Financial Performance - Net interest income decreased by $7.9 million, or 6.4%, to $114.5 million for the year ended December 31, 2024, due to higher funding costs [225]. - The company reported net income of $24.5 million, or $1.06 diluted earnings per share for the year ended December 31, 2024, compared to net income of $23.4 million, or $1.00 diluted earnings per share for the year ended December 31, 2023 [226]. - Total noninterest income increased by $3.1 million to $21.4 million for the year ended December 31, 2024, compared to the same period in 2023 [225]. - Total noninterest expense for the year ended December 31, 2024, was $110.0 million, an increase of $4.5 million, or 4.3%, from 2023 [253]. - The provision for credit losses decreased to a recovery of $5.0 million in 2024 from a provision of $5.5 million in 2023, reflecting improved credit quality assessments [317]. - The company reported a basic earnings per common share of $1.06 for 2024, up from $1.00 in 2023, reflecting a growth of 6% [362]. - Comprehensive income for 2024 was $31,441 thousand, down from $37,561 thousand in 2023, reflecting a decrease of approximately 16.3% [363]. Loan Portfolio and Credit Quality - Total portfolio loans increased by $118.9 million, or 3.4%, primarily in the commercial real estate and construction segments during the year ended December 31, 2024 [225]. - Nonperforming loans declined by $50.2 million to $259.3 million compared to December 31, 2023, with nonperforming loans as a percentage of total portfolio loans at 7.15% [225]. - The allowance for credit losses (ACL) was $75.6 million, or 2.09% of total portfolio loans, compared to $97.1 million, or 2.77% in 2023, indicating a reduction in the ACL ratio [316]. - Net loan charge-offs increased to $16.4 million for the year ended December 31, 2024, compared to $2.3 million in 2023, with a charge-off of $15.0 million impacting the Other segment [247]. - Nonperforming loans (NPLs) decreased by $50.2 million to $259.3 million as of December 31, 2024, resulting in a NPL ratio of 7.15%, down from 8.83% in the previous year [319]. - The provision for income taxes increased by $1.0 million to $6.3 million for the year ended December 31, 2024, with an effective tax rate of 20.6% compared to 18.6% in 2023 [285]. Deposits and Funding - Total deposits increased by $431.5 million, or 11.6%, to $4.2 billion at December 31, 2024, compared to December 31, 2023 [229]. - The portfolio loans to deposit ratio was 87.3%, compared to 94.2% [225]. - Federal Home Loan Bank borrowings decreased by $323.4 million to $70.0 million at December 31, 2024, compared to $393.4 million at December 31, 2023 [229]. - Average interest-bearing deposits grew by $100.7 million, or 20.8%, while average money market accounts increased by $63.0 million, or 14.1% [321]. - The ratio of highly liquid assets to total assets was 10.9% as of December 31, 2024, down from 12.8% in 2023 [345]. Securities and Investments - The available-for-sale securities portfolio decreased by $60.6 million, now representing 15.4% of total assets compared to 17.3% [225]. - The securities portfolio comprised 43.5% variable rate securities, with 84.6% expected to reprice within the next 12 months, mitigating interest rate risk [237]. - The company purchased $10.0 million of equity securities in 2024, focusing on investments that positively impact community development [259]. - Total gross unrealized gains in the available-for-sale portfolio were $0.1 million at December 31, 2024, offset by $82.4 million of gross unrealized losses, compared to $0.7 million in gains and $92.3 million in losses at December 31, 2023 [272]. - The company may consider changes to its interest rate mix strategy if the Federal Reserve continues to reduce short-term interest rates [237]. Strategic Initiatives and Growth - The Company aims to shift from restructuring the balance sheet to pursuing a prudent growth strategy, focusing on organic growth and opportunistic acquisitions [217]. - The Company introduced new guiding principles in June 2023 to align processes and operations with its brand strategy, aiming to enhance brand awareness and support future growth [216]. - The Company has entered into a definitive purchase and assumption agreement to acquire two branch facilities in North Carolina, expected to close in the first half of 2025 [215]. - The Company has established limits on total commercial real estate balances, which should not exceed 300% of total risk-based capital, and construction loan balances should not exceed 100% of total risk-based capital [291]. Risk Management and Underwriting - The Company’s underwriting process includes multiple shock scenarios focused on cash flow and leverage to determine supportable loan amounts, enhancing risk management [290]. - Management continuously monitors delinquency trends to identify emerging patterns and potential problem loans [310]. - The economic value of equity simulation model uses rate shocks of +/- 100, 200, 300, and 400 basis points to assess the impact on the balance sheet [356]. - The CECL model estimates default probabilities driven by economic metrics, including unemployment and the Consumer Price Index, to determine expected losses [394].
Carter Bankshares(CARE) - 2024 Q4 - Annual Report