Carter Bankshares, Inc. (CARE): 5 FORCES Analysis [Nov-2025 Updated]

You're looking to cut through the noise and see exactly where Carter Bankshares, Inc. (CARE) stands in late 2025, and honestly, the picture is complex: they are navigating a fragmented regional market where loan growth hit 9.4% annualized, but their pricing power is clearly strained, evidenced by a 2.86% Net Interest Margin. As a former head analyst, I see the core tension right away: managing supplier power from $4.2 billion in deposits while staring down a single, massive customer risk of $228.6 million in nonperforming loans. This isn't just about the competition; it's about the structural pressures from customers, suppliers, and digital substitutes that define their near-term survival. Below, we map out Michael Porter's five forces to show you precisely where the leverage points-and the real dangers-lie for Carter Bankshares, Inc. (CARE).

Carter Bankshares, Inc. (CARE) - Porter's Five Forces: Bargaining power of suppliers

When you look at Carter Bankshares, Inc. (CARE), the power held by its suppliers is almost entirely concentrated in the hands of its depositors. Think of it this way: for a bank, its primary supplier isn't raw materials; it's the money it uses to fund its lending. This is where the dynamic gets interesting, especially in late 2025.

The foundation of Carter Bankshares, Inc. (CARE)'s funding strength remains its core customer base. As of the data available near the end of 2024, customer deposits stood at a solid $4.2 billion. This is the low-cost funding source you want, the bedrock of the balance sheet. However, the composition of those deposits introduces a sensitivity you need to watch. As of December 2024, approximately 18.4% of total deposits were uninsured, meaning they exceeded the standard FDIC insurance limit. That percentage represents depositors who are definitely more sensitive to perceived risk or, more commonly, to the rates offered by competitors. If they start moving their money, that power shifts.

To counter reliance on any single group, Carter Bankshares, Inc. (CARE) maintains significant alternative funding channels. This acts as a crucial backstop, definitely lowering the bargaining power of the retail depositors by providing an alternative source of liquidity. Specifically, the Federal Home Loan Bank (FHLB) borrowing capacity was substantial, reported at approximately $1.2 billion as of December 2024, subject to collateral availability. This capacity, plus other correspondent facilities, means the bank isn't entirely beholden to deposit pricing wars.

Here's a quick look at the primary funding sources and their scale:

Now, let's talk about the environment. The high interest rate environment persisting into late 2025 is the real lever here. It forces Carter Bankshares, Inc. (CARE) to offer more competitive deposit rates to retain or attract funds. This directly raises the cost of funds, compressing the net interest margin (NIM). You saw earlier in Q1 2025 that lower funding costs were a tailwind, but that was following Fed cuts. If market rates stay elevated, or if competitors aggressively bid for deposits, the bank must follow suit.

The bargaining power of this supplier group is shaped by a few key factors:

• Depositor sensitivity to yield differentials.
• The amount of uninsured balances held.
• The bank's success in core relationship building.
• The availability and cost of wholesale alternatives.

The bank's ability to manage its funding mix-growing core deposits while keeping wholesale reliance in check-is what keeps supplier power manageable. If core deposits grow faster than loans, the pressure eases; if not, you're paying up for every dollar.

Carter Bankshares, Inc. (CARE) - Porter's Five Forces: Bargaining power of customers

You're looking at Carter Bankshares, Inc. (CARE) through the lens of customer power, and honestly, the data suggests it's a significant force they have to manage, especially on the lending side.

For basic retail services, the switching costs for customers are definitely low. Carter Bankshares, Inc. actively markets products designed to keep the barrier to exit minimal. Take their 'Lifetime Free™ Checking' account, for example. It carries a 0.00% Interest Rate and 0.00% APY, with no monthly service charge. To keep it free, you just need to meet a few simple requirements, like having a $100 minimum opening deposit, enrolling in eStatements, making 15 point-of-sale debit card transactions, and having at least one direct deposit or ACH credit per cycle.

Here are the key features of that low-friction product:

• No monthly service charge.
• $100 minimum opening deposit.
• Free eStatements with online check images.
• Access to nationwide MoneyPass® ATM network.
• Instant issue debit cards available at branches.

The loan market is where customer power really shows its teeth through price competition. To keep the loan engine running, Carter Bankshares, Inc. pushed for significant volume. We saw annualized loan growth of 9.4% between the second quarter of 2025 and the third quarter of 2025. To achieve that momentum, management has to be competitive on rates, which often means concessions when facing broader market options. The pressure is clear when you look at the overall loan portfolio growth versus the prior year-end.

Here's a quick snapshot of the loan and credit quality context as of September 30, 2025, which helps frame the competitive environment:

You have to pay close attention to the concentration risk, because that single relationship gives that one customer group immense leverage. As of September 30, 2025, the aggregate principal balance of the Justice Entities NPL relationship stood at $228.6 million. To put that into perspective, this single relationship accounted for 88.4% of Carter Bankshares, Inc.'s total NPLs and 6.0% of the total portfolio loans. The bank received $7.0 million in curtailment payments from this relationship during the third quarter of 2025 alone.

For the more sophisticated commercial borrowers, the threat of substitution is high because they have easy access to financing outside the traditional bank structure. While Carter Bankshares, Inc. is growing its loan book, commercial borrowers can often look to national lenders or specialized non-bank financing sources. This external competition forces Carter Bankshares, Inc. to keep its pricing sharp, which is the underlying reason for the pressure on loan rates that drives that 9.4% annualized growth figure.

Carter Bankshares, Inc. (CARE) - Porter's Five Forces: Competitive rivalry

You're looking at how Carter Bankshares, Inc. stacks up against its competitors in its operating territory right now, late 2025. The rivalry is definitely heating up, especially given the scale difference.

Carter Bankshares, Inc. maintains a presence across a fragmented regional market. As of the third quarter of 2025, the company's asset base stood at $4.8 billion. That size means it doesn't automatically get the same scale advantages that the bigger national players enjoy when pricing products or absorbing costs.

The competitive pressure is clear when you look at the pricing environment. The reported Net Interest Margin (NIM) for the three months ended September 30, 2025, was 2.86%. That figure reflects the tight pricing you see when competing for deposits and loans against institutions with deeper pockets.

Here's a quick look at how key metrics compare to the prior year, showing the pricing environment Carter Bankshares, Inc. is fighting in:

The geographic footprint dictates where this rivalry plays out. Carter Bankshares, Inc. operates in a defined, yet competitive, space. You see the physical presence here:

• Operates 64 branches as of May 23, 2025.
• Footprint covers Virginia and North Carolina.
• Announced expansion into South Carolina, specifically Greenville.
• Building on existing North Carolina growth in areas like Charlotte and Raleigh.

The competition isn't just local; it's from larger players who can offer more sophisticated products or better rates due to their size. Carter Bankshares, Inc. is actively trying to counter this by expanding its physical reach into the Carolinas, which is a clear action against the scale disadvantage. For instance, the company is actively pursuing a relationship-driven approach to compete with the resources of a large national bank.

The pressure on pricing is evident in the margin performance. While the NIM improved to 2.86% in Q3 2025 from 2.58% in Q3 2024, this improvement was driven by a 45 basis point decline in funding costs, which suggests deposit competition forced them to manage liability costs aggressively. The yield on average interest-earning assets only saw a five basis point decrease year-over-year, meaning the margin gain came mostly from the cost side, not necessarily from commanding higher loan yields in a competitive lending market.

Finance: draft competitive response analysis for Greenville market by next Tuesday.

Carter Bankshares, Inc. (CARE) - Porter's Five Forces: Threat of substitutes

You're looking at how external, non-traditional financial players are chipping away at Carter Bankshares, Inc.'s core business lines. The threat of substitutes is significant because digital innovation and market structure shifts allow alternative providers to offer similar, or sometimes superior, value propositions for deposits, lending, and payments.

Fintech platforms and money market funds offer high-yield deposit substitutes, attracting core funding away from the bank. This is a direct challenge to Carter Bankshares, Inc.'s funding stability. As of September 30, 2025, Carter Bankshares, Inc. reported total deposits of $4.2 billion. Critically, approximately 18.4% of these deposits were uninsured, meaning that portion of the funding base is highly sensitive to yield competition from money market funds or high-yield fintech accounts. The broader global fintech market itself was valued at $320.81 billion in 2025, with the neobanking segment projected to expand at an 18.7% CAGR through 2030, indicating rapid, sustained migration of consumer finance activity away from traditional models.

Here's a quick look at the scale of the digital funding competition versus Carter Bankshares, Inc.'s deposit base:

Non-bank lenders, including private credit, substitute for commercial real estate and consumer loans. Carter Bankshares, Inc. noted loan growth in its commercial real estate (CRE) and consumer portfolios. However, private credit has become a massive capital source, growing to nearly US$2 trillion in Assets Under Management (AUM) in 2024 and predicted to reach US$3.5 trillion by 2028. This sector specifically targets complex, long-tenor investments where banks may pull back due to capital constraints. Furthermore, the broader asset-based finance market, which private credit is penetrating, is estimated to be a $5 trillion market.

Stablecoins and other digital assets are emerging as substitutes for core transaction banking functions. While Carter Bankshares, Inc. focuses on traditional banking, the sheer volume moving through digital rails is undeniable. In 2024, total stablecoin transfer volume exceeded $32 trillion. Even focusing on payment-specific volumes, estimates reached approximately $5.7 trillion in 2024. This technology allows for near-instant, low-cost cross-border transfers, directly bypassing the correspondent banking system that underpins much of traditional transaction banking.

Direct-to-consumer mortgage lenders bypass the bank's branch network entirely. This is a structural shift where non-bank entities are capturing the majority of the origination market. In 2024, non-bank mortgage companies originated 53.3% of all home loans nationwide, while the market share for banks fell to 30.1%. For the specific, high-volume business of purchasing a new home, non-bank lenders were responsible for 66.1% of originations in 2024. Carter Bankshares, Inc.'s reported growth in its residential mortgage portfolio is therefore occurring within a segment where non-bank competition holds a clear majority share.

The competitive pressure manifests across several key areas:

• Yield competition on deposits from money market funds.
• Direct lending competition in CRE and consumer loans from private credit.
• Disintermediation of payment flows via stablecoins.
• Market share erosion in the lucrative mortgage origination business.

Finance: draft a sensitivity analysis on the impact of a 100 basis point shift in deposit beta, assuming 18.4% of deposits are rate-sensitive, by next Tuesday.

Carter Bankshares, Inc. (CARE) - Porter's Five Forces: Threat of new entrants

You're looking at the competitive landscape for Carter Bankshares, Inc. (CARE) as of late 2025, and the threat of new entrants is definitely shifting. The traditional moat around banking is being tested, though significant moats remain.

Regulatory hurdles and high capital requirements for a bank charter are significant barriers to entry. While the OCC granted preliminary conditional approval to Erebor Bank for a de novo national bank charter on October 15, 2025, this process is far from simple. New applicants must pass a pre-opening examination, secure FDIC deposit insurance, and meet strict initial capital standards. Startups typically need to raise capital ranging from $15 million to $30 million to satisfy early-stage operating needs and pass regulatory scrutiny. Furthermore, new banks are often required to maintain a Tier 1 capital ratio of at least 8% of total projected assets. Application and licensing expenses alone can run between $500,000 and $1 million before the bank even opens its doors for business. Still, regulators maintain strict expectations for governance, risk management, and BSA/AML compliance, regardless of the administration's stance on chartering.

The sheer scale of Carter Bankshares, Inc. presents a financial hurdle for a direct, comparable entrant. As of June 30, 2025, Carter Bankshares, Inc. reported total assets of $4.8 billion. A new entrant aiming to replicate that balance sheet size would need to raise substantial capital and deploy it effectively, which is a massive undertaking in today's environment. To put that scale in context, the largest new fintech entrants obtaining full-service charters might aspire to reach asset levels beyond $20 billion eventually, but the initial capital deployment to reach even Carter Bankshares, Inc.'s current size is daunting.

Non-bank entities are increasingly obtaining bank charters, which lowers the regulatory barrier for new competition in specific areas. We saw an all-time high with 20 charter filings submitted by fintech and non-traditional applicants through October 3, 2025. These firms are not always seeking full-service charters; instead, they are strategically targeting specific licenses to unlock critical functions. For instance, crypto firms like Circle and Ripple have filed for national trust bank charters, while automakers are using Industrial Loan Company (ILC) charters to offer financing. Stripe and Fiserv have pursued Merchant Acquirer Limited Purpose Bank (MALPB) charters to gain direct access to card networks.

Here's a quick look at the different charter paths non-banks are pursuing:

New digital-only banks can enter the market without the cost of Carter Bankshares, Inc.'s 64-branch physical footprint. This is a major structural advantage for a digital-first competitor. Building a new, traditional freestanding bank branch can cost, on average, between $750,000 and $5 million, depending on location and design complexity. Even a modest build costs in the low millions, plus land acquisition and annual operating expenses. For Carter Bankshares, Inc., maintaining 64 physical locations across Virginia and North Carolina represents a significant fixed cost base and operational complexity that a pure digital entrant completely bypasses. Digital entrants focus their initial capital on technology infrastructure, which, while expensive, avoids the real estate commitment that anchors incumbents like Carter Bankshares, Inc. to specific geographic markets.

• Digital entrants avoid the $1 million to $3 million average build cost per branch.
• Digital-only models reduce reliance on physical infrastructure for customer acquisition.
• New entrants can leverage cloud-based core processing systems from the start.
• The cost of a data breach in the banking sector averages over $5.9 million.
• Carter Bankshares, Inc. reported $4.8 billion in total assets as of mid-2025.