Executive Summary

EPS beat and top-line beat versus S&P Global consensus: S&P “Primary EPS” actual was $0.41* vs $0.30* estimate, while CARE reported GAAP diluted EPS of $0.37; “Revenue” actual was $39.93M* vs $37.33M* estimate. Net interest margin expanded to 2.82% FTE, aided by lower funding costs .*
Asset quality improved: nonperforming loans fell to $250.6M (6.69% of loans), down sequentially and year-over-year, driven by $9.5M of curtailments on the largest NPL relationship (Justice Entities) .
Growth and capital actions: portfolio loans rose $59.6M q/q; CARE completed two leased branch acquisitions, adding $55.9M deposits, and repurchased ~547K shares for $9.1M under the $20M buyback authorization .
Headwinds: noninterest income fell due to the absence of a prior quarter BOLI death benefit; efficiency ratio worsened q/q (78.63% GAAP), while adjusted efficiency improved to 75.55% .
Near-term stock catalysts: continued NIM tailwinds from lower deposit costs; visible progress on NPL resolution; deployment of buyback; but watch noninterest income normalization and legal/professional expenses .

What Went Well and What Went Wrong

What Went Well

Margin expansion and funding cost relief: Net interest margin (FTE) rose to 2.82% from 2.70% in Q1, driven by declines in deposit and borrowing costs post-Fed cuts . CEO: “we continued to see margin expansion and solid loan growth… cost of deposits continues to decline” .
Asset quality progress: NPLs fell $10.9M q/q to $250.6M; Justice Entities’ specific reserves declined to $24.0M reflecting curtailments and updated analysis; provision was a recovery of $(2.3)M .
Strategic actions: closed two NC branch facility acquisitions (+$55.9M deposits) and executed buybacks (547,332 shares at $16.70 avg) to deliver shareholder value .

What Went Wrong

Noninterest income compression: fell to $4.9M (-28.9% q/q) as a $1.9M BOLI death benefit in Q1 did not repeat; insurance commissions also declined y/y .
Higher operating expenses: noninterest expense rose to $29.3M (+4.5% q/q), with increases in other expenses (including $0.3M BOLI exchange fee), professional/legal (+$0.4M), and salaries/benefits (+$0.4M) .
Continued NPL overhang: largest relationship (Justice Entities) still 94% of NPLs and 6.3% of portfolio loans, suppressing interest income (–$6.7M in Q2) and headline metrics despite progress .

Financial Results

Note: CARE does not present “total revenue” in filings; we show Net Interest Income and Noninterest Income. S&P-defined “Revenue” is provided in the Estimates section.

Metric	Q2 2024	Q1 2025	Q2 2025
Net Interest Income ($USD Millions)	$28.09	$30.14	$32.36
Noninterest Income ($USD Millions)	$5.53	$6.90	$4.91
Diluted EPS (GAAP) ($)	$0.21	$0.39	$0.37
Adjusted EPS (Non-GAAP) ($)	$0.21	$0.32	$0.41
Net Interest Margin (FTE, %)	2.56%	2.70%	2.82%
Efficiency Ratio (GAAP, %)	81.62%	75.71%	78.63%
Adjusted Efficiency Ratio (%, Non-GAAP)	81.33%	78.67%	75.55%

Segment Loans

Loans ($USD Millions)	Jun 30, 2024	Mar 31, 2025	Jun 30, 2025
Commercial Real Estate (CRE)	$1,801.40	$1,915.86	$2,000.77
Commercial & Industrial (C&I)	$240.61	$234.02	$221.88
Residential Mortgages	$783.90	$801.25	$814.19
Other Consumer	$31.28	$28.80	$27.99
Construction	$394.93	$459.29	$443.57
Other	$297.40	$248.27	$238.72
Total Portfolio Loans	$3,549.52	$3,687.50	$3,747.12

KPIs

KPI	Q2 2024	Q1 2025	Q2 2025
Nonperforming Loans ($USD Millions)	$300.24	$261.44	$250.58
NPLs / Total Portfolio Loans (%)	8.46%	7.09%	6.69%
ACL / Total Portfolio Loans (%)	2.72%	1.99%	1.90%
Tier 1 Capital Ratio (%)	10.95%	11.01%	10.87%
Leverage Ratio (%)	9.43%	9.67%	9.46%
Total Deposits ($USD Millions)	$3,881.30	$4,200.93	$4,222.24
FHLB Borrowings ($USD Millions)	$238.00	$55.00	$113.50

Guidance Changes

CARE did not issue formal quantitative guidance ranges. Management provided directional commentary.

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	Remainder of 2025	Expect tailwind from Fed cuts; liability-sensitive positioning	Continued margin expansion; well positioned if near-term Fed cuts; CD portfolio short-term nature	Maintained/Strengthened
Deposit Costs	2025	Declining post-Fed cuts	Continued decline albeit at slower pace	Maintained (slower pace)
Loan Growth	12–18 months	Strong pipeline; construction lending tailwind as projects progress	Annualized loan growth 6.5%; pipeline healthy; tailwind expected over 12–18 months	Maintained
NPL Resolution (Justice Entities)	2025	Committed to resolution; curtailments ongoing	Committed; specific reserves lowered with updated analysis; more curtailments received	Progressing
Capital Actions (Buyback)	Through May 14, 2026	Announced $20M authorization	547,332 shares repurchased ($9.1M) by 6/30/25	Executing

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available in our document set; themes inferred from management press releases.

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Rate sensitivity & NIM	Balance sheet slightly liability-sensitive; NIM to benefit from ongoing rate cuts	NIM expanded; positioned to benefit further if Fed cuts; deposit costs declining	Improving
Loan pipeline & growth	Solid production; pipeline strong; construction lending funding lag	Annualized loan growth 6.5%; pipeline healthy; construction tailwind over 12–18 months	Positive momentum
Deposit mix & costs	Interest-bearing checking/money market growth; cost of funds declined	Modest deposit growth; costs declining at slower pace; added $55.9M via branch purchase	Stable to improving
NPL resolution (Justice Entities)	Curtailments reduced NPLs; specific reserves adjusted downward	More curtailments; NPLs down; reserves reduced (to $24.0M)	Progressing
Capital & liquidity	Strong ratios; significant borrowing capacity and unpledged securities	Well-capitalized; FHLB capacity (~$1.2B); unpledged AFS $438.8M	Solid

Management Commentary

“We are pleased to report another quarter with strong fundamentals and positive trends… margin expansion and solid loan growth… deposit balances showing modest growth and cost of deposits continues to decline… we are well positioned to benefit [from rate cuts] given the short-term nature of our CD portfolio.” — CEO Litz H. Van Dyke .
“On May 20, 2025, we announced a stock repurchase program… As of June 30, 2025, we have utilized approximately 46% of the stock repurchase program.” — CEO Litz H. Van Dyke .
“Although our large nonperforming credit relationship continues to have a negative impact… our fundamentals… remain solid. We are committed to resolving this lending relationship…” — CEO Litz H. Van Dyke .
“Our balance sheet remains slightly liability sensitive… further declines in short-term interest rates should continue to positively benefit our net interest margin… tailwind from prior construction lending… over 12 to 18 months.” — CEO Litz H. Van Dyke (Q1 context) .

Q&A Highlights

No Q2 2025 earnings call transcript was available in our document corpus; therefore, Q&A highlights and any real-time guidance clarifications are not available at this time.

Estimates Context

Metric	Q2 2025 Consensus	Q2 2025 Actual
Primary EPS Consensus Mean ($)	0.2967*	0.41*
Primary EPS – # of Estimates	3*	—
Revenue Consensus Mean ($USD)	37,334,000*	39,932,000*
Revenue – # of Estimates	2*	—

Values retrieved from S&P Global. Interpretation: EPS and revenue both exceeded consensus. CARE’s GAAP diluted EPS was $0.37, and adjusted EPS was $0.41; S&P’s “Primary EPS” actual matched adjusted EPS, underscoring the role of non-GAAP adjustments (e.g., BOLI-related items, OREO gains/losses, acquisition costs) in investor modeling .*

Key Takeaways for Investors

EPS and top-line beats versus S&P Global consensus; NIM expansion continues, supported by falling deposit costs; this combination is supportive of near-term multiple and price action. *
Sequential asset quality improvement with NPLs down and reserves right-sized; continued curtailment payments reduce headline risk overhang. Watch pace/timing of Justice Entities resolution .
Loan growth broad-based (CRE, residential), though construction moderated q/q; pipeline remains healthy, offering visibility into H2’25/2026 earning asset growth .
Operating expense pressure warrants monitoring (legal/professional, BOLI exchange fee), but adjusted efficiency improved; sustained discipline needed to translate margin gains into operating leverage .
Capital and liquidity robust with ample contingent funding (FHLB capacity ~$1.2B) and sizeable unpledged AFS securities ($438.8M), enabling flexibility to fund growth and buybacks .
Buyback deployment (46% of $20M authorization used by 6/30/25) can be an EPS lever and signal of confidence; consider potential for continued repurchases at or below tangible book .
Risk checks: nonaccrual relationship remains large (94% of NPLs); any adverse legal or collateral developments could reintroduce volatility to provisions and reported EPS .

Additional Notes and Cross-References

Non-GAAP impact: Adjusted EPS of $0.41 reflects items including OREO losses ($0.262M), BOLI 1035 exchange fees ($0.252M), acquisition costs ($0.386M), and tax effects; GAAP net income was $8.51M vs adjusted $9.31M .
Provision dynamics: $(2.3)M recovery tied to reserve rate declines in the Other segment (11.05% to 10.18%) and higher curtailments; unfunded commitments recovery $(0.335)M due to lower construction commitments .
Funding mix: Interest-bearing deposit costs fell 16 bps to 2.70%; average borrowings up $39.2M to fund loan growth; FHLB borrowings at $113.5M as of quarter-end .

Carter Bankshares, Inc. (CARE)·Q2 2025 Earnings Summary