Carter Bankshares, Inc. (NASDAQ:CARE), the holding company of Carter Bank, reported net income of $7.8 million, or $0.35 diluted earnings per share, for the third quarter of 2026. The results included higher net interest income and loan growth, while the company also recorded $12.1 million in net charge-offs and continued to manage the effects of transactions completed earlier in the year.
#Third-Quarter Financial Results
Net interest income was $41.2 million for the quarter ended September 30, 2026, compared with $40.0 million in the second quarter of 2026 and $33.7 million in the third quarter of 2025. Net interest margin was 3.51%, compared with 3.38% in the prior quarter and 2.86% in the prior-year quarter.
On a full tax-equivalent basis, net interest margin was 3.55%, compared with 3.40% in the second quarter of 2026 and 2.87% in the third quarter of 2025. Carter Bankshares said the quarter-on-quarter improvement reflected higher yields on interest-earning assets and lower funding costs.
Quarterly net income was below the $28.9 million reported for the second quarter of 2026, which included gains connected with the Insurance Transaction. Third-quarter net income was higher than the $5.4 million recorded in the third quarter of 2025. Adjusted net income was $7.6 million, compared with $11.6 million in the prior quarter and $5.7 million in the prior-year quarter.
#Nine-Month Results
For the nine months ended September 30, 2026, net income was $122.4 million, or $5.53 diluted EPS, compared with $22.9 million, or $1.00 diluted EPS, for the same period in 2025. Net interest income was $117.1 million, compared with $96.2 million a year earlier.
Adjusted net income for the nine-month period was $27.8 million, compared with $22.3 million for the same period in 2025. Noninterest income was $104.7 million for the nine months ended September 30, 2026, compared with $17.2 million in the prior-year period, primarily reflecting gains from the Loan Sale Transaction and Insurance Transaction.
#2026 Transactions and Securities Repositioning
During the first six months of 2026, Carter Bankshares completed the sale of a large nonperforming credit relationship and the sale of its membership interest in Bearing Insurance Group, LLC. The transactions generated aggregate nonrecurring pre-tax gains of approximately $100.9 million.
The company also repositioned part of its available-for-sale securities portfolio during the second quarter. It sold $139.4 million in book value of lower-yielding securities and purchased approximately $88.5 million of higher-yielding securities, while recognising a $12.5 million pre-tax loss on the repositioning.
Carter Bankshares said the securities repositioning contributed to higher investment securities yields during the third quarter. It also said the action supported interest-rate risk management and provided liquidity for organic loan growth.
#Loan Growth and Balance Sheet
Total portfolio loans increased $36.0 million during the third quarter to $3.8 billion at September 30, 2026, despite approximately $161.0 million in loan payoffs. The increase primarily reflected commercial real estate, construction and residential mortgage lending.
Compared with September 30, 2025, total portfolio loans decreased 1.7%. Excluding the impact of the Loan Sale Transaction, the company reported an increase of 4.53%.
Total assets were $4.7 billion at September 30, 2026, compared with $4.8 billion at June 30, 2026. Cash and cash equivalents decreased $174.8 million to $101.7 million, while securities available-for-sale increased $37.3 million to $677.6 million.
Total deposits were $4.1 billion at September 30, 2026, a decrease of $80.2 million. Carter Bankshares said liquidity was used to fund loan growth and securities purchases and to support the decline in deposits during the quarter.
At September 30, 2026, funding sources accessible to the company included borrowing availability at the Federal Home Loan Bank equal to 30.0% of total assets, or $1.4 billion, subject to eligible collateral pledged. The company had the capacity to borrow an additional $818.7 million.
#Credit Quality
Nonperforming loans stood at $27.9 million at September 30, 2026, compared with $37.6 million at June 30, 2026 and $258.6 million at September 30, 2025. Nonperforming assets were $29.2 million, compared with $40.9 million at June 30, 2026 and $259.0 million at September 30, 2025.
The company recorded $12.1 million in net charge-offs during the quarter, compared with net recoveries of $0.7 million in the second quarter of 2026 and net charge-offs of $0.2 million in the third quarter of 2025.
The charge-offs included $8.0 million related to a commercial and industrial relationship involving three loans. The relationship had been placed on nonaccrual status during the second quarter, and the charge-off followed updated third-party collateral valuations and collection developments, including a voluntary Chapter 11 bankruptcy filing.
Carter Bankshares also recorded a $4.0 million charge-off on a commercial real estate loan. Two residential mortgage loans totaling $2.0 million were placed on nonaccrual status during the quarter.
The allowance for credit losses on loans was $53.6 million, or 1.42% of total portfolio loans, at September 30, 2026. The allowance was $55.2 million, or 1.48%, at June 30, 2026 and $73.8 million, or 1.92%, at September 30, 2025.
#Shareholder and Lending Initiatives
During the quarter, Carter Bankshares established a dividend reinvestment and stock purchase plan for existing shareholders. The company will offer up to 1.0 million shares of common stock through the plan. Participants may obtain additional shares through the reinvestment of cash dividends and optional cash purchases.
Dividend reinvestments will begin with the first dividend, if any, declared and paid after August 24, 2026. Computershare Trust Company, N.A. administers the plan.
Carter Bank also launched a dedicated Small Business Administration lending team focused on SBA 7(a) financing. The company said the team is intended to support eligible small businesses nationwide through relationship-based banking and personalised service.
#Expenses and Taxes
Noninterest expense was $29.5 million in the third quarter of 2026, compared with $30.0 million in the second quarter and $28.7 million in the third quarter of 2025. The quarter included higher salaries and employee benefits and higher Federal Deposit Insurance Corporation insurance expense, partly offset by lower other noninterest expense and other taxes.
The company recorded an income tax benefit of $1.4 million for the third quarter, compared with an income tax provision of $1.7 million in the same quarter of 2025. For the nine months ended September 30, 2026, the company recorded an income tax provision of $31.2 million, compared with $6.0 million for the same period in 2025.
#Management Commentary
Chief Executive Officer Litz H. Van Dyke said the company continued to see lending activity in small business and commercial and industrial lending. Van Dyke also said construction lending commitments were expected to fund over the next 12 to 18 months as projects progress. These comments are management’s statements about anticipated lending activity and funding.
#Key Takeaways
- Third-quarter net income was $7.8 million, or $0.35 diluted EPS.
- Net interest income was $41.2 million and net interest margin was 3.51%.
- Portfolio loans increased $36.0 million to $3.8 billion despite approximately $161.0 million in loan payoffs.
- Net charge-offs were $12.1 million, including an $8.0 million commercial and industrial charge-off and a $4.0 million commercial real estate charge-off.
- The company established a plan offering up to 1.0 million shares and launched an SBA 7(a) lending team.
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