Carter Bankshares, Inc. (CARE) reported $33.46 million in revenue for the quarter ended March 2024, representing a year-over-year decline of 26.5%. EPS of $0.24 for the same period compares to $0.68 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $32.79 million, representing a surprise of +2.06%. The company delivered an EPS surprise of +140.00%, with the consensus EPS estimate being $0.10.While investors scrutinize revenue and earnings changes year-over-year and how they compare ...

Exhibit 99.1 • Net interest income increased $1.0 million, or 3.6%, to $28.4 million compared to the fourth quarter of 2023 primarily due to a 24 basis point increase in the yield on earning assets, partially offset by a 15 basis point increase in funding costs and decreased $12.4 million, or 30.3% compared to the first quarter of 2023, primarily due to a 155 basis point increase in funding costs and a 12 basis point decrease in the yield on earning assets; • The allowance for credit losses to total portfol ...

[PART I](index=6&type=section&id=PART%20I) [Business](index=6&type=section&id=Item%201.%20Business) Carter Bankshares, Inc. operates 65 branches in Virginia and North Carolina with **$4.5 billion in assets**, focusing on prudent growth and increased fee income - Carter Bankshares, Inc. is a holding company for Carter Bank & Trust, with **$4.5 billion in assets** and **65 branches** in Virginia and North Carolina as of December 31, 2023[178](index=178&type=chunk) - The company's strategic goal is to transition to a prudent growth strategy, emphasizing organic growth, increased fee income, and controlled operating expenses[183](index=183&type=chunk)[48](index=48&type=chunk) - The company's common stock is traded on the Nasdaq Global Select Market under the ticker symbol **"CARE"**[11](index=11&type=chunk) - As of December 31, 2023, the company employed **679 full-time associates**, with a voluntary separation turnover rate of **13.8%** for fiscal year 2023[207](index=207&type=chunk) - The company and its bank subsidiary are extensively regulated by authorities including the Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC), and Virginia State Corporation Commission (SCC)[214](index=214&type=chunk)[215](index=215&type=chunk)[321](index=321&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant credit risk from a **$301.9 million nonperforming loan**, alongside concentrations in commercial real estate, operational, cybersecurity, market, liquidity, and regulatory risks - A single large lending relationship, placed on nonaccrual status in Q2 2023, comprises **$301.9 million** or **97.5%** of the company's nonperforming loans as of December 31, 2023[2](index=2&type=chunk) - The company's loan portfolio has a significant concentration in commercial real estate (CRE), making it sensitive to real estate market downturns, particularly in Virginia and North Carolina[283](index=283&type=chunk)[313](index=313&type=chunk) - Operational and security risks are significant due to heavy reliance on IT infrastructure, making the company vulnerable to cyber-attacks, system failures, and data breaches[135](index=135&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - The business is subject to market risks, including adverse effects of interest rate changes and inflation on net interest income, asset values, and borrower creditworthiness[118](index=118&type=chunk)[121](index=121&type=chunk)[154](index=154&type=chunk) - The company faces significant litigation risk, including collection actions and lawsuits related to its largest lending relationship, potentially resulting in substantial legal costs and losses[26](index=26&type=chunk)[363](index=363&type=chunk)[392](index=392&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[369](index=369&type=chunk) [Cybersecurity](index=32&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity plan, based on the NIST framework, is managed by the COO and IRT with Board oversight, utilizing risk assessments and testing to mitigate threats - The company's cybersecurity plan is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework[31](index=31&type=chunk) - Cybersecurity governance is led by the Chief Operations Officer (COO) and an Incident Response Team (IRT), with oversight from the Board's IT Steering Committee and Audit Committee[31](index=31&type=chunk)[398](index=398&type=chunk)[400](index=400&type=chunk) - Key risk management strategies include risk assessments, independent third-party penetration testing, and continuous environment monitoring[61](index=61&type=chunk)[397](index=397&type=chunk) - Although the company has experienced past cybersecurity incidents, none have resulted in a material adverse effect on its business, financial condition, or operations[32](index=32&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) As of December 31, 2023, the company operates its principal executive office and **65 depository branches** across Virginia and North Carolina, primarily owned - The company operates **65 depository branches**, with **53 in Virginia** and **12 in North Carolina**, as of December 31, 2023[374](index=374&type=chunk) - The principal executive office is located at 1300 Kings Mountain Road in Martinsville, Virginia[374](index=374&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings, including significant pending litigation, is incorporated by reference from Note 18 of the financial statements - Information regarding legal proceedings is detailed in Note 18, "Commitments and Contingencies," of the financial statements[401](index=401&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - The company has no mine safety disclosures to report[375](index=375&type=chunk) [PART II](index=34&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under **"CARE"**, with no regular dividends since 2016, and a **$14.2 million** share repurchase program completed in 2023 - The company's common stock trades on NASDAQ under the ticker **"CARE"**, with **2,160 shareholders of record** as of March 4, 2024[403](index=403&type=chunk) - The company has not declared a regular quarterly cash dividend since **Q4 2016**, prioritizing resources for regulatory compliance and investments[376](index=376&type=chunk) - The 2023 share repurchase program of **1,000,000 shares** was completed as of August 31, 2023, at a total cost of **$14.2 million**, or an average price of **$14.16 per share**[38](index=38&type=chunk) - No shares of common stock were repurchased during the quarter ended December 31, 2023, as the 2023 program was fully exhausted[406](index=406&type=chunk) [Reserved](index=36&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income decreased to **$23.4 million** in 2023 due to lower net interest income and higher noninterest expense, while nonperforming loans surged to **8.83%** due to a large nonaccrual relationship 2023 Key Financial Highlights vs. 2022 (in millions, except EPS) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | **Net Income** | $23.4 million | $50.1 million | ($26.7 million) | | **Diluted EPS** | $1.00 | $2.03 | ($1.03) | | **Net Interest Income** | $122.3 million | $139.9 million | ($17.6 million) | | **Provision for Credit Losses** | $5.5 million | $2.4 million | $3.1 million | | **Noninterest Income** | $18.3 million | $21.7 million | ($3.4 million) | | **Noninterest Expense** | $105.5 million | $97.0 million | $8.5 million | Key Performance Ratios | Ratio | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Return on Average Assets | 0.53% | 1.21% | | Return on Average Shareholders' Equity | 6.79% | 14.30% | | Nonperforming Loans to Total Portfolio Loans | 8.83% | 0.21% | | Allowance for Credit Losses to Total Portfolio Loans | 2.77% | 2.98% | - The significant increase in nonperforming loans to **8.83%** is almost entirely due to placing the company's largest lending relationship, with a principal balance of **$301.9 million**, on nonaccrual status in Q2 2023[388](index=388&type=chunk)[88](index=88&type=chunk) - Total portfolio loans grew by **$357.0 million (11.3%)**, primarily in the commercial real estate, residential mortgage, and construction segments[51](index=51&type=chunk)[603](index=603&type=chunk) - Total deposits increased by **$89.4 million**, with a notable shift from noninterest-bearing and savings accounts into higher-yielding Certificates of Deposit (CDs), which grew by **$325.1 million**[78](index=78&type=chunk)[606](index=606&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with its balance sheet shifting to slightly liability-sensitive as of December 31, 2023, impacting net interest income sensitivity - The company's balance sheet shifted from asset-sensitive at year-end 2022 to slightly liability-sensitive at year-end 2023[799](index=799&type=chunk)[800](index=800&type=chunk) Net Interest Income Sensitivity Analysis (12-Month Horizon) | Change in Interest Rate (bps) | % Change in Pretax NII (as of Dec 31, 2023) | % Change in Pretax NII (as of Dec 31, 2022) | | :--- | :--- | :--- | | +200 | (1.1)% | 7.7% | | +100 | (0.3)% | 4.1% | | -100 | 2.4% | (5.1)% | | -200 | 4.4% | (10.7)% | Economic Value of Equity (EVE) Sensitivity Analysis | Change in Interest Rate (bps) | % Change in EVE (as of Dec 31, 2023) | % Change in EVE (as of Dec 31, 2022) | | :--- | :--- | :--- | | +200 | (4.7)% | (0.2)% | | +100 | (1.8)% | 0.8% | | -100 | 0.9% | (3.4)% | | -200 | 0.5% | (8.5)% | [Financial Statements and Supplementary Data](index=69&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the consolidated financial statements for Carter Bankshares, Inc. and its subsidiaries, along with the independent auditor's report and detailed notes on accounting policies and disclosures Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$4,512,539** | **$4,204,519** | | Portfolio Loans, net | $3,408,858 | $3,055,061 | | Securities Available-for-Sale | $779,003 | $836,273 | | **Total Liabilities** | **$4,161,296** | **$3,875,892** | | Total Deposits | $3,721,915 | $3,632,538 | | FHLB Borrowings | $393,400 | $180,550 | | **Total Shareholders' Equity** | **$351,243** | **$328,627** | - The independent auditor, Crowe LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[650](index=650&type=chunk) - A critical audit matter was identified concerning the allowance for credit losses for individually evaluated loans in the "Other" pool, due to significant and subjective judgments involved in estimating reserves, which totaled **$54.4 million**[658](index=658&type=chunk)[659](index=659&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=126&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - There were no disagreements with accountants on accounting and financial disclosures[666](index=666&type=chunk) [Controls and Procedures](index=126&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes in Q4 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[708](index=708&type=chunk) - Management's report on internal control over financial reporting concluded that the system was effective as of December 31, 2023, a conclusion supported by the independent auditor's report[669](index=669&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended December 31, 2023[670](index=670&type=chunk) [Other Information](index=127&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q4 2023 - No directors or officers made changes to Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q4 2023[711](index=711&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=127&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable to the company - This item is not applicable[712](index=712&type=chunk) [PART III](index=128&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=128&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 proxy statement, including the company's Code of Conduct - Required information is incorporated by reference from the proxy statement for the 2024 annual meeting of shareholders[714](index=714&type=chunk) - The company has adopted a Code of Conduct for directors, executive officers, and associates, available on its website[715](index=715&type=chunk) [Executive Compensation](index=128&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2024 annual shareholders' meeting proxy statement - Required information is incorporated by reference from the "Executive Compensation" and "Director Compensation" sections of the 2024 proxy statement[716](index=716&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=128&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details for beneficial owners and management are incorporated by reference from the 2024 proxy statement, with **30,630** securities issuable and **1,538,804** available for future issuance under equity plans - Required information on security ownership is incorporated by reference from the 2024 proxy statement[717](index=717&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2023) | Category | Number of Securities | | :--- | :--- | | Securities to be issued upon exercise of outstanding rights | 30,630 | | Securities remaining available for future issuance | 1,538,804 | [Certain Relationships and Related Transactions, and Director Independence](index=129&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related person transactions and director independence is incorporated by reference from the company's 2024 annual shareholders' meeting proxy statement - Required information is incorporated by reference from the "Related Person Transactions" and "Corporate Governance -- Director Independence" sections of the 2024 proxy statement[721](index=721&type=chunk) [Principal Accountant Fees and Services](index=129&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the company's 2024 annual shareholders' meeting proxy statement - Required information is incorporated by reference from the "Independent Registered Public Accounting Firm" section of the 2024 proxy statement[722](index=722&type=chunk) [PART IV](index=130&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=130&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K, including consolidated financial statements and various exhibits such as governance and compensation agreements - This item lists all financial statements and exhibits filed with the annual report, including governance documents, employment agreements, and compensation plans[724](index=724&type=chunk)[726](index=726&type=chunk) [Form 10-K Summary](index=133&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided for the Form 10-K - No summary is provided for the Form 10-K[765](index=765&type=chunk)

For the quarter ended December 2023, Carter Bankshares, Inc. (CARE) reported revenue of $30.67 million, down 34.9% over the same period last year. EPS came in at -$0.02, compared to $0.62 in the year-ago quarter.The reported revenue represents a surprise of -5.98% over the Zacks Consensus Estimate of $32.62 million. With the consensus EPS estimate being $0.17, the EPS surprise was -111.76%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectatio ...

The Company's portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company's internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors. Mortgage and consumer loans are defaulted to a pass grade until a loan migrates to past due status. • Individual reviews of the top twenty large loan relationships ("LLRs"), which are defined as any individual com ...

Table of Contents For the quarterly period ended June 30, 2023 CARTER BANKSHARES, INC. (Exact name of registrant as specified in its charter) Virginia 85-3365661 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1300 Kings Mountain Road Martinsville Virginia 24112 (Address of principal executive offices) (Zip Code) Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule ...

Table of Contents CARTER BANKSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 – FAIR VALUE MEASUREMENTS (continued) Individually Evaluated Loans: Individually evaluated loans with commitments greater than or equal to $1.0 million are evaluated for potential specific reserves and adjusted, if a shortfall exists, to fair value less costs to sell. Fair value is measured based on the value of the underlying collateral securing the loan if repayment is expected solely from the sale or operation of ...

41 The ACL as a percentage of total portfolio loans was 2.98% at December 31, 2022 and 3.41% at December 31, 2021. The provision (recovery) for credit losses decreased $0.9 million to $2.4 million for the year ended 2022 compared to year ended 2021. The decrease for the full year of 2022 was primarily driven by the release of $7.0 million of reserves that were allocated to the other segment due to principal pay-downs, partially offset by strong loan growth, increased qualitative reserves of $3.0 million, an ...

Table of Contents 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 September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39731 CARTER BANKSHARES, INC. (Exact name of registrant as specified in its charter) Virginia 85-3365661 (State or o ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements](index=3&type=section&id=ITEM%201%20%E2%80%93%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, for the quarter ended June 30, 2022 Consolidated Balance Sheet Highlights (Unaudited, in Thousands) | (Dollars in Thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$4,123,280** | **$4,133,746** | | Portfolio Loans, net | $2,899,915 | $2,716,190 | | Securities Available-for-Sale | $907,034 | $922,400 | | Total Deposits | $3,753,393 | $3,698,476 | | **Total Liabilities** | **$3,789,138** | **$3,726,150** | | **Total Shareholders' Equity** | **$334,142** | **$407,596** | Consolidated Income Statement Highlights (Unaudited, in Thousands, Except EPS) | (Dollars in Thousands, Except EPS) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $32,459 | $27,203 | $60,681 | $53,732 | | Provision for Credit Losses | $1,814 | $967 | $2,444 | $2,824 | | **Net Income** | **$10,778** | **$5,432** | **$20,101** | **$14,807** | | Diluted Earnings per Share | $0.44 | $0.21 | $0.80 | $0.56 | - The company experienced a significant other comprehensive loss of **$61.7 million** for the six months ended June 30, 2022, primarily due to net unrealized losses on available-for-sale securities, contrasting with a **$5.6 million** loss in the same period of 2021[15](index=15&type=chunk)[17](index=17&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes detail accounting policies, new standard adoptions, loan portfolio composition, allowance for credit losses, and stock repurchase programs - The company early adopted ASU No. 2022-02 on April 1, 2022, eliminating the Troubled Debt Restructuring (TDR) accounting model, which had no material effect on consolidated financial statements[25](index=25&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Commercial Real Estate | $1,389,117 | $1,323,252 | | Commercial and Industrial | $336,477 | $345,376 | | Residential Mortgages | $559,313 | $457,988 | | Other Consumer | $48,033 | $44,666 | | Construction | $322,731 | $282,947 | | Other | $342,225 | $357,900 | | **Total Portfolio Loans** | **$2,997,896** | **$2,812,129** | - The Allowance for Credit Losses (ACL) stood at **$98.0 million**, or **3.27%** of total portfolio loans, as of June 30, 2022, compared to **$95.9 million**, or **3.41%** of loans, at December 31, 2021[102](index=102&type=chunk)[250](index=250&type=chunk) - The company's stock repurchase program for up to **2,000,000 shares** was completed on April 28, 2022, and a new program to purchase an additional **750,000 shares** was authorized on June 28, 2022[153](index=153&type=chunk)[154](index=154&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=37&type=section&id=ITEM%202%20-%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes the company's financial performance and condition, focusing on earnings, balance sheet changes, credit quality, liquidity, and capital resources [Earnings Summary](index=41&type=section&id=Earnings%20Summary) The company reported strong earnings growth in Q2 2022, driven by increased net interest income and reduced noninterest expenses Quarterly Performance Highlights (Q2 2022 vs Q2 2021, in Millions) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Interest Income | $32.5 million | $27.2 million | | Provision for Credit Losses | $1.8 million | $1.0 million | | Noninterest Income | $5.6 million | $7.2 million | | Noninterest Expense | $23.4 million | $27.8 million | | Net Income | $10.8 million | $5.4 million | [Net Interest Income](index=42&type=section&id=Net%20Interest%20Income) Net interest income and margin significantly improved in Q2 2022 due to higher asset yields and lower funding costs in a rising rate environment Net Interest Margin (FTE, Non-GAAP) | Period | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Margin (FTE) | 3.27% | 2.79% | 3.09% | 2.78% | - The average rate earned on loans increased by **33 basis points** in Q2 2022 compared to Q2 2021, while the average rate paid on interest-bearing deposits decreased by **20 basis points** from **0.79%** to **0.59%**[185](index=185&type=chunk)[189](index=189&type=chunk) [Financial Condition](index=51&type=section&id=Financial%20Condition) Total assets remained stable, with strategic loan growth funded by cash redeployment, deposit shifts, and a decrease in shareholders' equity due to unrealized losses and repurchases - Total portfolio loans increased by **$185.8 million** since year-end 2021, driven by growth in residential mortgages (**+$101.3 million**), commercial real estate (**+$65.9 million**), and construction (**+$39.8 million**)[213](index=213&type=chunk) - The securities portfolio had gross unrealized losses of **$76.5 million** at June 30, 2022, a significant increase from **$7.8 million** at year-end 2021, primarily attributed to the sharp rise in market interest rates[223](index=223&type=chunk)[224](index=224&type=chunk) - Total shareholders' equity decreased by **$73.5 million** to **$334.1 million**, impacted by a **$61.7 million** net-of-tax decline in accumulated other comprehensive income (AOCI) and **$32.4 million** in common stock repurchases[217](index=217&type=chunk)[273](index=273&type=chunk) [Credit Quality](index=55&type=section&id=Credit%20Quality) Nonperforming assets increased due to a rise in nonperforming loans, partially offset by a decrease in OREO, while the ACL ratio slightly declined Nonperforming Assets (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Nonperforming Loans | $12,029 | $7,397 | | Other Real Estate Owned | $8,432 | $10,916 | | **Total Nonperforming Assets** | **$20,461** | **$18,313** | - The increase in nonperforming loans was primarily due to the deterioration of a purchased syndicated C&I loan totaling **$4.9 million**[244](index=244&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity and capital, with regulatory ratios exceeding minimums, despite a decrease due to stock repurchases Regulatory Capital Ratios | Ratio (Carter Bankshares, Inc.) | June 30, 2022 | December 31, 2021 | Minimum Required | | :--- | :--- | :--- | :--- | | Leverage Ratio | 9.96% | 10.62% | 4.00% | | Common Equity Tier 1 | 12.70% | 14.21% | 7.00% | | Total Capital | 13.96% | 15.46% | 10.50% | [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=ITEM%203%20-%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the company's interest rate risk management, showing an asset-sensitive balance sheet with NII expected to increase in rising rate scenarios Interest Rate Sensitivity Analysis (as of June 30, 2022) | Change in Interest Rate (bps) | % Change in Pretax NII | % Change in EVE | | :--- | :--- | :--- | | +400 | 21.6% | 3.9% | | +300 | 16.3% | 4.3% | | +200 | 11.0% | 3.8% | | +100 | 5.6% | 2.5% | | -100 | (7.1)% | (6.3)% | - The company's balance sheet is asset-sensitive, but less so than at the end of 2021, due to deploying floating-rate cash into fixed and floating-rate loans and securities, and shifts in the yield curve[292](index=292&type=chunk) [Controls and Procedures](index=60&type=section&id=ITEM%204%20-%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[296](index=296&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2022[297](index=297&type=chunk) [PART II – OTHER INFORMATION](index=61&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides additional information including legal proceedings, risk factors, equity security sales, and other required disclosures [Legal Proceedings](index=61&type=section&id=ITEM%201%20-%20LEGAL%20PROCEEDINGS) As of June 30, 2022, no material legal proceedings were pending or threatened against the company - As of June 30, 2022, no material legal proceedings were pending or threatened against the Company[299](index=299&type=chunk) [Risk Factors](index=61&type=section&id=ITEM%201A%20-%20RISK%20FACTORS) No material changes in risk factors were reported compared to the 2021 Annual Report on Form 10-K - There have been no material changes in the risk factors from those disclosed in the 2021 Annual Report on Form 10-K[300](index=300&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's stock repurchase activities, including the completion of one program and the authorization of a new one Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30, 2022 | 446,436 | $17.44 | | May 1 - May 31, 2022 | — | — | | June 1 - June 30, 2022 | — | — | | **Total** | **446,436** | **—** | - A new stock repurchase program for up to **750,000 shares** was authorized by the Board on June 28, 2022, effective August 1, 2022[302](index=302&type=chunk) [Defaults Upon Senior Securities](index=61&type=section&id=ITEM%203%20-%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities - None[302](index=302&type=chunk) [Mine Safety Disclosures](index=61&type=section&id=ITEM%204%20-%20MINE%20SAFETY%20DISCLOSURES) The company reported no mine safety disclosures - None[303](index=303&type=chunk) [Other Information](index=62&type=section&id=ITEM%205%20-%20OTHER%20INFORMATION) The company reported no other information - None[305](index=305&type=chunk) [Exhibits](index=62&type=section&id=ITEM%206%20-%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and a new deferred compensation plan - The filing includes required CEO and CFO certifications and details of a new Non-Qualified Deferred Compensation Plan adopted on May 19, 2022[305](index=305&type=chunk)