Executive Summary

Q4 2024 delivered improved profitability: net income rose to $8.3M ($0.36 diluted EPS) vs $5.6M ($0.24) in Q3 and a loss of $(1.9)M ($(0.08)) in Q4’23, driven by a $(5.1)M recovery in credit loss provision, steadier net interest income, and lower funding costs following Fed cuts .
Asset quality trended better as nonperforming loans (NPLs) fell to $259.3M (7.15% of loans) from $287.7M (8.00%) in Q3 and $309.5M (8.83%) in Q4’23; progress was primarily from $28.9M of curtailment payments on the company’s largest nonperforming relationship (Justice Entities) .
Balance sheet momentum: deposits grew to $4.15B (+$68M q/q), FHLB borrowings declined to $70M (−$20M q/q), and capital ratios remained well-capitalized (Tier 1 leverage 9.56%; Tier 1 capital 10.88%; Total RBC 12.13%) .
Strategic catalysts: NC branch acquisition ($56M deposits, 4.6% premium; no loans; expected close 1H’25) and brand refresh support longer-term growth; management expects further rate cuts to benefit NIM given slightly liability-sensitive positioning and NIM normalization post-resolution of the large NPL .
Wall Street consensus (S&P Global) for Q4’24 EPS/Revenue was unavailable during this session; we will update the “vs. estimates” view when accessible (see Estimates Context) [GetEstimates error noted].

What Went Well and What Went Wrong

What Went Well
- Credit improvement: NPLs declined $28.4M q/q to $259.3M (7.15% of loans), aided by $28.9M of curtailments on the largest relationship; allowance coverage remains solid though lower (ACL/loans 2.09%) .
- Funding and liquidity: deposits rose $68.4M q/q to $4.15B; FHLB borrowings fell to $70M (−$20M q/q), improving mix and liquidity profile .
- Net interest income stable/improving: NII rose to $29.1M (+$0.4M q/q; +$1.7M y/y) as funding costs eased after Fed cuts, despite a 1 bp sequential decline in FTE NIM to 2.58% and continued nonaccrual impact from the large relationship .
- Management tone: “The Bank produced a strong fourth quarter on multiple fronts” and expects NIM to benefit from further rate declines and to “return to a more normalized level” once the large nonperforming relationship is resolved .
What Went Wrong
- Efficiency slippage: efficiency ratio worsened to 83.6% from 80.2% in Q3 (though better y/y vs 94.8%), reflecting higher noninterest expense (advertising for brand refresh and other items) .
- Yield pressure from cuts: yield on interest-earning assets fell 9 bps q/q to 4.99% as 25% of the loan book and 44% of the securities portfolio reprice lower quickly; this offset some benefit from lower funding costs .
- Large NPL still a swing factor: the Justice Entities relationship continues to meaningfully depress interest income (cumulative impact $65.1M since 2Q’23; $7.9M in Q4’24) and dominates reported asset quality metrics, despite recent curtailments .

Financial Results

Summary P&L and Profitability (oldest → newest)

Metric	Q4 2023	Q3 2024	Q4 2024
Diluted EPS ($)	$(0.08)	$0.24	$0.36
Adjusted Diluted EPS (Non-GAAP) ($)	$(0.02)	$0.23	$0.37
Net Income ($M)	$(1.888)	$5.629	$8.280
Net Interest Income ($M)	$27.420	$28.798	$29.148
Noninterest Income ($M)	$3.245	$5.422	$5.368
Pre-Tax Pre-Provision Income ($M)	$1.593	$6.787	$5.650
Net Interest Margin (FTE, %)	2.49%	2.59%	2.58%
Efficiency Ratio (%)	94.81%	80.17%	83.63%

Notes: Q4’24 included a $(5.114)M recovery in credit loss provision vs $(0.432)M in Q3’24 and $2.895M provision in Q4’23, a key driver of EPS improvement . Funding costs eased after Fed cuts; however, asset yields fell 9 bps given significant floating-rate exposure .

Balance Sheet and Capital (period-end; oldest → newest)

Metric	Q4 2023	Q3 2024	Q4 2024
Total Assets ($B)	$4.51	$4.61	$4.66
Total Portfolio Loans ($B)	$3.51	$3.60	$3.62
Total Deposits ($B)	$3.72	$4.09	$4.15
FHLB Borrowings ($M)	$393.4	$90.0	$70.0
Portfolio Loans / Deposits (%)	94.20%	88.02%	87.27%
Cash & Due from Banks ($M)	$54.5	$105.0	$131.2
Securities AFS ($M)	$779.0	$742.6	$718.4
Shareholders’ Equity ($M)	$351.2	$386.8	$384.3
Tier 1 Leverage (%)	9.48%	9.53%	9.56%
Tier 1 Capital (%)	11.08%	10.83%	10.88%
Total RBC (%)	12.34%	12.09%	12.13%

Asset Quality (oldest → newest)

Metric	Q4 2023	Q3 2024	Q4 2024
NPLs ($M)	$309.5	$287.7	$259.3
NPLs / Loans (%)	8.83%	8.00%	7.15%
NPAs / (Loans+OREO) (%)	8.89%	8.04%	7.17%
ACL / Loans (%)	2.77%	2.25%	2.09%
ACL / NPLs (%)	31.35%	28.12%	29.15%
Net Charge-offs (QTD, $M)	$0.317	$15.345	$0.195
NCOs (Annualized) / Avg Loans (QTD, %)	0.04%	1.71%	0.02%

Commentary: Q4’s specific reserve on the large relationship declined to $30.3M from $36.9M in Q3 as curtailments and updated DCF analysis reduced required reserves; these dynamics contributed to the $(5.1)M provision recovery .

Loan Portfolio Mix (period-end; $M; oldest → newest)

Category	Q4 2023	Q3 2024	Q4 2024
Commercial Real Estate	$1,670.6	$1,858.0	$1,869.8
Commercial & Industrial	$271.5	$241.5	$230.5
Total Commercial	$1,942.1	$2,099.5	$2,100.3
Residential Mortgages	$787.9	$782.9	$777.5
Other Consumer	$34.3	$29.8	$28.9
Total Consumer	$822.2	$812.7	$806.4
Construction	$436.3	$399.5	$462.9
Other	$305.2	$284.1	$255.2
Total Portfolio Loans	$3,505.9	$3,595.9	$3,624.8

Guidance Changes

No formal numeric guidance was provided; management offered qualitative commentary.

Metric	Period	Previous Guidance	Current Guidance/Commentary	Change
Net Interest Margin	Near-term	N/A	Slightly liability-sensitive; further Fed cuts should lower funding costs and benefit NIM; NIM expected to normalize post-resolution of large NPL	Qualitative positive
Cost of Funds	Near-term	N/A	Declined in Q4 following Fed cuts; expects continued benefit if easing persists	Qualitative positive
Loan Growth Mix	Near-term	N/A	Q4 production solid, skewed to construction (lags in funding/earnings); pipeline remains strong	Maintained
Large NPL Resolution	2025 focus	N/A	Continued progress via curtailments; committed to resolution protecting shareholders	Improving
Branch Acquisition	1H 2025 close	N/A	Acquire ~$56M deposits, 4.6% deposit premium; no loans; enhances NC presence	New initiative

Earnings Call Themes & Trends

(Call transcript not available in repository; themes below reflect quarterly press releases and filings.)

Topic	Previous Mentions (Q2 and Q3 2024)	Current Period (Q4 2024)	Trend
Large Nonperforming Relationship (Justice Entities)	Q2: Litigation dismissed with prejudice; agreed curtailment pathway; $7.8M curtailments; significant NII headwind . Q3: GLAS Trust suit dismissed with prejudice; reaffirmed loan validity; $13.2M curtailments .	Q4: $28.9M additional curtailments; NPLs down to 7.15% of loans; provision recovery $(5.1)M aided by updated analysis and reserve releases .	Improving
Interest Rate Sensitivity/NIM	Q2: Slightly liability sensitive; margin pressure stabilizing; potential benefit from future cuts . Q3: Fed cut 50 bps; expect immediate decline in cost of funds in Q4; margin poised to benefit .	Q4: Funding costs declined; asset yields dipped 9 bps due to floaters; further rate declines expected to benefit NIM .	Improving
Deposits/Liquidity	Q2: Deposits +$50.8M q/q; insured ~82.8%; brokered CDs stable . Q3: Deposits +$203.8M q/q (incl. +$100.5M brokered CDs); FHLB −$148M q/q .	Q4: Deposits +$68.4M q/q; FHLB −$20M to $70M; insured ~81.6% .	Improving
Operating Efficiency	Q2: Efficiency ratio 81.6% . Q3: 80.17% .	Q4: 83.63% (brand advertising drove opex q/q) .	Mixed
Strategic Expansion/Brand	Q2/Q3: No branch M&A; brand not yet launched.	Q4: NC branch acquisition announced (expected 1H’25 close); brand refresh unveiled .	Positive

Management Commentary

CEO on Q4 performance and expansion: “The Bank produced a strong fourth quarter on multiple fronts… announced the acquisition of two branches in Winston-Salem and Mooresville… We believe that the transaction will improve our profitability and deliver positive returns to our shareholders.”
Rate outlook and NIM: “Our cost of funds declined in the fourth quarter as a result of the recent Federal Reserve rate cuts… Our balance sheet is slightly liability sensitive and is well positioned so that further declines in interest rates should continue to positively benefit our net interest margin.”
On fundamentals ex-large NPL: “Although our large nonperforming credit relationship continues to have a negative impact… aside from this impact, our fundamentals, financial performance, and asset quality metrics all remain solid.”
Branch acquisition rationale: “This transaction strengthens our presence… gives us an immediate presence in the [Winston-Salem] market… We believe that the Transaction will improve our profitability and deliver exceptional returns to our shareholders.”
Brand positioning (Q4 press cycle): New brand emphasizes relationship focus and community roots as the bank celebrates 50 years .

Q&A Highlights

The Q4 2024 earnings call transcript was not available in the document repository; therefore, specific Q&A themes and guidance clarifications could not be extracted. We searched for “earnings-call-transcript” for CARE between Dec 1, 2024 and Feb 28, 2025 and found no transcript documents [Search returned none].

Estimates Context

Wall Street consensus estimates (S&P Global) for Q4 2024 EPS and revenue were not retrievable during this session due to an S&P Global API request-limit error; as a result, we cannot provide a beat/miss analysis versus consensus at this time. We will update the estimates comparison when access is available.

Key Takeaways for Investors

Credit progress is tangible: NPLs fell to 7.15% of loans with $28.9M of Q4 curtailments; a $(5.1)M provision recovery boosted earnings—continued curtailment or resolution timing remains a key stock driver .
Core profitability stabilizing: NII edged up to $29.1M; FTE NIM held at 2.58% despite asset yield headwinds from rate cuts; further easing should reduce funding costs faster than asset yields given liability sensitivity .
Expense discipline vs. growth investments: Efficiency ratio rose to 83.6% on brand refresh and other items; watch for expense normalization and operating leverage as credit costs moderate .
Healthy funding and liquidity: Deposits grew q/q, FHLB borrowings declined to $70M, insured deposits ~82% (Q3/Q4), and ample contingent liquidity supports resilience into 2025 .
Strategic catalysts: NC branch acquisition (no loan risk, $56M deposits, 4.6% premium) and brand refresh can support growth, market presence, and funding mix in North Carolina .
Biggest swing factor remains the large nonperforming relationship (Justice Entities): while trends are improving, its resolution path and timing will continue to influence NIM, provision, and overall sentiment .
With consensus unavailable this session, the narrative skew is constructive: improving credit, stable margin with positive rate sensitivity, and strategic expansion—monitor upcoming updates for definitive “beat/miss” framing.

Additional Detail and Cross-References

Drivers of q/q EPS improvement: $(5.114)M credit provision recovery, steady NII, and lower funding costs after rate cuts; offset by slightly higher opex (brand advertising) and a 9 bp drop in asset yields .
Capital intact: Tier 1 leverage 9.56%; Tier 1 capital 10.88%; Total RBC 12.13%; shareholders’ equity to assets 8.25% .
Non-GAAP: Adjusted EPS of $0.37 in Q4 (vs $0.23 in Q3 and $(0.02) in Q4’23); adjusted efficiency ratio 82.76% in Q4 (vs 80.65% in Q3) .

Sources: CARE Q4’24 8-K/press release and financial tables -; CARE Q3’24 8-K/press release -; CARE Q2’24 8-K/press release -; NC branch acquisition 8-K -; Brand identity press release .

Carter Bankshares, Inc. (CARE)·Q4 2024 Earnings Summary