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Carter Bankshares, Inc. Announces Record Third Quarter 2022 Financial Results

MARTINSVILLE, VA / ACCESSWIRE / October 27, 2022 / Carter Bankshares, Inc. (the "Company") (NASDAQ:CARE), the holding company of Carter Bank & Trust (the "Bank") today announced record net income of $14.4 million, or $0.59 diluted earnings per share ("EPS"), for the third quarter of 2022 compared to net income of $10.8 million, or $0.44 diluted EPS, in the second quarter of 2022 and net income of $11.2 million, or $0.42 diluted EPS, for the third quarter of 2021. The pre-tax pre-provision income1 was $19.5 million for the quarter ended September 30, 2022, $14.7 million for the quarter ended June 30, 2022 and $11.6 million for the quarter ended September 30, 2021.

For the nine months ended September 30, 2022, the Company had record net income of $34.5 million, or $1.38 diluted EPS, compared to net income of $26.0 million, or $0.98 diluted EPS for the same period in 2021. Pre-tax pre-provision earnings1 were $45.2 million and $30.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Third Quarter 2022 Financial Highlights

  • Annualized quarterly performance metrics were strong with return on average assets ("ROA") of 1.38% and return on average equity ("ROE") of 16.75%;
  • Net interest income increased $5.3 million, or 16.2%, to $37.7 million compared to the second quarter of 2022 primarily due to a 48 basis point increase in earning assets, offset by one basis point increase in funding costs;
  • Net interest margin, on a fully taxable equivalent basis ("FTE"), increased 48 basis points to 3.75% compared to the second quarter of 2022 and increased 79 basis points compared to the third quarter of 2021;
  • Total portfolio loans increased $33.5 million, or 4.4%, on an annualized basis, to $3.0 billion at September 30, 2022 compared to June 30, 2022;
  • Core deposits, including noninterest-bearing and interest-bearing demand deposits, money market and savings accounts, decreased $15.7 million compared to June 30, 2022 and increased $213.8 million compared to September 30, 2021;
  • Nonperforming loans decreased $5.0 million, or 41.7%, to $7.0 million at September 30, 2022 compared to June 30, 2022 and $1.9 million, or 20.9%, from September 30, 2021;
  • The provision for credit losses totaled $(0.1) million for the quarter ended September 30, 2022 compared to $1.8 million for the quarter ended June 30, 2022;
  • Expenses continue to be well controlled with an efficiency ratio of 57.1% for the quarter ended September 30, 2022 compared to 61.3% for the quarter ended June 30, 2022.

"We are very pleased with the solid third quarter 2022 financial results for our Company. The strong quarterly results represent a record level for our Company. We continue to see positive trends in net interest income expansion, loan growth, asset quality and expense control. Loans grew by an annualized rate of 4.4% since June 30, 2022, but were muted by a high level of payoffs in the third quarter. The positive side of this is that most of the pay downs were in adversely classified credits. Our production was in our commercial construction and residential mortgage portfolios. Loan pipelines also remain healthy and at record levels for the near term. The asset sensitivity of our balance sheet has us well positioned to further benefit from the rising rate environment. While there will undoubtedly be mounting pressure on higher funding costs, the increase in our asset yields should more than offset rising deposit rates at least in the short-term," stated Litz H. Van Dyke, Chief Executive Officer.

Van Dyke continued, "These factors are driving improvement in operating leverage and financial performance. The Company continues to be well capitalized, has strong liquidity, has improved asset quality and strong reserve levels, all of which will be beneficial to navigate the potential challenges should a recessionary environment develop over the next year."

Operating Highlights

Net interest income increased $5.3 million, or 16.2%, to $37.7 million compared to the second quarter of 2022 and $8.3 million, or 28.3%, compared to the third quarter of 2021. The net interest margin, on an FTE basis3, increased 48 basis points to 3.75% compared to the quarter ended June 30, 2022 and increased 79 basis points compared to the third quarter of 2021. The yield on interest-earning assets increased 48 basis points and 69 basis points compared to the quarters ended June 30, 2022 and September 30, 2021, respectively. Funding costs increased one basis point compared to the previous quarter and declined 13 basis points compared to the same quarter of 2021.

The Company continues to focus on the expansion of net interest income and net interest margin. The third quarter of 2022 was positively impacted by an increase in the yield on loans and investment securities as well as stable funding costs due to the rising interest rate environment. The third quarter of 2022 was also positively impacted by enhanced pricing on loans related to one large credit relationship. Certain of these loans may not be renewed at maturity and/or may not otherwise impact the net interest income and net interest margin as significantly in future periods.

The provision for credit losses decreased $1.9 million to $(0.1) million in the third quarter of 2022 compared to $1.8 million in the second quarter of 2022. The decrease in the provision for credit losses was primarily driven by the release of $3.7 million in the other segment due to principal pay-downs, partially offset by loan growth and increased qualitative reserves of $3.0 million. Qualitative adjustments for the quarter ended September 30, 2022 included increases in both residential and commercial construction factors due to escalation of project costs, supply chain and labor disruptions and increased material costs. Also impacting the provision was a purchased syndicated commercial and industrial ("C&I") loan that was charged-down by $3.4 million, of which $2.6 million was previously reserved.

The provision for unfunded commitments in the third quarter of 2022 was a provision of $0.2 million compared to a provision of $0.3 million in the second quarter of 2022 and a recovery of $(0.1) million in the third quarter of 2021. The decrease to the provision for unfunded commitments in the third quarter of 2022 compared to the second quarter of 2022 was related to a slight decrease in reserve rates.

At September 30, 2022 nonperforming loans decreased $5.0 million, or 41.7%, to $7.0 million since June 30, 2022 primarily due to a $4.9 million purchased syndicated C&I loan that was partially charged-down to $1.5 million and moved to held-for-sale. Net charge-offs were $3.7 million for the third quarter of 2022 compared to $9.6 million in the same quarter of 2021. As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 0.49% and 1.30% for the third quarter of 2022 and 2021, respectively. Nonperforming loans as a percentage of total portfolio loans were 0.23%, 0.40% and 0.31% as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Total noninterest income was $5.2 million for the third quarter of 2022, a decrease of $0.4 million, or 6.6%, from the second quarter of 2022 and a decrease of $1.7 million, or 24.3%, compared to the third quarter of 2021. The decrease of $0.4 million from the second quarter of 2022 related to the following fluctuations. Commercial loan swap fee income decreased $0.7 million, debit card interchange fees decreased $0.1 million and net securities losses of $0.1 million were offset by an increase in insurance commissions of $0.3 million and an increase of $0.2 million in other noninterest income.

Compared to the third quarter of 2021, the decrease in noninterest income of $1.7 million was primarily driven by declines in net security gains of $1.3 million and a decrease of $1.1 million in commercial loan swap fee income. These decreases were offset by increases of $0.4 million in insurance commissions, $0.2 million in other noninterest income and $0.1 million in service charges, commissions and fees. The declines in commercial loan swap fee income is related to the timing and demand for this product in the current rising interest rate environment. Changes in service charges on deposit accounts and debit card interchange fees were primarily volume driven. The increases in insurance commissions was due to increased customer activity. The increases in other noninterest income in the comparable periods related to an increase in fair value due to our interest rate swap contracts with commercial customers in the third quarter of 2022.

Total noninterest expense was $23.5 million for the third quarter of 2022, an increase of $0.1 million, or 0.2%, from the second quarter of 2022 and a decrease of $1.2 million, or 5.0%, compared to the third quarter of 2021. The increase from the second quarter of 2022 was primarily driven by $1.1 million higher salaries and employee benefits resulting from an increase of $0.5 million due to one extra working day and the reversal of expired vacation carryover from the prior period, as well as a $0.5 million profit sharing adjustment in the third quarter of 2022. Also increasing compared to the second quarter of 2022 was $0.2 million in losses on sales and write-downs of other real estate owned ("OREO"), net, offset by the reversal of $1.4 million in tax credit amortization during the third quarter of 2022 due to updated information from the developer which extends the in-service date to 2023 for one of the Company's partnerships.

Compared to the third quarter of 2021 the decrease of $1.2 million in total noninterest expense was primarily driven by $1.2 million decrease in tax credit amortization as previously mentioned. Other decreases included $0.4 million in losses on sales and write-downs of OREO, net, and $0.4 million in other noninterest expenses. These decreases were offset by a $0.7 million increase in salaries and employee benefits and $0.2 million in advertising expenses. The losses on sales and write-downs of OREO, net, related to sales and properties under contract during the third quarter of 2022. The increase compared to the year ago period in salaries and employee benefits was primarily related the $0.5 million profit sharing adjustment in the third quarter of 2022.

Financial Condition

Total assets were $4.1 billion at both September 30, 2022 and June 30, 2022. Total portfolio loans increased $33.5 million, or 4.4%, on an annualized basis, to $3.0 billion at September 30, 2022 compared to June 30, 2022 primarily due to consistent loan growth during the first three quarters of 2022 muted by a high level of payoffs in the third quarter of 2022. OREO decreased $0.3 million at September 30, 2022 compared to June 30, 2022.

Nonperforming loans decreased $5.0 million, or 41.7% to $7.0 million at September 30, 2022 compared to June 30, 2022 and $1.9 million, or 20.9%, from September 30, 2021. The decreases from June 30, 2022 and September 30, 2021 were primarily due to a purchased syndicated C&I loan totaling $4.9 million that was partially charged-down and moved to held-for-sale. Nonperforming loans as a percentage of total portfolio loans were 0.23%, 0.40% and 0.31% as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Closed retail bank offices have a remaining book value of $0.8 million at September 30, 2022, of which $0.7 million is under contract to be sold, compared to $1.0 million at June 30, 2022.

Federal Reserve Bank excess reserves decreased $4.5 million to $21.8 million at September 30, 2022 from $26.3 million at June 30, 2022 due to solid loan growth during the first three quarters of 2022.

The securities portfolio decreased $55.8 million and is currently 20.7% of total assets at September 30, 2022 compared to 22.0% of total assets at June 30, 2022. The decrease was due to redeploying security maturities into higher yielding loan growth and the continued decline in fair value. We have further diversified the securities portfolio as to bond types, maturities and interest rate structures.

Total deposits decreased $27.5 million to $3.7 billion at September 30, 2022 as compared to June 30, 2022. The decreases included $38.6 million in money market accounts, the intentional decline of $11.8 million in CDs and $2.0 million in savings accounts, offset by an increase of $14.2 million in noninterest-bearing demand accounts and an increase of $10.7 million in interest-bearing demand accounts. At September 30, 2022, noninterest-bearing deposits comprised 19.3% compared to 18.8% and 19.7% of total deposits at June 30, 2022 and September 30, 2021, respectively. CDs comprised 33.5%, 33.6% and 38.3% of total deposits at September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

The Company remains well capitalized. The Company's Tier 1 Capital ratio was 12.80% at September 30, 2022 compared to 12.70% at June 30, 2022. The Company's leverage ratio was 10.11% at September 30, 2022 compared to 9.96% at June 30, 2022. The Company's Total Risk-Based Capital ratio was 14.06% at September 30, 2022 compared to 13.96% at June 30, 2022.

Total capital decreased $19.3 million to $314.8 million at September 30, 2022 compared to June 30, 2022. The decrease in total capital from the previous quarter is primarily due to a $26.3 million decrease in other comprehensive income due to changes in fair value of available-for-sale investment securities, $7.7 million is related to the repurchase of common stock, offset by net income of $14.4 million for the three months ended September 30, 2022. The remaining difference of $0.3 million is related to restricted stock activity for the quarter ended September 30, 2022.

At September 30, 2022, funding sources accessible to the Company include borrowing availability at the Federal Home Loan Bank ("FHLB"), equal to 25.0% of the Company's assets or approximately $1.0 billion, subject to the amount of eligible collateral pledged, federal funds unsecured lines with six other correspondent financial institutions in the amount of $145.0 million and access to the institutional CD market. In addition to the above funding resources, the Company also has $623.7 million of unpledged available-for-sale investment securities as an additional source of liquidity.

About Carter Bankshares, Inc.

Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ: CARE) provides a full range of commercial banking, consumer banking, mortgage and services through its subsidiary Carter Bank & Trust. The Company has $4.1 billion in assets and 67 branches in Virginia and North Carolina. For more information or to open an account visit www.CBTCares.com.

Important Note Regarding Non-GAAP Financial Measures

In addition to traditional measures presented in accordance with GAAP, our management uses, and this press release contains or references, certain non-GAAP financial measures and should be read along with the accompanying tables in our definitions and reconciliations of GAAP to non-GAAP financial measures. This press release and the accompanying tables discuss financial measures that we believe are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Important Note Regarding Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements made in Mr. Van Dyke's quotes and relate to our financial condition, market conditions, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels and asset quality. Forward looking statements are typically identified by words or phrases such as "will likely result," "expect," "anticipate," "estimate," "forecast," "project," "intend," " believe," "assume," "strategy," "trend," "plan," "outlook," "outcome," "continue," "remain," "potential," "opportunity," "comfortable," "current," "position," "maintain," "sustain," "seek," "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements including, but not limited to the effects of:

  • market interest rates and the impacts of market interest rates on economic conditions, customer behavior, and the Company's loan and securities portfolios;
  • monetary and fiscal policies of the U.S. government, including policies of the Federal Reserve;
  • changes in accounting policies, practices, or guidance, for example, our adoption of CECL, including potential volatility in the Company's operating results due to application of the CECL methodology;
  • cyber-security threats, attacks or events; rapid technological developments and changes;
  • changes in the Company's liquidity and capital positions;
  • concentrations of loans secured by real estate, particularly commercial real estate, and the potential impacts of changes in market conditions on the value of real estate collateral;
  • an insufficient ACL
  • the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, war and other military conflicts (such as the ongoing war between Russia and Ukraine) or public health events (such as the COVID-19 pandemic), and of any governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;
  • a change in spreads on interest-earning assets and interest-bearing liabilities;
  • regulatory supervision and oversight;
  • legislation affecting the financial services industry as a whole, and the Company and the Bank, in particular;
  • the outcome of pending and future litigation and governmental proceedings;
  • increasing price and product/service competition;
  • the ability to continue to introduce competitive new products and services on a timely, cost-effective basis;
  • managing our internal growth and acquisitions;
  • the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or more costly than anticipated;
  • material increases in costs and expenses;
  • reliance on significant customer relationships;
  • general economic or business conditions, including unemployment levels, continuing supply chain disruptions and slowdowns in economic growth;
  • expansions or consolidations in the Company's branch network, including that the anticipated benefits of the Company's branch network optimization project are not fully realized in a timely manner or at all;
  • deterioration of the housing market and reduced demand for mortgages; and
  • re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described in our filings with the SEC including in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. All risk factors and uncertainties described herein and therein should be considered in evaluating the Company's forward-looking statements. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are prepared. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Carter Bankshares, Inc.
Wendy Bell, 276-656-1776
Senior Executive Vice President & Chief Financial Officer
wendy.bell@CBTCares.com

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
BALANCE SHEETS

September 30,
2022
June 30,
2022
September 30,
2021
(Dollars in Thousands, except per share data)
(unaudited) (unaudited) (unaudited)
ASSETS
Cash and Due From Banks
$ 38,749 $ 43,194 $ 43,061
Interest-Bearing Deposits in Other Financial Institutions
5,129 745 61,435
Federal Reserve Bank Excess Reserves
21,830 26,301 121,300
Total Cash and Cash Equivalents
65,708 70,240 225,796
Securities Available-for-Sale, at Fair Value
851,211 907,034 897,546
Loans Held-for-Sale
1,513 - 4,889
Portfolio Loans
3,031,349 2,997,896 2,884,157
Allowance for Credit Losses
(94,164 ) (97,981 ) (99,294 )
Portfolio Loans, net
2,937,185 2,899,915 2,784,863
Bank Premises and Equipment, net
73,344 73,202 74,771
Other Real Estate Owned, net
8,134 8,432 13,265
Federal Home Loan Bank Stock, at Cost
3,192 2,067 3,215
Bank Owned Life Insurance
56,387 56,046 55,028
Other Assets
117,636 106,344 74,690
Total Assets
$ 4,114,310 $ 4,123,280 $ 4,134,063
LIABILITIES
Deposits:
Noninterest-Bearing Demand
$ 718,549 $ 704,323 $ 722,145
Interest-Bearing Demand
509,949 499,282 433,144
Money Market
517,031 555,621 432,167
Savings
731,747 733,704 676,035
Certificates of Deposit
1,248,653 1,260,463 1,402,982
Total Deposits
3,725,929 3,753,393 3,666,473
Federal Home Loan Bank Borrowings
30,000 - 30,000
Other Liabilities
43,565 35,745 31,720
Total Liabilities
3,799,494 3,789,138 3,728,193
SHAREHOLDERS' EQUITY
Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares;
24,111,171 outstanding at September 30, 2022,
24,577,477 outstanding at June 30, 2022 and 26,461,426 at September 30, 2021
24,111 24,577 26,461
Additional Paid-in Capital
107,031 113,975 144,153
Retained Earnings
269,984 255,576 229,865
Accumulated Other Comprehensive (Loss) Income
(86,310 ) (59,986 ) 5,391
Total Shareholders' Equity
314,816 334,142 405,870
Total Liabilities and Shareholders' Equity
$ 4,114,310 $ 4,123,280 $ 4,134,063
PERFORMANCE RATIOS
Return on Average Assets (QTD Annualized)
1.38 % 1.04 % 1.07 %
Return on Average Assets (YTD Annualized)
1.12 % 0.98 % 0.84 %
Return on Average Shareholders' Equity (QTD Annualized)
16.75 % 12.51 % 10.95 %
Return on Average Shareholders' Equity (YTD Annualized)
12.80 % 10.95 % 8.76 %
Portfolio Loans to Deposit Ratio
81.36 % 79.87 % 78.66 %
Allowance for Credit Losses to Total Portfolio Loans
3.11 % 3.27 % 3.44 %
CAPITALIZATION RATIOS
Shareholders' Equity to Assets
7.65 % 8.10 % 9.82 %
Tier 1 Leverage Ratio
10.11 % 9.96 % 10.48 %
Risk-Based Capital - Tier 1
12.80 % 12.70 % 13.85 %
Risk-Based Capital - Total
14.06 % 13.96 % 15.11 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
INCOME STATEMENTS

Quarter-to-Date Year-to-Date
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
(Dollars in Thousands, except per share data)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Interest Income
$ 42,327 $ 36,961 $ 34,913 $ 111,966 $ 100,964
Interest Expense
4,602 4,502 5,512 13,560 17,831
NET INTEREST INCOME
37,725 32,459 29,401 98,406 83,133
(Recovery) Provision for Credit Losses
(77 ) 1,814 (413 ) 2,367 2,411
Provision (Recovery) for Unfunded Commitments
157 269 (60 ) 190 (945 )
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
37,645 30,376 29,874 95,849 81,667
NONINTEREST INCOME
(Losses) Gains on Sales of Securities, net
(4 ) 76 1,341 48 6,450
Service Charges, Commissions and Fees
1,750 1,749 1,660 5,452 4,958
Debit Card Interchange Fees
1,788 1,850 1,751 5,570 5,456
Insurance Commissions
876 568 427 1,713 1,099
Bank Owned Life Insurance Income
341 334 349 1,009 1,031
(Losses) Gains on Sales and Write-downs of Bank Premises, net
(4 ) (37 ) - 342 -
Other Real Estate Owned Income
13 12 7 35 82
Commercial Loan Swap Fee Income
18 756 1,096 774 2,057
Other
457 296 284 1,231 1,972
TOTAL NONINTEREST INCOME
5,235 5,604 6,915 16,174 23,105
NONINTEREST EXPENSE
Salaries and Employee Benefits
13,520 12,444 12,816 37,721 39,084
Occupancy Expense, net
3,412 3,296 3,333 10,060 10,298
FDIC Insurance Expense
543 629 582 1,540 1,882
Other Taxes
848 819 825 2,471 2,305
Advertising Expense
368 267 196 874 586
Telephone Expense
448 454 519 1,390 1,707
Professional and Legal Fees
1,310 1,202 1,244 3,731 3,908
Data Processing
833 842 1,018 2,516 2,893
Losses (Gains) on Sales and Write-downs of Other Real Estate Owned, net
169 (60 ) 608 268 3,423
Losses on Sales and Write-downs of Bank Premises, net
- - 7 - 114
Debit Card Expense
797 659 700 2,089 2,045
Tax Credit Amortization
(764 ) 615 427 466 1,281
Other Real Estate Owned Expense
38 141 84 220 280
Other
1,941 2,102 2,326 6,038 6,243
TOTAL NONINTEREST EXPENSE
23,463 23,410 24,685 69,384 76,049
INCOME BEFORE INCOME TAXES
19,417 12,570 12,104 42,639 28,723
Income Tax Provision
5,009 1,792 931 8,130 2,743
NET INCOME
$ 14,408 $ 10,778 $ 11,173 $ 34,509 $ 25,980
Shares Outstanding, at End of Period
24,111,171 24,577,477 26,461,426 24,111,171 26,461,426
Average Shares Outstanding-Basic & Diluted
24,265,075 24,490,302 26,348,488 24,827,143 26,339,930
PER SHARE DATA
Basic Earnings Per Common Share
$ 0.59 $ 0.44 $ 0.42 $ 1.38 $ 0.98
Diluted Earnings Per Common Share
$ 0.59 $ 0.44 $ 0.42 $ 1.38 $ 0.98
Book Value
$ 13.06 $ 13.60 $ 15.34 $ 13.06 $ 15.34
Market Value
$ 16.10 $ 13.20 $ 14.22 $ 16.10 $ 14.22
PROFITABILITY RATIOS (non-GAAP)
Net Interest Margin (FTE)3
3.75 % 3.27 % 2.96 % 3.31 % 2.84 %
Core Efficiency Ratio4
57.07 % 61.30 % 70.66 % 61.18 % 73.05 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
NET INTEREST MARGIN (FTE) (QTD AVERAGES)
(Unaudited)

September 30, 2022 June 30, 2022 September 30, 2021
(Dollars in Thousands)
Average
Balance
Income/
Expense
Rate
Average
Balance
Income/
Expense
Rate
Average
Balance
Income/
Expense
Rate
ASSETS
Interest-Bearing Deposits with Banks
$ 25,151 $ 134 2.11 % $ 30,606 $ 61 0.80 % $ 191,047 $ 76 0.16 %
Tax-Free Investment Securities3
30,073 215 2.84 % 33,873 237 2.81 % 26,849 221 3.27 %
Taxable Investment Securities
942,571 5,466 2.30 % 975,352 4,452 1.83 % 836,957 3,163 1.50 %
Total Securities
972,644 5,681 2.32 % 1,009,225 4,689 1.86 % 863,806 3,384 1.55 %
Tax-Free Loans3
141,082 1,115 3.14 % 147,060 1,159 3.16 % 174,680 1,350 3.07 %
Taxable Loans
2,883,790 35,652 4.90 % 2,831,384 31,323 4.44 % 2,755,595 30,403 4.38 %
Total Loans
3,024,872 36,767 4.82 % 2,978,444 32,482 4.37 % 2,930,275 31,753 4.30 %
Federal Home Loan Bank Stock
2,213 24 4.30 % 2,314 22 3.81 % 3,215 30 3.70 %
Total Interest-Earning Assets
4,024,880 42,606 4.20 % 4,020,589 37,254 3.72 % 3,988,343 35,243 3.51 %
Noninterest Earning Assets
109,307 120,540 169,554
Total Assets
$ 4,134,187 $ 4,141,129 $ 4,157,897
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Demand
$ 500,281 $ 462 0.37 % $ 487,567 $ 343 0.28 % $ 424,517 $ 278 0.26 %
Money Market
552,718 395 0.28 % 528,211 310 0.24 % 420,946 307 0.29 %
Savings
731,931 192 0.10 % 735,438 189 0.10 % 668,436 176 0.10 %
Certificates of Deposit
1,257,907 3,420 1.08 % 1,270,569 3,570 1.13 % 1,435,716 4,623 1.28 %
Total Interest-Bearing Deposits
3,042,837 4,469 0.58 % 3,021,785 4,412 0.59 % 2,949,615 5,384 0.72 %
Federal Funds Purchased
3,432 23 2.66 % 3,033 4 0.53 % - - - %
Federal Home Loan Bank Borrowings
3,913 31 3.14 % 6,594 10 0.61 % 30,000 89 1.18 %
Other Borrowings
6,326 79 4.95 % 6,205 76 4.91 % 3,437 39 4.50 %
Total Borrowings
13,671 133 3.86 % 15,832 90 2.28 % 33,437 128 1.52 %
Total Interest-Bearing Liabilities
3,056,508 4,602 0.60 % 3,037,617 4,502 0.59 % 2,983,052 5,512 0.73 %
Noninterest-Bearing Liabilities
736,441 757,831 769,871
Shareholders' Equity
341,238 345,681 404,974
Total Liabilities and Shareholders' Equity
$ 4,134,187 $ 4,141,129 $ 4,157,897
Net Interest Income3
$ 38,004 $ 32,752 $ 29,731
Net Interest Margin3
3.75 % 3.27 % 2.96 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
NET INTEREST MARGIN (FTE) (YTD AVERAGES)
(Unaudited)

September 30, 2022 September 30, 2021
(Dollars in Thousands)
Average
Balance
Income/
Expense
Rate
Average
Balance
Income/
Expense
Rate
ASSETS
Interest-Bearing Deposits with Banks
$ 64,858 $ 257 0.53 % $ 185,603 $ 182 0.13 %
Tax-Free Investment Securities3
30,188 663 2.94 % 37,064 906 3.27 %
Taxable Investment Securities
959,456 13,650 1.90 % 770,636 9,288 1.61 %
Total Securities
989,644 14,313 1.93 % 807,700 10,194 1.69 %
Tax-Free Loans3
147,372 3,480 3.16 % 198,185 4,703 3.17 %
Taxable Loans
2,802,692 94,720 4.52 % 2,771,860 86,965 4.19 %
Total Loans
2,950,064 98,200 4.45 % 2,970,045 91,668 4.13 %
Federal Home Loan Bank Stock
2,222 66 3.97 % 3,739 98 3.50 %
Total Interest-Earning Assets
4,006,788 112,836 3.77 % 3,967,087 102,142 3.44 %
Noninterest Earning Assets
128,105 174,194
Total Assets
$ 4,134,893 $ 4,141,281
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Demand
$ 484,076 $ 1,082 0.30 % $ 402,663 $ 727 0.24 %
Money Market
530,560 989 0.25 % 361,204 877 0.32 %
Savings
724,472 559 0.10 % 657,101 507 0.10 %
Certificates of Deposit
1,278,905 10,650 1.11 % 1,522,384 15,328 1.35 %
Total Interest-Bearing Deposits
3,018,013 13,280 0.59 % 2,943,352 17,439 0.79 %
Federal Funds Purchased
2,168 27 1.67 % - - - %
Federal Home Loan Bank Borrowings
3,978 47 1.58 % 31,282 276 1.18 %
Other Borrowings
5,637 206 4.89 % 3,090 116 5.02 %
Total Borrowings
11,783 280 3.18 % 34,372 392 1.52 %
Total Interest-Bearing Liabilities
3,029,796 13,560 0.60 % 2,977,724 17,831 0.80 %
Noninterest-Bearing Liabilities
744,597 767,207
Shareholders' Equity
360,500 396,350
Total Liabilities and Shareholders' Equity
$ 4,134,893 $ 4,141,281
Net Interest Income3
$ 99,276 $ 84,311
Net Interest Margin3
3.31 % 2.84 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
LOANS AND LOANS HELD-FOR-SALE
(Unaudited)

(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
Commercial
Commercial Real Estate
$ 1,365,348 $ 1,389,117 $ 1,346,953
Commercial and Industrial
325,973 336,477 387,402
Total Commercial Loans
1,691,321 1,725,594 1,734,355
Consumer
Residential Mortgages
617,681 559,313 449,118
Other Consumer
47,006 48,033 44,953
Total Consumer Loans
664,687 607,346 494,071
Construction
350,037 322,731 297,337
Other
325,304 342,225 358,394
Total Portfolio Loans
3,031,349 2,997,896 2,884,157
Loans Held-for-Sale
1,513 - 4,889
Total Loans
$ 3,032,862 $ 2,997,896 $ 2,889,046

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
ASSET QUALITY DATA
(Unaudited)

(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
Nonperforming Loans



Commercial Real Estate
$ 2,416 $ 3,258 $ 752
Commercial and Industrial
201 5,210 547
Residential Mortgages
3,509 2,555 2,500
Other Consumer
9 6 77
Construction
875 1,000 4,991
Other
- - -
Total Nonperforming Loans
7,010 12,029 8,867
Other Real Estate Owned
8,134 8,432 13,265
Total Nonperforming Assets
$ 15,144 $ 20,461 $ 22,132
Nonperforming Loans to Total Portfolio Loans 0.23 % 0.40 % 0.31 %
Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned 0.50 % 0.68 % 0.76 %
Allowance for Credit Losses to Total Portfolio Loans 3.11 % 3.27 % 3.44 %
Allowance for Credit Losses to Nonperforming Loans 1343.28 % 814.54 % 1119.82 %
Net Loan Charge-offs (Recoveries) QTD $ 3,740 $ 209 $ 9,612
Net Loan Charge-offs (Recoveries) YTD $ 4,142 $ 402 $ 18,833
Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans QTD 0.49 % 0.03 % 1.30 %
Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans YTD 0.19 % 0.03 % 0.85 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA
ALLOWANCE FOR CREDIT LOSSES
(Unaudited)

Quarter-to-Date Year-to-Date
(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Balance Beginning of Year
$ 97,981 $ 96,376 $ 109,319 $ 95,939 $ 54,074
Impact of CECL Adoption
- - - - 61,642
Provision for Credit Losses
(77 ) 1,814 (413 ) 2,367 2,411
Charge-offs:
Commercial Real Estate
- - 9,187 - 17,425
Commercial and Industrial
3,432 - 188 3,432 196
Residential Mortgages
- 28 56 45 273
Other Consumer
418 391 424 1,244 1,833
Construction
- - - - -
Other
- - - - -
Total Charge-offs
3,850 419 9,855 4,721 19,727
Recoveries:
Commercial Real Estate
- - 9 - 149
Commercial and Industrial
- - 3 1 5
Residential Mortgages
1 96 1 97 168
Other Consumer
109 114 198 332 479
Construction
- - 32 149 93
Other
- - - - -
Total Recoveries
110 210 243 579 894
Total Net Charge-offs
3,740 209 9,612 4,142 18,833
Balance End of Period
$ 94,164 $ 97,981 $ 99,294 $ 94,164 $ 99,294

DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:
(Unaudited)

1 Pre-tax Pre-provision Income (Non-GAAP)
Quarter-to-Date Year-to-Date
(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Net Interest Income
$ 37,725 $ 32,459 $ 29,401 $ 98,406 $ 83,133
Noninterest Income
5,235 5,604 6,915 16,174 23,105
Noninterest Expense
23,463 23,410 24,685 69,384 76,049
Pre-tax Pre-provision Income
19,497 14,653 11,631 45,196 30,189

Losses (Gains) on Sales of Securities, net
4 (76 ) (1,341 ) (48 ) (6,450 )
Losses (Gains) on Sales and Write-downs of Bank Premises, net
4 37 7 (342 ) 114
Losses (Gains) on Sales and Write-downs of OREO, net
169 (60 ) 608 268 3,423
Branch Consolidation Severance and Expenses
- - 39 - 566
Non-recurring Fees5
(1 ) (4 ) (1,289 ) (70 ) (1,898 )
OREO Income
(13 ) (12 ) (7 ) (35 ) (82 )
FHLB Prepayment Penalty
- - - 18 4
Contingent Liability
- (10 ) - 150 -
Tax Credit Amortization Reversal6
(1,379 ) - - (1,379 ) -
Gain on Sale of Branches
- - - - (506 )
Core Pre-tax Pre-provision Income (Non-GAAP)
$ 18,281 $ 14,528 $ 9,648 $ 43,758 $ 25,360

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA

2 Core Net Income (Non-GAAP)
Quarter-to-Date Year-to-Date
(Dollars in Thousands, except per share data)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Net Income
$ 14,408 $ 10,778 $ 11,173 $ 34,509 $ 25,980
Losses (Gains) on Sales of Securities, net
4 (76 ) (1,341 ) (48 ) (6,450 )
Losses (Gains) on Sales and Write-downs of Bank Premises, net
4 37 7 (342 ) 114
Losses (Gains) on Sales and Write-downs of OREO, net
169 (60 ) 608 268 3,423
Branch Consolidation Severance and Expenses
- - 39 - 566
Non-recurring Fees5
(1 ) (4 ) (1,289 ) (70 ) (1,898 )
OREO Income
(13 ) (12 ) (7 ) (35 ) (82 )
FHLB Prepayment Penalty
- - - 18 4
Contingent Liability
- (10 ) - 150 -
Tax Credit Amortization Reversal6
(1,379 ) - - (1,379 ) -
Gain on Sale of Branches
- - - - (506 )
Total Tax Effect
256 26 416 302 1,014
Core Net Income (Non-GAAP)
$ 13,448 $ 10,679 $ 9,606 $ 33,373 $ 22,165

Average Shares Outstanding - diluted
24,265,075 24,490,302 26,348,488 24,827,143 26,339,930
Core Earnings Per Common Share (diluted) (Non-GAAP)
$ 0.55 $ 0.44 $ 0.36 $ 1.34 $ 0.84

3 Net interest income has been computed on a fully taxable equivalent basis ("FTE") using a 21% federal income tax rate for the 2022 and 2021 periods.

Net Interest Income (FTE) (Non-GAAP)
Quarter-to-Date Year-to-Date
(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Interest Income (FTE)(Non-GAAP)





Interest and Dividend Income (GAAP)
$ 42,327 $ 36,961 $ 34,913 $ 111,966 $ 100,964
Tax Equivalent Adjustment3
279 293 330 870 1,178
Interest and Dividend Income (FTE) (Non-GAAP)
42,606 37,254 35,243 112,836 102,142
Average Earning Assets
4,024,880 4,020,589 3,988,343 4,006,788 3,967,087
Yield on Interest-earning Assets (GAAP)
4.17 % 3.69 % 3.47 % 3.74 % 3.40 %
Yield on Interest-earning Assets (FTE) (Non-GAAP)
4.20 % 3.72 % 3.51 % 3.77 % 3.44 %
Net Interest Income (GAAP)
$ 37,725 $ 32,459 $ 29,401 $ 98,406 $ 83,133
Tax Equivalent Adjustment3
279 293 330 870 1,178
Net Interest Income (FTE) (Non-GAAP)
38,004 32,752 29,731 99,276 84,311
Average Earning Assets
4,024,880 4,020,589 3,988,343 4,006,788 3,967,087
Net Interest Margin (GAAP)
3.72 % 3.24 % 2.92 % 3.28 % 2.80 %
Net Interest Margin (FTE) (Non-GAAP)
3.75 % 3.27 % 2.96 % 3.31 % 2.84 %

CARTER BANKSHARES, INC.
CONSOLIDATED SELECTED FINANCIAL DATA

4 Core Efficiency Ratio (Non-GAAP)
Quarter-to-Date Year-to-Date
(Dollars in Thousands)
September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
NONINTEREST EXPENSE
$ 23,463 $ 23,410 $ 24,685 $ 69,384 $ 76,049
Less: (Losses) Gains on Sales and Write-downs of OREO, net
(169 ) 60 (608 ) (268 ) (3,423 )
Less: Losses on Sales and Write-downs of Bank Premises, net
- - (7 ) - (114 )
Less: Branch Consolidation Severance and Expenses
- - (39 ) - (566 )
Less: FHLB Prepayment Penalty
- - - (18 ) (4 )
Add: Tax Credit Amortization Reversal6
1,379 - - 1,379 -
Less: Contingent Liability
- 10 - (150 ) -
CORE NONINTEREST EXPENSE (Non-GAAP)
$ 24,673 $ 23,480 $ 24,031 $ 70,327 $ 71,942
NET INTEREST INCOME
$ 37,725 $ 32,459 $ 29,401 $ 98,406 $ 83,133
Plus: Taxable Equivalent Adjustment3
279 293 330 870 1,178
NET INTEREST INCOME (FTE) (Non-GAAP)
38,004 32,752 29,731 99,276 84,311
Less: Losses (Gains) on Sales of Securities, net
4 (76 ) (1,341 ) (48 ) (6,450 )
Less: Losses (Gains) on Sales of Bank Premises, net
4 37 - (342 ) -
Less: Non-recurring Fees5
(1 ) (4 ) (1,289 ) (70 ) (1,898 )
Less: OREO Income
(13 ) (12 ) (7 ) (35 ) (82 )
Less: Gain on Sale of Branches
- - - - (506 )
Noninterest Income
5,235 5,604 6,915 16,174 23,105
CORE NET INTEREST INCOME (FTE) (Non-GAAP) plus NONINTEREST INCOME
$ 43,233 $ 38,301 $ 34,009 $ 114,955 $ 98,480
CORE EFFICIENCY RATIO (Non-GAAP)
57.07 % 61.30 % 70.66 % 61.18 % 73.05 %

5 The Non-recurring fees include PPP related fees.
6 Tax credit amortization was reversed due to the extension of the in-service date from 2022 to 2023.

SOURCE: Carter Bankshares, Inc.



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