Carter Bankshares, Inc. (CARE) is a bank holding company headquartered in Martinsville, Virginia, with $4.7 billion in assets as of December 31, 2024. The company's wholly-owned subsidiary, Carter Bank & Trust, operates 65 branches across Virginia and North Carolina, providing a full range of retail and commercial banking products and services.
Business Overview and Detailed History Carter Bankshares, Inc. was incorporated on October 7, 2020, for the sole purpose of acquiring Carter Bank & Trust and serving as the bank's parent holding company. The origins of the bank, however, date back to 2006 when it was formed through the merger of ten regional banking institutions. This strategic combination brought together a network of community banks with deep roots in Virginia and North Carolina, creating a stronger financial institution poised to serve the needs of its local markets.
The ten merged banks and their respective main office locations were Blue Ridge Bank, N.A. (Floyd, Virginia), Central National Bank (Lynchburg, Virginia), Community National Bank (South Boston, Virginia), First National Bank (Rock Mount, Virginia), First National Exchange Bank (Roanoke, Virginia), Mountain National Bank (Galax, Virginia), Patrick Henry National Bank (Martinsville, Virginia), Patriot Bank, N.A. (Fredericksburg, Virginia), Peoples National Bank (Danville, Virginia), and Shenandoah National Bank (Staunton, Virginia).
In 2020, Carter Bank & Trust entered into an Agreement and Plan of Reorganization with Carter Bankshares, Inc. and a wholly-owned subsidiary of the company, pursuant to which the reorganization would be effected. Effective in November 2020, the bank merged with the merger sub and survived such merger as a wholly-owned subsidiary of Carter Bankshares, Inc. Prior to the effective time, Carter Bankshares, Inc. had no material assets and had not conducted any business or operations except for activities related to the company's organization and the reorganization.
The company's common stock is traded on the Nasdaq Global Select Market under the ticker symbol CARE. In addition to its banking services, Carter Bankshares also offers insurance products to its customers.
Over the years, Carter Bank & Trust has navigated various economic and industry challenges, from the 2008 financial crisis to the COVID-19 pandemic. Throughout these periods, the bank has demonstrated its resilience, adapting its strategies to support its customers and communities. In 2024, the company unveiled a new brand identity that emphasizes its commitment to relationship banking and meeting the evolving needs of its clientele.
Financial Performance and Ratios For the year ended December 31, 2024, Carter Bankshares reported net income of $24.5 million, or $1.06 per diluted share, compared to $23.4 million, or $1.00 per diluted share, in the previous year. The company's return on average assets (ROAA) stood at 0.54%, while its return on average equity (ROAE) was 6.67%.
As of December 31, 2024, the company's total assets reached $4.7 billion, up from $4.5 billion at the end of 2023. The loan portfolio grew by 3.4% to $3.6 billion, with strong performance in the commercial real estate (CRE) and construction loan segments. The bank's deposit base also experienced robust growth, increasing by 11.6% to $4.2 billion.
Carter Bankshares' capital position remained strong, with a Tier 1 capital ratio of 10.88% and a total risk-based capital ratio of 12.13% as of December 31, 2024. These ratios exceeded the well-capitalized thresholds set by regulatory authorities, underscoring the company's financial stability and ability to withstand potential economic headwinds.
For the fiscal year 2024, Carter Bankshares reported annual revenue of $221.73 million, annual net income of $24.52 million, annual operating cash flow of $36.94 million, and annual free cash flow of $28.80 million.
In the most recent quarter (Q4 2024), the company reported revenue of $33.546 million and net income of $8.28 million. Compared to Q4 2023, revenue increased by 6.8% and net income increased by 47.5%. The increase in revenue and net income was primarily driven by higher net interest income due to loan growth and higher loan yields, partially offset by higher funding costs.
Liquidity and Solvency The company's liquidity position remained solid, with a highly liquid assets to total assets ratio of 10.9% as of December 31, 2024. This was supported by the bank's access to a diverse range of funding sources, including deposits, Federal Home Loan Bank (FHLB) borrowings, and unsecured lines of credit.
Carter Bankshares' debt ratios also indicated a strong solvency profile. The debt-to-equity ratio stood at 0.18, and the interest coverage ratio was 0.22, suggesting the company's ability to meet its debt obligations.
As of December 31, 2024, Carter Bankshares had cash and cash equivalents of $131.17 million. The company has borrowing availability at the FHLB of Atlanta equal to 25% of its assets or approximately $1.20 billion, subject to the amount of eligible collateral pledged, of which the company is eligible to borrow up to an additional $735.29 million. The company also has unsecured facilities with three other correspondent financial institutions totaling $30 million and a fully secured facility with one other correspondent financial institution totaling $45 million.
Operational Highlights and Initiatives In 2024, Carter Bankshares embarked on a multi-year initiative to refine and enhance its brand image and position in the markets it serves. This included the introduction of a new purpose statement, "To create opportunities for more people and businesses to prosper," and a set of core values – "Build Relationships, Earn Trust, and Take Ownership" – to align the organization's culture and priorities.
The company also continued to focus on the resolution of its largest nonperforming credit relationship, which had been placed on nonaccrual status in the second quarter of 2023. Through a series of curtailment payments totaling $49.9 million in 2024, the company was able to reduce the aggregate nonperforming loan balance from this relationship to $252.0 million as of December 31, 2024.
Additionally, Carter Bankshares announced the acquisition of two branches and associated deposits from First Reliance Bank in North Carolina, further expanding its footprint and customer base in the state. This transaction, expected to close in the first half of 2025, aligns with the company's strategic focus on prudent growth, both organically and through selective acquisitions.
Risks and Challenges While Carter Bankshares has demonstrated resilience, the company faces several risks and challenges that warrant consideration. The bank's loan portfolio is concentrated in commercial real estate, with CRE loans representing 51.6% of the total loan portfolio as of December 31, 2024. This concentration exposes the company to potential risks associated with changes in the commercial real estate market and economic conditions in its primary markets.
The company's reliance on its largest credit relationship, which accounted for 7.0% of total portfolio loans as of December 31, 2024, also represents a significant risk. Any deterioration in the financial condition of the borrowers or guarantors, adverse changes in collateral values, or disputes with other creditors could have a material adverse effect on the company's financial performance.
Additionally, the ongoing regulatory environment, with its evolving compliance requirements and potential for further changes, poses a challenge for Carter Bankshares. The company must continue to invest in its risk management and compliance capabilities to ensure adherence to applicable laws and regulations.
Human Capital Management As of December 31, 2024, Carter Bankshares employed 680 full-time associates across its two-state footprint. For fiscal year 2024, the company hired 182 associates and had a voluntary separation turnover rate of 12.3%. None of the associates are represented by a collective bargaining unit.
The company offers competitive compensation, health benefits, wellness programs, a 401(k) program with matching and employer contributions, flexible spending accounts, and employee assistance programs to all eligible associates. Carter Bankshares also invests in associate development through training, leadership programs, and a standardized performance review process.
Carter Bankshares focuses on creating an inclusive work environment, promoting engagement, and providing opportunities for associates to develop and thrive. The company conducts annual engagement surveys and uses the results to inform decisions on cultivating its desired culture and workforce. The company's efforts to promote inclusion are reflected in its core values, engagement initiatives, and commitment to cultivating a diverse and inclusive workforce.
Regulatory Compliance and Legal Matters As a regulated financial institution, Carter Bankshares is subject to various capital, liquidity, and other requirements administered by federal and state banking regulators. The company believes it meets all applicable regulatory capital and other requirements.
Carter Bankshares is also subject to various laws and regulations related to consumer protection, Bank Secrecy Act/anti-money laundering, mortgage banking, and other areas. The company monitors regulatory developments and adjusts its operations accordingly to maintain compliance.
In the normal course of business, Carter Bankshares is subject to various legal proceedings and claims, but there are no material pending legal matters to report as of the filing date.
Industry Trends The banking industry continues to experience technological innovation, increased competition from non-bank financial services providers, regulatory changes, and macroeconomic uncertainties. Key industry trends include:
- Accelerated digital transformation and adoption of fintech solutions - Evolving customer preferences and demands for digital banking experiences - Ongoing regulatory scrutiny and compliance requirements - Margin pressure from the interest rate environment and competition for deposits - Heightened focus on risk management, cybersecurity, and operational resilience
Carter Bankshares is positioning itself to navigate these industry dynamics through investments in technology, brand enhancement, prudent growth strategies, and disciplined risk management. The company's strong capital and liquidity positions provide flexibility to execute its strategic initiatives.
Conclusion Carter Bankshares, Inc. (CARE) is a resilient community bank that has navigated various challenges over its nearly 50-year history. The company's recent rebranding efforts and strategic initiatives, such as the acquisition of First Reliance Bank's North Carolina branches, demonstrate its commitment to adapting to the changing needs of its customers and markets.
While the company faces risks related to its commercial real estate concentration and its largest credit relationship, Carter Bankshares' strong capital position, liquidity, and operational resilience suggest it is well-positioned to continue serving its communities and generating value for its shareholders. As the company continues to execute its strategic plan, investors will closely monitor its ability to manage its risks, drive organic growth, and capitalize on selective acquisition opportunities.
The company's focus on human capital management, regulatory compliance, and industry trend adaptation further reinforces its commitment to long-term success. With its strong financial foundation and strategic initiatives in place, Carter Bankshares appears poised to navigate the evolving banking landscape and continue its growth trajectory in the coming years.