Breaking Down Carter Bankshares, Inc. (CARE) Financial Health: Key Insights for Investors

You're looking at Carter Bankshares, Inc. (CARE) and seeing a mixed signal: strong core growth but a persistent, ugly credit issue that won't go away, so let's be defintely clear on the numbers. The bank's nine-month net income for 2025 hit $22.9 million, which is a solid jump from the $16.2 million in the prior-year period, and total assets now stand at a respectable $4.8 billion as of September 30, 2025. Still, the third quarter net income of only $5.4 million, or $0.24 diluted earnings per share (EPS), missed analyst estimates by a mile, and that's because the elephant in the room-the nonaccrual loans to the Justice Entities-still holds a massive $228.6 million principal balance. This is a classic bank story: the core business is working, with net interest income up 17.1% year-over-year in Q3 to $33.7 million and portfolio loans growing at a 9.4% annualized rate, but that single credit risk is a huge anchor on the bottom line and is what you need to understand before making any move.

Revenue Analysis

You need to know where the money is actually coming from to gauge a bank's quality, not just the top-line number. For Carter Bankshares, Inc. (CARE), the story is clear: it's a net interest income (NII) business, but that core strength is fighting a significant headwind from one large, nonperforming credit.

For the nine months ended September 30, 2025, the company generated $96.2 million in Net Interest Income (NII)-the profit from lending money versus the cost of funding it-up a solid 12.8% from the same period in 2024. This growth is defintely a positive sign of core operational health, driven by strong loan growth and better management of funding costs.

Here's the quick math on their revenue mix for the third quarter of 2025 (Q3 2025), which totaled approximately $39.1 million:

• Net Interest Income: $33.7 million (approximately 86.2% of total revenue).
• Noninterest Income (fees, service charges, commissions): $5.4 million (approximately 13.8% of total revenue).

The total estimated revenue for the full 2025 fiscal year is expected to be around $154.8 million, which would represent a projected year-over-year growth of nearly 9.9% from the 2024 actual revenue of $140.87 million.

The year-over-year (YoY) revenue growth has been strong on the NII side, with Q3 2025 NII jumping 17.1% compared to Q3 2024. This is due to a 9.4% annualized increase in total portfolio loans, which reached $3.8 billion by September 30, 2025. That's a healthy loan pipeline. Noninterest income, however, has been flat, decreasing by $0.1 million in Q3 2025 compared to the year-ago quarter, still landing at $5.4 million.

What this estimate hides is the drag from nonperforming assets (NPAs). The company's financial results are significantly impacted by a large nonaccrual loan relationship (loans where interest is no longer being recorded as income) with the Justice Entities. The aggregate principal balance on these loans was $228.6 million as of September 30, 2025. This single issue negatively impacted interest income by $6.5 million in Q3 2025 alone. The resolution of this credit is the single biggest variable in the near-term revenue picture.

To be fair, the bank is expanding its footprint and diversifying, having completed the acquisition of two North Carolina branches, which added $55.9 million in deposits and expanded their market presence. This strategic move is a long-term play to solidify their regional banking base and diversify their revenue-generating assets. For a deeper dive into the risks and opportunities, you can check out the full analysis: Breaking Down Carter Bankshares, Inc. (CARE) Financial Health: Key Insights for Investors.

Profitability Metrics

You need a clear-eyed view of Carter Bankshares, Inc. (CARE)'s ability to turn its lending activity into real profit, especially as a community bank. The headline is that while the bank is seeing positive momentum in its core lending margin, its operational efficiency remains a significant drag on overall profitability compared to the industry.

For a bank, we swap traditional manufacturing terms like Gross Profit for Net Interest Margin (NIM) and Net Interest Income (NII). NII is your primary revenue line, and NIM is your core gross margin-what you earn on loans minus what you pay on deposits. For the first three quarters of 2025, Carter Bankshares, Inc.'s total NII reached approximately $96.2 million, which is the engine driving the business. That's a solid revenue base.

Core Margin and Profit Trends

Carter Bankshares, Inc.'s NIM has been on a positive trend in 2025, which is a good sign for core profitability. This increase is often due to lower funding costs and higher yields on interest-earning assets, a trend we've seen across the sector as the interest rate environment normalizes.

• Q1 2025 NIM (FTE): 2.70%
• Q2 2025 NIM (FTE): 2.82%
• Q3 2025 NIM (FTE): 2.86%

However, when you look at the bottom line, the trend is more volatile. Net income-the final profit-peaked in Q1 at $9.0 million, dipped slightly to $8.5 million in Q2, and then dropped to $5.4 million in Q3 2025. This volatility is a red flag, suggesting non-core operating factors are heavily influencing the result. For a deeper dive into who is betting on these trends, check out Exploring Carter Bankshares, Inc. (CARE) Investor Profile: Who's Buying and Why?

Operational Efficiency: The Biggest Hurdle

The operational efficiency ratio (noninterest expense as a share of net operating revenue) is where Carter Bankshares, Inc. faces its stiffest challenge. This is your operating profit metric, and for banks, a lower ratio is better. Honestly, the numbers here show a clear need for cost management to catch up with revenue growth.

The industry aggregate efficiency ratio for FDIC-insured institutions was around 56.2% in Q1 2025. Carter Bankshares, Inc.'s figures are significantly higher, which means they spend far more to generate each dollar of revenue. Here's the quick math on their GAAP efficiency ratio trend for the year:

While the Q3 ratio of 73.43% shows improvement from Q2, it's defintely still far above the industry average. What this estimate hides is the continued impact of a large nonaccrual lending relationship (the 'Justice Entities'), which has negatively affected interest income by about $6.8 million in Q1 2025 alone. This single factor artificially inflates the ratio, but it's a real cost that hits the bottom line.

Industry Comparison and Actionable Insight

When you compare Carter Bankshares, Inc.'s profitability ratios to its peers, a clear picture emerges. The NIM of 2.86% in Q3 2025 is within the typical range for large U.S. banks (2.5% to 3.5%), but it is below the higher margins (3.5% to 4.5%) typically achieved by smaller community banks like CARE. This suggests their funding costs are relatively high or their loan yields are comparatively low for their asset size.

Their annualized Return on Assets (ROA) in Q3 2025 is approximately 0.45%, which is well below the industry aggregate ROA of 1.16% reported in Q1 2025. The high efficiency ratio is the primary culprit here. The clear action is that the management team must continue to drive down non-interest expense and resolve that legacy nonperforming loan relationship to bring the efficiency ratio closer to the 60% range, which is the ceiling for a well-run regional bank.

Debt vs. Equity Structure

When you look at Carter Bankshares, Inc. (CARE)'s balance sheet, the immediate takeaway is a conservative financing approach, favoring equity over debt. For a bank, managing this balance is crucial, and Carter Bankshares sits well below the industry average, which is defintely a point of stability.

The company's debt-to-equity (D/E) ratio-a core measure of financial leverage-stood at 0.2798 as of June 30, 2025. This ratio tells you that for every dollar of shareholder equity, the company has roughly 28 cents in debt. Compare that to the US Regional Banks industry average of approximately 0.5 as of November 2025, and you see a significantly lower reliance on borrowed money.

This low leverage is a sign of capital strength, especially given the current economic climate where funding costs are high. You want to see a bank's capital ratios remaining strong, and Carter Bankshares' Tier 1 Capital ratio of 10.66% at September 30, 2025, confirms they are well-capitalized, sitting comfortably above the regulatory minimum of 8.5%.

Here's the quick math on the major components as of the third quarter of 2025:

• Total Shareholders' Equity: $412.8 million
• Total Assets: $4.84 billion
• Key Debt Component (FHLB Borrowings): $175.5 million

The company's debt financing is primarily short-term and tactical, utilizing Federal Home Loan Bank (FHLB) borrowings. This source of debt increased to $175.5 million by September 30, 2025, up from $70 million at the end of 2024, with an average cost of 4.12%. This increase shows the company actively using debt to fund loan growth-total portfolio loans grew to $3.84 billion in Q3 2025-while maintaining a very low D/E ratio overall. It's a calculated, short-term funding move, not a structural shift to high leverage.

In terms of recent activity, Carter Bankshares has been managing its balance sheet for efficiency. In the first quarter of 2025, they surrendered $10.5 million of Bank Owned Life Insurance (BOLI) to reinvest the proceeds into higher-yielding, non-BOLI assets. This is a strategic move to optimize the asset side and boost returns, rather than a major debt or equity issuance. Also, the company received an October 2025 upgrade from Weiss Ratings to a Buy (B-) rating, which reflects a positive shift in sentiment toward their financial health and management of risk.

What this estimate hides is the ongoing impact of a large nonperforming loan relationship, which continues to consume capital and affect profitability, but the low D/E ratio provides a stronger capital buffer to absorb these hits. The management is clearly prioritizing equity strength and capital preservation over aggressive debt-fueled growth. To dive deeper into the full picture of the bank's stability, you can read the full analysis at Breaking Down Carter Bankshares, Inc. (CARE) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Carter Bankshares, Inc. (CARE) can cover its near-term obligations, and the quick answer is yes, but the funding mix is the real story. The bank maintains a strong capital position, with a Tier 1 Capital ratio of 10.66% as of September 30, 2025, which comfortably exceeds regulatory minimums, but we need to watch the underlying funding trends.

The traditional liquidity ratios-Current Ratio and Quick Ratio-are less insightful for a bank than for a manufacturer, but they still give a snapshot. The latest figures show both the Current Ratio and the Quick Ratio at approximately 0.89. This is common in banking because customer deposits are considered current liabilities, but they are a stable, core funding source, not like a supplier bill due in 30 days. It's defintely a number to track, still.

Working Capital and Funding Trends

Instead of working capital (current assets minus current liabilities), we look at the stability of the funding base and the quality of liquid assets. Carter Bankshares, Inc. has been actively managing its most liquid assets, and its deposit base is growing year-over-year.

• Cash and due from banks increased to $106.9 million by the end of Q3 2025.
• Total deposits reached $4.2 billion as of September 30, 2025.
• Deposit growth was 3.1% year-over-year (Q3 2025 vs. Q3 2024).

However, the second quarter of 2025 showed a dip, with a $34.6 million decrease in deposits, excluding an acquisition, as some large commercial clients moved funds for their own working capital needs. That kind of movement is a reminder that large commercial deposits can be fickle, so the bank's focus on a granular deposit base-with approximately 78.2% from retail customers-is a clear strength.

Cash Flow Dynamics

The cash flow statement tells us where the money is coming from and where it's going. For the nine months ended September 30, 2025, the bank reported a strong net income of $22.9 million. That's the starting point for operating cash flow (OCF), which is generally healthy.

Here's the quick math on the major cash flow movements in 2025:

The investing activity shows the bank is trimming its available-for-sale securities, which frees up cash, but the financing activity reveals a reliance on Federal Home Loan Bank (FHLB) borrowings, which increased to $113.5 million in Q2 2025. This is a common strategy to fund loan growth when deposit growth lags lending demand, but it also increases the cost of funds.

Near-Term Liquidity Assessment

Carter Bankshares, Inc. has a strong available liquidity position and remains well capitalized. The primary liquidity strength is its large, stable retail deposit base and the increasing cash on hand. The main risk is the reliance on wholesale funding (like FHLB borrowings) to support its aggressive loan growth, plus the ongoing issue of a concentrated nonperforming loan relationship that totaled $228.6 million in principal as of Q3 2025. This credit risk is a shadow over the otherwise solid liquidity picture. If you want to understand the long-term strategic direction that underpins these decisions, take a look at their Mission Statement, Vision, & Core Values of Carter Bankshares, Inc. (CARE).

Your next step is simple: Review the Q4 2025 earnings release immediately upon publication to check the FHLB borrowing trend. If it continues to climb, the cost of funding that loan growth will start to erode net interest margin.

Valuation Analysis

You're looking for a clear signal on whether Carter Bankshares, Inc. (CARE) is a buy, a hold, or a sell right now, and the short answer is that the stock appears reasonably valued, leaning toward undervalued based on its book value, but the analyst consensus is split, suggesting caution.

The core of any bank valuation rests on its Price-to-Book (P/B) ratio, and at a recent P/B of just 0.938, Carter Bankshares, Inc. is trading below its tangible book value per share. This means, theoretically, you are buying $1.00 of the company's net assets for only about $0.94, which is a classic indicator of a potentially undervalued regional bank stock.

Here's the quick math on key valuation multiples, using a recent stock price of $16.96 as of November 2025:

• Price-to-Earnings (P/E): The trailing twelve-month (TTM) P/E ratio is approximately 12.89.
• Forward P/E (FY 2025): Based on the consensus 2025 Earnings Per Share (EPS) forecast of $1.38, the forward P/E is about 12.29.
• Price-to-Book (P/B): The P/B ratio is a low 0.938.

To be fair, the Enterprise Value-to-EBITDA (EV/EBITDA) ratio is not a standard or useful metric for banks, which have unique capital structures and earnings profiles; that's why you'll often see EBITDA listed as N/A for financial institutions like this one. We should stick to P/E and P/B for a bank.

Near-Term Stock Performance and Dividends

Looking at the stock price trend over the last 12 months, Carter Bankshares, Inc. has been volatile, with a 52-week trading range between a low of $13.61 and a high of $20.53. The stock's 1-year return is down about -7.93% as of mid-November 2025, which reflects the broader pressure on regional bank stocks from interest rate and credit quality concerns. Still, the recent closing price of $16.96 is 22.36% above the 52-week low.

If you are an income investor, you need to know that Carter Bankshares, Inc. currently does not pay a regular cash dividend. The dividend yield is effectively 0.00%, and the last payment was a small distribution back in March 2020. The payout ratio is N/A. This is a growth-focused or turnaround story, not a dividend play, defintely.

Analyst Consensus and Price Targets

Wall Street's view on Carter Bankshares, Inc. is mixed, which is why the stock is sitting where it is. The consensus rating from a group of analysts is currently a Hold. This means analysts believe you should maintain your existing position, but not necessarily rush to buy more. Other analyst groups, however, have a more bullish Buy consensus.

The average 12-month price target is approximately $22.00, which suggests a potential upside of over 29% from the current price of $16.96. The range of forecasts is tight, with the highest and lowest targets often converging near that average, which gives you a clear sense of the near-term opportunity. This is a good place to start your deeper dive into the company's fundamentals, which you can read more about in Breaking Down Carter Bankshares, Inc. (CARE) Financial Health: Key Insights for Investors.

Next Step: Finance: Review the bank's latest 10-Q for Q3 2025 to understand the drivers behind the $1.38 EPS forecast, particularly the nonperforming loan trends.

Risk Factors

You're looking for the unvarnished truth about Carter Bankshares, Inc. (CARE), and the takeaway is clear: the bank's financial health is defintely defined by its success in resolving a single, massive credit issue, but its core banking business shows signs of strength. The biggest risk isn't the market-it's the lingering credit quality headache.

Operational and Financial Headwinds

The most immediate and material risk for Carter Bankshares, Inc. remains the nonperforming loan (NPL) relationship with the 'Justice Entities.' As of September 30, 2025, this single credit relationship drove the NPL balance to a substantial $228.6 million, representing 6.74% of total portfolio loans. Here's the quick math: since being placed on nonaccrual status in Q2 2023, this has negatively impacted interest income by an aggregate of $85.2 million. That's a huge drag on earnings.

Another operational challenge is cost management. While the efficiency ratio improved in Q3 2025, noninterest expenses have seen significant year-to-date increases, including a +55.6% jump in advertising and a +17.8% rise in professional and legal fees. Plus, the bank is liability-sensitive, meaning if interest rates rise again, their funding costs could increase faster than their loan yields, creating downside risk to the net interest margin (NIM).

• Credit Concentration: NPLs were $228.6 million in Q3 2025.
• Earnings Drag: $85.2 million aggregate negative impact on interest income since Q2 2023.
• Cost Creep: Advertising expenses rose +55.6% year-to-date 2025.

External and Industry-Specific Risks

Like all regional banks, Carter Bankshares, Inc. faces external risks from the broader economic climate and regulatory shifts. Their loan portfolio has a high concentration in Commercial Real Estate (CRE), especially in sectors like office, hospitality, and multifamily. If the economic slowdown deepens, or if remote work trends further depress office property values, this concentration could lead to higher charge-offs. Also, competition for deposits is fierce; while the bank's total deposits reached $4.2 billion as of September 30, 2025, maintaining a low cost of funds is a constant battle in a competitive market.

On the regulatory front, the bank made a strategic move in November 2025 by becoming a state member bank of the Federal Reserve Bank of Richmond. This is intended to streamline its regulatory structure, but it also means adapting to a new oversight framework. What this estimate hides is the potential for increased compliance costs during the transition, even if the long-term goal is greater efficiency.

Mitigation Strategies and Clear Actions

The management team is not sitting still. They are actively working to mitigate the core credit risk, having received aggregate curtailment payments of $73.4 million on the large NPL since June 2023, with $7.0 million received in Q3 2025 alone. That's a clear action toward resolution, not just talk.

Strategically, Carter Bankshares, Inc. is focused on diversification and growth to dilute the impact of the NPL. They are pushing for core deposit acquisition and noninterest income expansion, evidenced by the completion of a branch purchase in Q2 2025 that added approximately $55.9 million in deposits. They are a well-capitalized franchise, with a Tier 1 Capital Ratio of 10.66% at September 30, 2025, which gives them a cushion to absorb potential losses. For a deeper look at who is betting on these mitigation efforts, you should check out Exploring Carter Bankshares, Inc. (CARE) Investor Profile: Who's Buying and Why?

Growth Opportunities

You need to know where Carter Bankshares, Inc. (CARE) is heading, and the near-term picture is one of focused, regional expansion. The key takeaway is that their growth is being driven by strategic acquisitions and a deliberate push into higher-growth markets in North Carolina, which is translating into solid loan portfolio expansion.

Their strategy isn't about flashy product innovations; it's about deepening their footprint and improving operational efficiency. A major growth driver was the completion of a branch purchase from First Reliance Bank, which immediately added $55.9 million in deposits and two new branches in North Carolina. This is a concrete way to acquire core funding. Also, they're expanding their loan production offices into key North Carolina cities like Gastonia, following recent openings in Raleigh and Winston-Salem. This steady, targeted expansion is how a regional bank builds market share.

Future Revenue and Earnings Trajectory

The 2025 fiscal year is showing tangible results from these initiatives. For the nine months ended September 30, 2025, Carter Bankshares, Inc. reported net income of $22.9 million, or $1.00 diluted earnings per share (EPS). Here's the quick math: if we conservatively project the fourth quarter at the same run-rate as Q3 2025's net income of $5.4 million, the full-year 2025 net income could reach approximately $28.3 million. That's a defintely strong performance, especially with the net interest margin (NIM) improving to 2.86% in Q3 2025.

The loan portfolio is the engine here. Total portfolio loans grew to $3.8 billion as of September 30, 2025, representing a strong annualized loan growth rate of 9.4%. Plus, the bank is sitting on an anticipated tailwind from prior construction lending, with approximately $450 million of those loans expected to fund over the next 12 to 18 months.

• Q3 2025 Net Interest Income: $33.7 million.
• Q3 2025 Net Interest Margin: 2.86%.
• Annualized Loan Growth (Q3 2025): 9.4%.

Competitive Advantages and Strategic Actions

The competitive edge for Carter Bankshares, Inc. rests on two pillars: capital strength and a disciplined focus on profitability. The company's net profit margin surged to 20.3% as of October 2025, a significant jump from 9.8% previously, which signals much stronger operational efficiency and cost control. This focus on a strong balance sheet is what investors prefer in the current environment.

The bank is also actively managing its capital structure. They initiated a $20 million stock repurchase program, with $9.1 million already utilized, which is a clear action to return capital to shareholders. Also, their move in November 2025 to become a state member bank of the Federal Reserve Bank of Richmond is a strategic step that institutionalizes their regulatory oversight and may help with long-term stability and access to Federal Reserve services. This is a well-capitalized franchise with momentum, as reflected by a Tier 1 Capital ratio of 11.01% at March 31, 2025.

To understand the full context of these numbers, you should review the broader analysis in Breaking Down Carter Bankshares, Inc. (CARE) Financial Health: Key Insights for Investors.