Carter Bankshares(US:CARE)2025-11-03 21:17Financial Performance - As of September 30, 2025, Carter Bankshares, Inc. has total assets of $4.8 billion[152] - Net income for the three months ended September 30, 2025, was $5.4 million, or $0.24 diluted earnings per share, compared to $5.6 million, or $0.24 diluted earnings per share, for the same period in 2024[164] - Net interest income increased by $4.9 million, or 17.1%, to $33.7 million for the three months ended September 30, 2025, compared to $28.8 million for the same period in 2024[162] - Net interest income increased by $10.9 million, or 12.8%, for the nine months ended September 30, 2025, compared to the same period in 2024[171] - Total noninterest income decreased by $0.1 million to $5.4 million for the three months ended September 30, 2025, compared to the same period in 2024[162] - Total noninterest income slightly decreased by $0.1 million for the three months ended September 30, 2025, but increased by $1.2 million, or 7.4%, for the nine months ended September 30, 2025, compared to the same periods in 2024[184] - Total noninterest expense increased by $1.3 million to $28.7 million for the three months ended September 30, 2025, compared to the same period in 2024[162] - Total noninterest expense increased by $1.3 million for the three months ended September 30, 2025, primarily driven by higher professional and legal fees of $0.7 million and occupancy expenses of $0.6 million[186] Loan and Credit Quality - A significant credit relationship was placed on nonaccrual status in Q2 2023, with an aggregate principal balance of $228.6 million as of September 30, 2025[158] - Interest income has been negatively impacted by $6.5 million and $20.0 million for the three and nine months ended September 30, 2025, respectively, due to the nonaccrual loans[158] - The Company is dedicated to resolving nonaccrual loans, primarily related to a single large credit relationship[157] - The financial results are significantly impacted by the aforementioned nonaccrual loans, with a total negative impact of $85.2 million since their placement[158] - Nonperforming loans decreased by $0.7 million to $258.6 million compared to December 31, 2024, with nonperforming loans as a percentage of total portfolio loans at 6.74% compared to 7.15%[162] - The largest nonperforming credit relationship accounted for $228.6 million, or 88.4% of total nonperforming loans as of September 30, 2025[223] - The company closely monitors collateral values and potential recoveries on nonperforming loans, particularly in the hospitality, agriculture, and energy sectors[226] - The company has implemented new underwriting standards to reduce defaults by considering global cash flows and repayment capabilities of borrowers[228] - Loans rated special mention or substandard require management attention to limit potential losses, reflecting the ongoing monitoring of credit quality[218] - The Criticized Asset Committee meets monthly to review high-risk loans, ensuring proactive management of potential losses[214] Deposits and Funding - Total deposits increased by $56.9 million, or 1.8%, on an annualized basis, to $4.2 billion at September 30, 2025, compared to December 31, 2024[168] - Noninterest-bearing demand deposits decreased by $28.2 million to $606.2 million, while interest-bearing demand deposits increased by $82.6 million to $809.5 million, reflecting a shift in customer preferences[239] - Federal Home Loan Bank borrowings increased significantly to $175.5 million as of September 30, 2025, from $70.0 million at December 31, 2024, primarily to support loan growth[242] - The company has identified additional funding sources, including borrowing availability at the FHLB of approximately $1.2 billion, with $544.0 million eligible to borrow as of September 30, 2025[247] - Approximately 81.6% of total deposits were insured under standard FDIC insurance coverage limits as of September 30, 2025, indicating a stable deposit base[240] Capital and Liquidity - The Company's total capital increased by $28.5 million to $412.8 million at September 30, 2025, primarily due to net income of $22.9 million[253] - The Tier 1 capital ratio was 10.66% at September 30, 2025, compared to 10.88% at December 31, 2024[256] - The leverage ratio was 9.41% at September 30, 2025, compared to 9.56% at December 31, 2024[256] - The Bank's total risk-based capital ratio was 11.72% at September 30, 2025, compared to 11.98% at December 31, 2024[257] - The ratio of highly liquid assets to total assets was 9.9% at September 30, 2025, with highly liquid assets totaling $481.0 million[249] - Total available liquidity to uninsured deposits was 157.1% at September 30, 2025[252] - The company’s liquidity management is overseen by the ALCO, which monitors cash flow projections and maintains a contingency funding plan to address potential liquidity stress events[245] Strategic Initiatives - The Company aims to shift from restructuring to a prudent growth strategy, focusing on organic growth and opportunistic acquisitions[156] - The new brand identity was unveiled on October 30, 2024, emphasizing customer and community focus[155] - The Company’s strategic plan includes enhancing brand image and increasing fee income while monitoring operating expenses[156] Interest Rate Sensitivity - As of September 30, 2025, a 200 basis point increase in interest rates is projected to result in a decrease of 1.8% in pretax net interest income, while a 100 basis point increase would lead to a decrease of 0.7%[269] - In a declining interest rate environment, the company expects an increase in net interest income, with a projected increase of 3.3% for a 100 basis point decrease in rates and 6.8% for a 200 basis point decrease[269] - The economic value of equity is projected to decrease by 8.6% with a 200 basis point increase in interest rates as of September 30, 2025, and by 3.4% with a 100 basis point increase[273] - The company's balance sheet is liability sensitive, indicating a small decrease in net interest income in a rising interest rate environment due to its composition and maturity structures[269] - The ALCO has temporarily suspended the analysis for +300 and +400 basis point rate shock scenarios due to the Federal Open Market Committee's recent actions to lower the Fed Funds Target Rate[266]