Carter Bankshares(US:CARE)2023-10-26 16:00Financial Performance - For the nine months ended September 30, 2023, total interest income increased to $144.6 million, up 29% from $111.97 million in the same period of 2022[68]. - Net interest income after provision for credit losses was $91.97 million for the nine months ended September 30, 2023, compared to $95.85 million for the same period in 2022, reflecting a decrease of 4%[68]. - Net income for the three months ended September 30, 2023, was $3.63 million, a decrease of 75% from $14.41 million in the same period of 2022[68]. - Basic earnings per common share for the three months ended September 30, 2023, was $0.16, down from $0.59 in the same period of 2022, representing a decline of 73%[68]. - Total noninterest income for the nine months ended September 30, 2023, was $15.03 million, down 7% from $16.17 million in the same period of 2022[68]. - Net income for the nine months ended September 30, 2023, was $25,272,000, a decrease from $34,509,000 for the same period in 2022, representing a decline of approximately 26.5%[75]. - Net income for Q3 2023 was $3,627,000, down 74.8% from $14,408,000 in Q3 2022[68]. - Basic earnings per common share for Q3 2023 were $0.16, a decrease of 72.9% compared to $0.59 in Q3 2022[68]. Expenses and Losses - Total noninterest expense increased to $76.39 million for the nine months ended September 30, 2023, compared to $69.38 million in the same period of 2022, marking an increase of 10%[68]. - Total noninterest expense increased to $27,282,000 in Q3 2023 from $23,463,000 in Q3 2022, representing a rise of 16.0%[68]. - Interest expense on deposits surged to $34.63 million for the nine months ended September 30, 2023, compared to $13.28 million in the same period of 2022, reflecting a significant increase of 61%[68]. - Interest expense on deposits surged to $15,328,000 in Q3 2023 from $4,469,000 in Q3 2022, an increase of 243.5%[68]. - Provision for credit losses for the nine months ended September 30, 2023, was $2.61 million, compared to $2.37 million in the same period of 2022, indicating an increase of 10%[68]. - Provision for credit losses increased to $2,919,000 from $2,557,000, reflecting a rise of 14.2% year-over-year[75]. - Provision for credit losses was $1,105,000 in Q3 2023, compared to a recovery of $(77,000) in Q3 2022[68]. Shareholder Equity and Stock Repurchase - The company repurchased 2,433,801 shares of common stock, resulting in a total repurchase cost of $40.13 million[57]. - The balance of total shareholders' equity as of September 30, 2023, was $314.82 million, a decrease from $407.60 million as of December 31, 2022[57]. - Total shareholders' equity as of September 30, 2023, was $330,621,000, compared to $344,237,000 at June 30, 2023, indicating a decrease of about 4.0%[72]. - The company repurchased 1,132,232 shares of common stock for a total cost of $16,416,000 during the nine months ended September 30, 2023[71]. - The balance of total shareholders' equity as of September 30, 2023, was $330,621,000, reflecting changes from net income and stock repurchases[71]. Cash Flow and Liquidity - Cash and cash equivalents at the end of the period were $55,398,000, down from $65,708,000 at the end of the same period in 2022, reflecting a decrease of approximately 15.0%[75]. - Net cash provided by operating activities for the nine months ended September 30, 2023, was $38,855,000, down from $47,698,000 in the prior year, a decrease of approximately 18.6%[75]. - The company reported a net cash used in investing activities of $255,481,000 for the nine months ended September 30, 2023, compared to $270,111,000 in the prior year, a decrease of about 5.4%[75]. - Net cash provided by financing activities increased significantly to $225,155,000 from $10,322,000, marking a substantial rise[75]. - The total liquidity sources were reported at $1,215.8 million as of September 30, 2023[117]. - Total available liquidity to uninsured deposits was 306.8% at September 30, 2023[117]. - Highly liquid assets amounted to $597.8 million, resulting in a highly liquid assets to total assets ratio of 13.4% at September 30, 2023[115]. Loan Portfolio and Credit Quality - The company established a valuation allowance of $53.6 million as of September 30, 2023, based on discounted cash flow valuation techniques for borrowers in the hospitality, agriculture, and energy sectors[103]. - As of September 30, 2023, special mention, substandard, and doubtful loans increased by $157.1 million to $314.0 million compared to $156.9 million at December 31, 2022[109]. - The increase in substandard loans of $168.1 million is primarily related to a large nonaccrual lending relationship[109]. - The allowance for credit losses was established at $53.6 million as of September 30, 2023, reflecting the company's assessment of potential losses in its loan portfolio[103]. - The company has enhanced its underwriting standards since 2018 to mitigate potential credit losses[94]. Regulatory and Accounting Changes - The company recorded a transitional adjustment of $106,000 to retained earnings due to the early adoption of ASU 2023-02, effective January 1, 2023[79]. - The company adopted new accounting standards in 2023, resulting in a transitional adjustment of $0.1 million to retained earnings[79]. - The Company ceased originating new LIBOR-based variable rate loans as of December 31, 2021, and has transitioned to using the one-month term Secured Overnight Financing Rate (SOFR) as the replacement benchmark[81]. - The Company completed remediation efforts for existing LIBOR-based loans by September 30, 2023[81]. - The transition team is committed to working within the guidelines established by regulatory authorities to ensure a smooth transition away from LIBOR[81]. Market and Economic Impact - The economic value of equity decreased by 10.6% under a -300 basis points interest rate shock scenario as of September 30, 2023[123]. - A 200 basis point increase in interest rates would result in a 0.2% increase in pretax net interest income as of September 30, 2023[123]. - A 100 basis point decrease in interest rates would lead to a 1.6% increase in pretax net interest income[123]. - The economic value of equity would decrease by 3.6% with a 200 basis point increase in interest rates[123]. - A 400 basis point decrease in interest rates would result in a 17.1% decrease in economic value of equity[123].