Carter Bankshares (CARE)·Q4 2025 Earnings Summary
Carter Bankshares Q4 2025: NIM Expansion Powers 30% Annual EPS Growth Despite NPL Overhang
January 29, 2026 · by Fintool AI Agent
Carter Bankshares (NASDAQ: CARE) reported Q4 2025 diluted EPS of $0.38, missing consensus by 8% but delivering strong underlying fundamentals. Net interest income surged 18.7% year-over-year to $34.6 million as the Virginia-based regional bank continued to benefit from Fed rate cuts and improving funding costs.
Full year 2025 net income reached $31.4 million, or $1.38 per diluted share—a 30% increase from $1.06 in 2024. The company's largest credit headache, the Justice Entities NPL relationship, continues its steady paydown with the balance now at $214 million, down from $301.9 million at peak.
Did Carter Bankshares Beat Earnings?
EPS: Miss. Carter reported $0.38 diluted EPS versus consensus of ~$0.41. The miss was driven by elevated noninterest expense (+8.0% QoQ) from seasonal compensation costs and higher medical claims.
Net Interest Income: Beat. NII of $34.6M came in above expectations, rising $5.5M or 18.7% year-over-year. The beat was powered by margin expansion as funding costs declined 43 basis points while loan yields held steady.
Ask Fintool AI AgentWhat Drove the Results?
Net Interest Margin Expansion
The standout metric this quarter was continued NIM expansion. At 2.92%, the margin is now 35 basis points higher than a year ago, driven by:
- Funding costs down 43 bps YoY — Interest-bearing deposit costs fell to 2.54% from 3.01%
- Certificate of deposit repricing — CD rates dropped to 3.48% from 4.02% YoY
- Fed tailwind — The 100 bps of Fed cuts in late 2024 plus 75 bps in H2 2025 continue flowing through
Management noted the balance sheet remains "slightly liability sensitive" — meaning further Fed cuts should benefit margins. CEO Litz Van Dyke stated: "As the Federal Reserve continues to reduce short-term interest rates, we believe we are well positioned to benefit, including with further margin expansion."
Loan Growth Momentum
Portfolio loans grew 7.0% year-over-year to $3.9 billion, with particular strength in:
The company expanded into South Carolina with a new commercial lending presence in Greenville and added lending teams in Western North Carolina. Management expects prior construction lending to fund over the next 12-18 months as projects progress.
How Did the Stock React?
Shares opened at $20.22 following the pre-market release but traded down to ~$19.92 by mid-day, a decline of approximately 1.1% from the prior close. The muted reaction suggests the market was anticipating the EPS miss but found comfort in the underlying trends.
Year-to-date, CARE shares have appreciated significantly from the ~$13-14 range seen in early 2024, reflecting improved confidence in the bank's ability to work through its NPL challenges.
What Changed From Last Quarter?
The Good
- NIM up 6 bps sequentially (2.86% → 2.92%)
- NPL ratio improved to 6.29% from 6.74%
- Justice Entities curtailment of $14.5M received in Q4
- Credit recovery of $2.2M vs. $2.9M provision last quarter
- EPS rebounded to $0.38 from $0.24 in Q3
The Concerns
- Expense spike — Noninterest expense jumped 8.0% QoQ to $31.0M due to seasonal factors
- New CRE NPL — A $14.3M CRE loan secured by an office building vacated by government tenants moved to nonaccrual in Q3, with a $1.0M specific reserve established in Q4
- Efficiency ratio deteriorated to 77.84% from 73.43%
The Justice Entities Saga Continues
Carter Bank's financial results remain materially impacted by loans to entities controlled by James C. Justice, II (the Governor of West Virginia). Key facts:
The loans were placed on nonaccrual in Q2 2023 due to loan maturities and failure to pay in full. They have since been reduced to judgments. Management stated they believe the relationship is "well secured based on the net carrying value" but provided no assurance on timing or amount of future payments.
Ask Fintool AI AgentCapital and Liquidity
Carter Bankshares remains well-capitalized with comfortable liquidity buffers:
Share Repurchases: The company repurchased 1.12 million shares for $20.0 million in 2025 at an average price of $17.78, representing solid capital return discipline.
Liquidity: The bank has access to ~$1.5B in FHLB borrowing capacity (subject to collateral), $30M in unsecured correspondent lines, and $402M in unpledged available-for-sale securities.
What Did Management Guide?
Management did not provide explicit numerical guidance but offered qualitative commentary pointing to optimism for 2026:
"We continue to believe we are well positioned for a strong 2026 and beyond." — CEO Litz Van Dyke
Key forward-looking points:
- Further NIM expansion expected as Fed cuts continue to benefit liability-sensitive balance sheet
- Loan pipeline remains healthy with construction projects funding over next 12-18 months
- Geographic expansion continues with new South Carolina presence
- Committed to resolving NPL in manner "most beneficial to shareholders"
Full Year 2025 Snapshot
Key Risks to Monitor
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Justice Entities concentration — While declining, this single relationship still represents 5.5% of total loans and creates headline risk
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CRE office exposure — The new $14.3M NPL highlights risks in office CRE as government tenants vacate
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Expense control — Q4 showed expense discipline challenges; efficiency ratio needs improvement
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Interest rate sensitivity — While positioned to benefit from cuts, a pause or reversal in Fed policy could pressure margins
The Bottom Line
Carter Bankshares delivered solid fundamental performance in Q4 2025 despite the EPS miss. The NIM expansion story remains intact (+35 bps YoY), loan growth is healthy (7% YoY), and the problematic Justice Entities relationship continues its gradual resolution. With book value now at $19.01 and shares trading near that level, valuation appears reasonable for investors comfortable with the NPL overhang.
The key question: Can management execute on expense control while maintaining growth momentum? Q1 2026 will be telling.
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