 351,069 $ ( 52,250 ) $ 405,635 Net Income — — 5,419 — 5,419 Other Comprehensive Income, Net of Tax — — — 6,197 6,197 1% Excise Tax on Stock Buybacks — ( 47 ) — — ( 47 ) Repurchase of Common Stock ( 262,269 shares) ( 263 ) ( 4,641 ) — — ( 4,904 ) Forfeiture of Restricted Stock ( 1,159 shares) ( 1 ) — — — ( 1 ) Recognition of Restricted Stock Compensation Expense — 539 — — 539 Balance at September 30, 2025 $ 22,406 $ 79,997 $ 356,488 $ ( 46,053 ) $ 412,838 Three Months Ended September 30, 2024 (Dollars in Thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at June 30, 2024 $ 23,073 $ 91,274 $ 319,697 $ ( 69,633 ) $ 364,411 Net Income — — 5,629 — 5,629 Other Comprehensive Income, Net of Tax — — — 16,328 16,328 Forfeitures of Restricted Stock ( 736 shares) ( 1 ) — — — ( 1 ) Recognition of Restricted Stock Compensation Expense — 458 — — 458 Balance at September 30, 2024 $ 23,072 $ 91,732 $ 325,326 $ ( 53,305 ) $ 386,825 Nine Months Ended September 30, 2025 (Dollars in Thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity Balance at December 31, 2024 $ 23,069 $ 92,159 $ 333,606 $ ( 64,521 ) $ 384,313 Net Income — — 22,882 — 22,882 Other Comprehensive Income, Net of Tax — — — 18,468 18,468 1% Excise Tax on Stock Buybacks — ( 122 ) — — ( 122 ) Repurchase of Common Stock ( 809,601 shares) ( 810 ) ( 13,232 ) — — ( 14,042 ) Forfeiture of Restricted Stock ( 15,360 shares) ( 15 ) ( 195 ) — — ( 210 ) Issuance of Restricted Stock ( 162,1

FINANCIAL STATEMENTS - (continued)

ITEM 1. FINANCIAL STATEMENTS - (continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended September 30, (Dollars in Thousands) 2025 2024 OPERATING ACTIVITIES Net Income $ 22,882 $ 16,243 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Recovery for Credit Losses, including Recovery for Unfunded Commitments ( 1,573 ) ( 13 ) Origination of Loans Held-for-Sale ( 11,021 ) ( 6,233 ) Proceeds From Loans Held-for-Sale 10,662 5,932 Depreciation/Amortization of Bank Premises and Equipment 5,815 5,216 Provision for Deferred Taxes 976 1,377 Net Amortization of Securities 2,491 2,735 Tax Credit Amortization 487 354 Gains on Sales of Loans Held-for-Sale ( 119 ) ( 89 ) Gains on Sales of Securities, net — ( 36 ) Unrealized Gain on Equity Securities ( 228 ) ( 207 ) Commercial Loan Swap Derivative Loss 107 112 Increase in the Value of Life Insurance Contracts ( 1,055 ) ( 1,088 ) Gain on Bank Owned Life Insurance Death Benefit ( 1,882 ) — 1035 Exchange Fee on Bank Owned Life Insurance 527 — Balance Sheet Hedge Fair Value Adjustment 140 ( 103 ) Recognition of Restricted Stock Compensation Expense 1,549 1,324 Decrease in Other Assets 2,561 1,754 Decrease in Other Liabilities ( 4,529 ) ( 1,791 ) Net Cash Provided By Operating Activities 27,790 25,487 INVESTING ACTIVITIES Securities Available-for-Sale: Proceeds from Sales — 10,617 Proceeds from Maturities, Redemptions, and Paydowns 70,245 54,910 Purchases ( 58,624 ) ( 8,615 ) Purchase of Equity Securities — ( 5,000 ) Purchase of Bank Premises and Equipment, Net ( 4,979 ) ( 4,996 ) Net Cash Acquired from Branch Purchase 53,573 — (Purchase) Redemption of Federal Home Loan Bank Stock, net ( 5,111 ) 14,189 Loan Originations, net ( 211,303 ) ( 98,866 ) Proceeds from Death Benefit on Bank Owned Life Insurance 3,077 — Proceeds from Surrender of BOLI Policies 7,273 — Proceeds from Sales and Payments of Other Real Estate Owned 1,379 2,984 Net Cash

FINANCIAL STATEMENTS - (continued)

ITEM 1. FINANCIAL STATEMENTS - (continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - (continued) Nine Months Ended September 30, (Dollars in Thousands) 2025 2024 SUPPLEMENTARY DATA Cash Interest Paid $ 77,861 $ 79,122 Cash Paid for Income Taxes 3,140 457 Transfer from Loans to Other Real Estate Owned — 1,181 Loans Financed to Purchase Other Real Estate Owned 525 — Transfer from Fixed Assets to Other Real Estate Owned 1,829 — Right-of-use Asset Recorded in Exchange for Lease Liabilities 1,041 2,511 Stock Repurchase Excise Tax Settled in Subsequent Period ( 122 ) — Stock Repurchases Settled in Subsequent Period ( 371 ) — See accompanying notes to unaudited Consolidated Financial Statements. 8 Table of Contents CARTER BANKSHARES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – BASIS OF PRESENTATION Principles of Consolidation: The interim Consolidated Financial Statements include the accounts of Carter Banks hares, Inc. (the "Company") and its wholly owned subsidiary, Carter Ban k & Trust (the "Bank"). CB&T Investment Company (the "Investment Company") is a subsidiary of the Bank. All significant intercompany transactions have been eliminated in consolidation. Basis of Presentation: The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission ("SEC"), on March 7, 2025. In management's opinion, the accompanying interim financial information reflects all adj

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