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Carter Bankshares, Inc. (CARE)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered improving profitability: diluted EPS of $0.39 (+8% q/q, +56% y/y), NIM (FTE) up 12 bps q/q to 2.70%, and efficiency ratio improved to 75.7% from 83.6% in Q4 2024, aided by lower funding costs and a $1.9M BOLI death benefit gain .
  • Credit costs were favorable, with a $(2.0)M recovery for credit losses and NPL ratio stable at 7.09%; the largest relationship (Justice Entities) continues to amortize, with NPL balance down to $245.1M vs $301.9M a year ago .
  • Against S&P Global consensus, Q1 EPS and revenue were above expectations: EPS $0.39 vs $0.303*; operating revenue beat consensus as funding costs fell and noninterest income rose on BOLI gains; estimates based on S&P Global data* .
  • Strategic deposit growth and reduced FHLB borrowings (to $55M) support margin trajectory; management reiterated NIM tailwinds from late‑2024 Fed cuts and expects normalization once the large nonaccrual is resolved .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion: NIM (FTE) rose to 2.70% (+12 bps q/q; +10 bps y/y) as cost of funds declined following Fed rate cuts (“our balance sheet remains slightly liability sensitive… further declines… should positively benefit our net interest margin”) .
  • Noninterest income uplift: total noninterest income increased to $6.9M (+29% q/q), supported by a $1.9M BOLI death benefit gain; management is exchanging BOLI to enhance ratings/yields .
  • Funding progress: deposits grew $47.5M q/q and FHLB borrowings fell $15M q/q; branch purchase approvals received, expected to add ~$60M deposits in May .

What Went Wrong

  • Large NPL exposure persists: NPLs were $261.4M (7.09% of loans), with 93.7% tied to the Justice Entities; interest income was negatively impacted by $6.8M due to nonaccrual status .
  • CRE credit migration: a $9.5M CRE relationship (four loans) moved to nonaccrual, partially offset by curtailments on the largest NPL .
  • Expense mix: y/y noninterest expense rose $1.8M on occupancy, advertising (brand refresh), data processing, and a $0.3M 1035 exchange fee tied to BOLI surrender, though q/q expenses fell $0.8M .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Operating Revenue ($USD Millions; Net Interest Income + Noninterest Income)$33.46 (28.419 + 5.045) $34.52 (29.148 + 5.368) $37.04 (30.138 + 6.901)
Diluted EPS ($)$0.25 $0.36 $0.39
Net Interest Margin (FTE, %)2.60% 2.58% 2.70%
Efficiency Ratio (GAAP, %)78.46% 83.63% 75.71%
Net Interest Income ($USD Millions)$28.42 $29.15 $30.14
Noninterest Income ($USD Millions)$5.05 $5.37 $6.90
(Recovery) Provision for Credit Losses ($USD Millions)$0.02 $(5.11) $(2.03)
NPLs to Total Loans (%)8.76% 7.15% 7.09%

Segment breakdown – portfolio loans

Segment ($USD Millions)Q1 2024Q4 2024Q1 2025
Commercial Real Estate$1,728.93 $1,869.83 $1,915.86
Commercial & Industrial$257.18 $230.48 $234.02
Residential Mortgages$788.13 $777.47 $801.25
Other Consumer$32.43 $28.91 $28.80
Construction$397.22 $462.93 $459.29
Other$305.19 $255.20 $248.27
Total Portfolio Loans$3,509.07 $3,624.83 $3,687.50

Key KPIs

KPIQ1 2024Q4 2024Q1 2025
Deposits ($USD Billions)$3.83 $4.15 $4.20
FHLB Borrowings ($USD Millions)$310.5 $70.0 $55.0
Tier 1 Capital Ratio (%)10.89% 10.88% 11.01%
Leverage Ratio (%)9.34% 9.56% 9.67%
ACL / Loans (%)2.75% 2.09% 1.99%

Q1 2025 actuals vs S&P Global consensus

MetricActualConsensusBeat/Miss
EPS ($)$0.39 $0.30333*Bold beat (+$0.0867)
Revenue ($USD Millions)$37.04 (NII+Noninterest) $34.9035*Bold beat (+$2.14M)

Values with asterisks (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)2025 trajectoryDirectional: slight liability sensitivity; expect benefit from rate cuts Directional: continued positive NIM impact from late‑2024 Fed cuts; normalization post NPL resolution Maintained directional, reinforced tailwinds
DepositsNear-term (Q2 2025)Branch purchase announced Q4 2024 Branch purchase closing in May; adds ~$60M funding Raised (specific timing and amount)
Credit resolution (Justice Entities)2024–2025Curtailments accelerating (Q3–Q4) Agreed pathway for curtailment/payoff; $6.9M curtailments in Q1; NPL down to $245.1M Maintained trajectory with updates
Operating Expenses2025Elevated from brand refresh/FDIC in 2024 Q1 mix included BOLI exchange fee; q/q down $0.8M Mixed; near-term normalization

Earnings Call Themes & Trends

Note: We searched for a Q1 2025 earnings call transcript and found none published (no earnings-call-transcript in Apr–Jun 2025) [ListDocuments: 2025-04-01 to 2025-06-30].

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Net interest margin & rate sensitivitySlightly liability sensitive; expect immediate decline in cost of funds after Fed cuts; NIM recovery as NPL resolves NIM (FTE) expanded to 2.70%; cost of interest-bearing deposits down 15 bps; balance sheet remains slightly liability sensitive Improving margin; continued tailwinds
Credit resolution – Justice EntitiesLitigation dismissed with prejudice; curtailments of $13.2M (Q3) and $28.9M (Q4); reserves adjusted Pathway to payoff; $6.9M curtailments in Q1; specific reserves down to $27.1M; NPL $245.1M (93.7% of total) Progressing, though still dominant exposure
Deposits & fundingStrong deposit growth; brokered CDs added in Q3; FHLB borrowings reduced Deposits up $47.5M q/q; branch purchase to add ~$60M; FHLB down to $55M Strengthening core funding, lowering wholesale
Noninterest income diversificationStable to rising insurance commissions; securities activity in Q4 BOLI death benefit gain and BOLI optimization strategy; higher other noninterest income Expanding noninterest income drivers
Operating expensesBrand refresh and data processing inflation; FDIC fees elevated q/q decrease on salaries; one-time BOLI exchange fee; y/y increases in occupancy/advertising/data processing Mixed; signs of normalization

Management Commentary

  • “Our 2025 focus is building and enhancing relationships through core deposit acquisition, diversified loan growth and noninterest income expansion… We were also pleased to see net interest margin expansion as our cost of funds declined as a result of the Federal Reserve rate cuts in late 2024… We also expect that our net interest margin will return to a more normalized level once the large nonperforming lending relationship is fully resolved.” — Litz H. Van Dyke, CEO .
  • “Although our large nonperforming credit relationship continues to have a negative impact on our financial and credit metrics, aside from this impact, our fundamentals, financial performance, and asset quality metrics all remain solid.” — Litz H. Van Dyke, CEO .
  • BOLI strategy: “The Company initiated this surrender strategy with its current BOLI portfolio to be exchanged to a new portfolio to take advantage of enhanced credit ratings and better yields due to improving BOLI markets.” .

Q&A Highlights

  • No Q1 2025 earnings call transcript was published based on document searches; therefore Q&A themes are unavailable [ListDocuments: 2025-04-01 to 2025-06-30].

Estimates Context

  • Q1 2025 EPS beat: actual diluted EPS $0.39 vs consensus $0.30333*, driven by lower funding costs, NIM expansion, and BOLI gain; number of EPS estimates: 3* .
  • Q1 2025 revenue beat: operating revenue $37.04M vs consensus $34.90M*, supported by higher NII and noninterest income mix shift; number of revenue estimates: 2* .
  • Forward quarters show modest consensus variability (small coverage): Q2 2025 EPS 0.29667* and revenue $37.334M*; Q3 2025 EPS 0.43* and revenue $39.200M*, indicating expectations for continued NIM recovery and revenue stabilization*.

Values with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Margin recovery is underway: NIM (FTE) rose to 2.70% with deposit costs falling; further Fed cuts or repricing could extend tailwinds .
  • The Justice Entities exposure continues to dominate asset quality metrics, but curtailments and reserve releases are progressing; specific reserves declined to $27.1M .
  • Funding mix is improving: deposits grew q/q and FHLB borrowings declined to $55M; branch acquisition adds ~$60M deposits, supporting lower cost of funds and NIM .
  • Noninterest income diversification (BOLI, interchange, fees) is contributing to total revenue; expect normalized levels post one-time BOLI exchange fee .
  • Expense discipline showed early signs (q/q decrease), while y/y inflation in occupancy/data processing/advertising warrants monitoring .
  • Near-term trading: positive skew from estimate beats and NIM trajectory; headline risk remains tied to NPL resolution pace and any CRE migration .
  • Medium-term thesis: continued balance sheet optimization and deposit growth, combined with resolving the large nonaccrual, should unlock NIM normalization and improved ROE .

Appendix: Prior Quarter Benchmarks (for trajectory)

  • Q3 2024: EPS $0.24; NIM (FTE) 2.59%; NPLs/loans 8.00%; noninterest expense $27.4M .
  • Q4 2024: EPS $0.36; NIM (FTE) 2.58%; NPLs/loans 7.15%; noninterest expense $28.9M .

Document availability note: We read the full Q1 2025 8‑K earnings press release and supporting tables; no Q1 2025 earnings call transcript or additional Q1 press releases were found in the Apr–May 2025 window [ListDocuments: 2025-04-01 to 2025-05-31].