Carter Bankshares, Inc. Announces First Quarter 2026 Financial Results

About this update from Carter Bankshares, Inc.

MARTINSVILLE, VA / ACCESS Newswire / April 23, 2026 / Carter Bankshares, Inc. (the "Company") (NASDAQ:CARE), the holding company of Carter Bank (the "Bank") today announced quarterly net income of $85.8 million, or $3.88 diluted earnings per share ("EPS"), for the first quarter of 2026 compared to net income of $8.5 million, or $0.38 diluted EPS, for the fourth quarter of 2025 and net income of $9.0 million, or $0.39 diluted EPS, for the first quarter of 2025. Net interest income was $35.9 million for the first quarter of 2026, $34.6 million for the fourth quarter of 2025, and $30.1 million for the first quarter of 2025. Pre-tax pre-provision income 1 was $75.9 million for the first quarter of 2026, $8.8 million for the fourth quarter of 2025 and $9.0 million for the first quarter of 2025. On March 26, 2026, the Bank completed the sale (the "Transaction") of all loans, subsequently reduced to judgments related to various entities in which James C. Justice, II has an interest (such loans, subsequently reduced to judgments, the "Loans"). The Transaction was completed as an absolute, "as-is, where-is" sale to an unaffiliated third party. The Company received consideration of $289.5 million in cash in the Transaction. Immediately prior to the Transaction, the Loans had an outstanding aggregate principal amount of $209.5 million, all of the Loans were nonperforming and on nonaccrual status, and the Company had recorded a specific reserve with respect to the Loans of $18.0 million as of December 31, 2025. Transaction Highlights Financial Highlights for the Three Months Ended March 31, 2026 "We are very pleased to report the successful resolution of our largest nonperforming credit relationship during the first quarter of 2026," stated Litz H. Van Dyke, Chief Executive Officer. "This Transaction meaningfully strengthened our balance sheet and favorably increased tangible book value by $3.49 per share, while also improving key financial ratios. It represents an important milestone for the Company and positions us well for continued growth." Van Dyke added, "We continued to deliver strong operating performance during the quarter, highlighted by margin expansion and solid loan growth across our footprint. Annualized loan growth of 6.1% 7 , net of the Transaction, reflects continued momentum in our commercial and small business lending platforms, supported by a healthy pipeline and increasing traction in commercial and industrial lending. We also expect a continued tailwind from prior construction lending commitments, which are anticipated to fund over the next 12 to 18 months as projects progress. Our balance sheet remains slightly liability sensitive, positioning us to benefit from potential Federal Reserve interest rate reductions, which we expect would further support margin expansion, particularly given the short-term nature of our certificates of deposit ("CD") portfolio." Operating Highlights Credit Quality Credit quality metrics for the quarter were favorably impacted by the Transaction, driving meaningful improvements in nonperforming assets and overall credit quality trends. During the quarter, the Company recognized a recovery for credit losses of $33.9 million and a recovery for unfunded commitments of $0.2 million, primarily reflecting the release of previously established specific reserves of $18.0 million, as well as a $15.0 million net recovery associated with the Loans, in each case related to the Transaction. As a result, the Company recorded a net benefit to the recovery for credit losses, contributing to a decline in the allowance for credit losses to total portfolio loans. The net benefit to the recovery for credit losses was a significant driver of earnings for the quarter. At March 31, 2026, nonperforming assets declined to $27.4 million compared to $244.1 million at December 31, 2025 and $262.0 million at March 31, 2025, primarily reflecting the resolution of the aforementioned credit relationship. Nonperforming loans decreased to $24.0 million at March 31, 2026, from $244.0 million at December 31, 2025 and $261.4 million at March 31, 2025. The ratio of nonperforming assets to total portfolio loans plus other real estate owned ("OREO") improved to 0.73% at March 31, 2026, compared to 6.29% at December 31, 2025 and 7.10% at March 31, 2025. The allowance for credit losses to total portfolio loans was 1.41% at March 31, 2026 compared to 1.84% at December 31, 2025 and 1.99% at March 31, 2025, reflecting the release of previously established reserves of $18.0 million related to the Loans. The allowance for credit losses to nonperforming loans increased to 219.03% at March 31, 2026 compared to 29.30% at December 31, 2025 and 28.12% at March 31, 2025, driven by the significant reduction in nonperforming loans. The Company recognized net recoveries of $14.9 million for the quarter ended March 31, 2026, compared to net charge-offs of $0.1 million for the fourth quarter of 2025 and $0.1 million for the first quarter of 2025. Net recoveries (annualized) to average portfolio loans, were 1.55% for the quarter ended March 31, 2026 compared to net charge-offs of 0.01% in each of the fourth quarter of 2025 and the first quarter of 2025. Excluding the impact of the Transaction, underlying credit quality trends remained relatively stable during the first quarter of 2026. Net Interest Income and Margin Net interest income (GAAP) for the quarter ended March 31, 2026 totaled $35.9 million, representing an increase of $1.3 million from net interest income of $34.6 million in the prior quarter and an increase of $5.8 million from net interest income of $30.1 million in the prior year quarter. Net interest income, on an FTE basis 4 (non-GAAP) totaled $36.1 million for the quarter ended March 31, 2026, representing an increase of $1.3 million, or 3.8%, compared to the quarter ended December 31, 2025, and an increase of $5.8 million, or 19.0% compared to the quarter ended March 31, 2025. The linked-quarter increase in net interest income, on an FTE basis 4 (non-GAAP) was primarily driven by a 12 basis point decline in funding costs and a six basis point increase in the yield on average interest-earning assets. The year-over-year increase was attributable to a 41 basis point decline in funding costs and a seven basis point increase in average interest-earning assets yields. Net interest income during the first quarter of 2026 benefited from lower rates paid on average interest-bearing liabilities and higher average loan balances compared to both the prior quarter and the prior year quarter. These positive impacts were partially offset by declines in both average balances of and yields on investment securities. Net interest margin was 3.07% for the quarter ended March 31, 2026 compared to 2.92% for the prior quarter and 2.68% for the quarter ended March 31, 2025. On an FTE basis 4 (non-GAAP) net interest margin was 3.08% compared to 2.93% and 2.70% for the prior quarter and prior year quarter, respectively. During the first quarter of 2026, interest-bearing funding costs declined compared to both the prior quarter and prior year quarter, primarily due to continued reductions in funding costs, as well as stabilization in deposit pricing, partially reflecting the broader interest rate environment. Noninterest Income Noninterest income for the quarter ended March 31, 2026 totaled $71.0 million, increasing $65.7 million from the prior quarter and $64.1 million from the prior year quarter. The increase was primarily driven by the $65.0 million gain on the Transaction, which is considered non-core in nature and not indicative of the Company's ongoing operating performance. Compared to the quarter ended March 31, 2025, insurance commissions increased $0.6 million, while other noninterest income decreased $2.0 million, primarily reflecting favorable period-end adjustments within insurance commissions and the impact of a $1.9 million gain on a bank owned life insurance ("BOLI") death benefit recognized in the first quarter of 2025, respectively. Noninterest Expense Noninterest expense for the quarter ended March 31, 2026 totaled $31.0 million, relatively unchanged compared to the prior quarter and increased $3.0 million compared to the prior year quarter. Compared to the prior quarter, the quarter reflected several changes across expense categories. Salaries and employee benefits decreased $1.1 million, primarily due to lower base salaries resulting from seasonal expenses in the prior quarter and two less working days in the first quarter, medical costs, and deferred compensation expense, partially offset by higher incentive compensation. Data processing increased $0.4 million and occupancy expenses increased $0.5 million, primarily reflecting higher costs associated with new and existing service agreements, software licenses, maintenance contracts, and related infrastructure investments. Other noninterest expense increased $0.7 million primarily due to a write-down of $0.6 million on one closed office that was transferred to OREO during the first quarter of 2026. Compared to the quarter ended March 31, 2025, salaries and employee benefits increased $1.3 million, other noninterest expense increased $0.5 million, data processing expenses increased $0.4 million, occupancy expense increased $0.4 million and professional and legal fees increased $0.3 million. The increase in salaries and employee benefits was primarily driven by higher incentive compensation, increased medical costs and annual merit increases, partially offset by higher deferred costs on loan originations. Other noninterest expense increased primarily due to the aforementioned $0.6 million write-down on one closed office that was transferred to OREO during the first quarter of 2026. Data processing expenses increased due to inflationary cost pressures and higher costs associated with new and existing service agreements implemented in early 2026. The increase in occupancy expense was primarily attributable to maintenance contracts entered into during the first quarter of 2026 and related infrastructure investments. Professional and legal fees increased primarily due to costs associated with the Transaction and higher expenses related to the management of special assets. Financial Condition Total assets decreased $52.7 million to $4.8 billion at March 31, 2026, compared to December 31, 2025. The decrease was primarily driven by a $151.1 million decline in portfolio loans, largely reflecting the Transaction, partially offset by net loan growth during the first quarter of $58.4 million. This decrease was partially offset by an increase in cash and due from banks of $123.2 million, as balances held at the Federal Reserve Bank increased due to the excess proceeds from the Transaction in the first quarter of 2026. The allowance for credit losses decreased $19.0 million during the first quarter, primarily reflecting the release of the $18.0 million of specific reserve related to the Loans. Available-for-sale investment securities decreased $29.5 million, primarily due to normal paydowns, calls and sales, as well as changes in unrealized losses, partially offset by purchases. These securities represented 13.8% of total assets at March 31, 2026, compared to 14.3% at December 31, 2025. Federal Home Loan Bank ("FHLB") stock declined $8.4 million in line with lower borrowing levels. On the funding side, FHLB borrowings decreased $178.5 million during the first quarter, reflecting the repayment of borrowings utilizing proceeds from the Transaction. Total deposits increased $24.4 million to $4.2 billion at March 31, 2026 compared to December 31, 2025, reflecting an increase of $63.2 million in interest-bearing demand deposits and $17.5 million in noninterest-bearing demand deposits, partially offset by a decrease of $39.6 million in money market accounts and $17.5 million in CDs. Other liabilities increased $16.5 million, primarily due to an increase in taxes payable associated with the Transaction. At March 31, 2026, approximately 82.8% of total deposits were insured under FDIC insurance coverage limits, while approximately 17.2% of total deposits were uninsured. At December 31, 2025, approximately 81.3% of total deposits were insured under Federal Deposit Insurance Corporation ("FDIC") insurance coverage limits, while approximately 18.7% of total deposits were uninsured. Capitalization and Liquidity The Company maintained a strong capital and liquidity position at March 31, 2026. Capital levels increased significantly and continued to exceed all applicable regulatory requirements, supported by earnings for the quarter and the impact of the Transaction. The Company remained well capitalized at March 31, 2026. The Company's Tier 1 capital ratio was 13.52% at March 31, 2026, compared to 10.70% at December 31, 2025. The Company's leverage ratio was 11.10% at March 31, 2026, compared to 9.43% at December 31, 2025. The Company's total risk-based capital ratio was 14.78% at March 31, 2026, compared to 11.95% at December 31, 2025. The Company did not repurchase any shares under the current repurchase plan during the three months ended March 31, 2026. The Transaction also resulted in an increase in book value per share and tangible book value of $3.49 per share, reflecting the net gain recognized on the Transaction and the associated improvement in capital. At March 31, 2026, funding sources accessible to the Company included borrowing availability at the FHLB equal to 30.0% of total assets, or $1.4 billion, subject to eligible collateral pledged, of which the Company had the capacity to borrow an additional $816.6 million. The Company also maintains unsecured facilities with three correspondent financial institutions totaling $30.0 million, a fully secured facility with one correspondent financial institution totaling $25.0 million, and access to the institutional CD market. The borrowing capacity under the secured line of credit decreased by $20.0 million during the quarter ended March 31, 2026, from $45.0 million as of March 13, 2026, as a result of the sale of investment securities previously pledged as collateral to the secured facility, which reduced the borrowing capacity, as the Company did not replace the sold investment securities with new pledged assets. In addition to these funding sources, the Company had $407.8 million of unpledged available-for-sale investment securities at fair value at March 31, 2026, providing additional liquidity. About Carter Bankshares, Inc. Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ:CARE) provides a full range of commercial banking, consumer banking, mortgage and services through its subsidiary Carter Bank. The Company has $4.8 billion in assets and 63 branches in Virginia and North Carolina as of March 31, 2026. For more information or to open an account visit www.carterbank.com . Important Note Regarding Non-GAAP Financial Measures In addition to results presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), management uses, and this press release contains or references, certain non-GAAP financial measures, including pre-tax pre-provision income, adjusted net income, adjusted earnings per common share (diluted), tangible book value, adjusted noninterest expense, adjusted efficiency ratio, and interest and dividend income, yield on interest-earning assets, net interest income and net interest margin on a fully taxable equivalent ("FTE") basis. These non-GAAP measures should be read along with the accompanying tables in our definitions and reconciliation of GAAP to non-GAAP financial measures. Management believes these non-GAAP financial measures are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results across periods in a meaningful manner. These measures also assist in assessing the Company's underlying operating performance and performance trends and facilitate comparisons with other financial services companies. The Company believes that presenting interest and dividend income, yield on interest-earning assets, net interest income and net interest margin on an FTE basis improves comparability between income derived from taxable and tax-exempt sources and is consistent with industry practice. While management believes these non-GAAP measures provide meaningful supplemental information, they should not be considered as an alternative to GAAP results, as more relevant than financial results prepared in accordance with GAAP, or as necessarily comparable to similarly titled non-GAAP measures used by other companies. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for an analysis of the Company's financial condition or results of operations as reported under GAAP. Investors are encouraged to review the Company's GAAP financial results and all other relevant information when evaluating its performance and financial condition. Important Note Regarding Forward-Looking Statements This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements made in Mr. Van Dyke's quotations and may include statements relating to our financial condition, market conditions, results of operations, plans, including our strategic plan, brand strategy, and guiding principles and the anticipated results of the foregoing, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, loan pipeline and nonaccrual and nonperforming loans. Forward looking statements are typically identified by words or phrases such as "will likely result," "expect," "anticipate," "estimate," "forecast," "project," "intend," "believe," "assume," "strategy," "trend," "plan," "outlook," "outcome," "continue," "remain," "potential," "opportunity," "comfortable," "current," "position," "maintain," "sustain," "seek," "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the Company's control. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Actual results may differ significantly from those expressed in or implied by these forward-looking statements. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements including, but not limited to the effects of: Many of these factors, as well as other factors, are described in our filings with the Securities and Exchange Commission, including in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2025. All risk factors and uncertainties described herein and therein should be considered in evaluating the Company's forward-looking statements. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events are expressed in or implied by a forward-looking statement may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update, revise or clarify any forward-looking statement to reflect developments occurring after the statement is made, except as required by law. Carter Bankshares, Inc. [email protected] CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA BALANCE SHEETS CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA INCOME STATEMENTS *All outstanding unvested restricted stock awards are considered participating securities for the earnings per share calculation. As such, these shares have been allocated to a portion of net income ($1,069 thousand, $104 thousand and $93 thousand for the quarters ended March 31, 2026, December 31, 2025 and March 31, 2025, respectively) and are excluded from the diluted earnings per share calculation. CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA NET INTEREST MARGIN (FTE) (QTD AVERAGES) (Unaudited) a Nonaccruing loans are included in the daily average loan amounts outstanding. CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA LOANS AND LOANS HELD-FOR-SALE (Unaudited) ASSET QUALITY DATA (Unaudited) CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA ALLOWANCE FOR CREDIT LOSSES (Unaudited) CARTER BANKSHARES, INC. CONSOLIDATED SELECTED FINANCIAL DATA DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES: (Unaudited) 4 Net interest income has been computed on a fully taxable equivalent basis ("FTE") using 21% federal income tax rate for the 2026 and 2025 periods. SOURCE: Carter Bankshares, Inc. View the original press release on ACCESS Newswire

View stock analysis, news, and events for Carter Bankshares, Inc.