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

You're defintely right to be scrutinizing Carter Bankshares (CARE) right now. On one hand, they've built a solid foundation with a Tier 1 Capital ratio of 11.01% and a Net Interest Margin (NIM) that hit 2.82% in Q2 2025. But, and this is the big but, a single, nonaccrual loan relationship with a principal balance of $245.1 million is still a massive headwind, pushing Nonperforming Loans (NPLs) to an elevated 6.69% and causing that Q3 2025 EPS miss. The question isn't just about their strengths; it's whether those strengths can absorb the impact of this one credit issue while they pursue growth in the Carolinas. Let's break down the real risks and clear opportunities for CARE based on the 2025 fiscal year data.

Carter Bankshares, Inc. (CARE) - SWOT Analysis: Strengths

You're looking for clear-cut reasons why Carter Bankshares, Inc. is a solid player in the regional banking space, and the numbers from the first half of 2025 tell a precise story. The core strength here is a fortress balance sheet-strong capital, improving margins, and a reliable funding base. This isn't just about surviving; it's about having the financial muscle to grow and return capital to shareholders, even with legacy credit issues still in play.

Strong Regulatory Capital with a Tier 1 Capital Ratio of 11.01% as of Q1 2025

Capital strength is the bedrock of any bank, and Carter Bankshares is sitting comfortably above regulatory minimums. At the end of Q1 2025, the Tier 1 Capital ratio-a key measure of a bank's core equity capital to its total risk-weighted assets-stood at a robust 11.01%. This is a sign of financial resilience, giving the bank a significant buffer against unexpected losses and the capacity to support future lending and expansion. For context, the leverage ratio also improved to 9.67% at March 31, 2025, up from 9.56% at the end of 2024. Simply put, this bank has a lot of dry powder.

Net Interest Margin (NIM) Improved to 2.82% in Q2 2025, Up 26 Basis Points Year-over-Year

The bank is doing a better job of making money from its core lending business. The Net Interest Margin (NIM), which is the difference between the interest income a bank earns on its loans and the interest it pays on deposits, rose to 2.82% in Q2 2025. This represents a solid increase of 26 basis points compared to the second quarter of 2024. This improvement is defintely a tailwind, driven by lower funding costs as the Federal Reserve began cutting short-term rates in late 2024, which benefited their slightly liability-sensitive balance sheet.

Here's the quick math on the NIM improvement:

Consistent Loan Growth, with Total Portfolio Loans Increasing at a 6.5% Annualized Rate in Q2 2025

A healthy bank grows its loan book, and Carter Bankshares is showing good momentum. Total portfolio loans increased by $59.6 million in Q2 2025, translating to a strong 6.5% annualized growth rate. This growth pushed the total loan portfolio to $3.7 billion at June 30, 2025. This isn't just random growth; it's concentrated in key areas, primarily commercial real estate (CRE) loans, which increased by $84.9 million in the quarter.

• Total portfolio loans reached $3.7 billion.
• Growth rate was 6.5% annualized in Q2 2025.
• Commercial Real Estate (CRE) drove growth with an $84.9 million increase.

Diversified Funding Base, with a High Percentage of Insured Deposits

The stability of a bank's funding is critical, and Carter Bankshares has a highly granular and stable deposit base. While the specific '78.2% from granular retail customers' figure isn't public, the most reliable proxy confirms this strength: approximately 81.6% of the bank's total deposits of $4.2 billion at March 31, 2025, were insured under standard Federal Deposit Insurance Corporation (FDIC) limits. This means the vast majority of their funding comes from small, stable, and sticky retail and small business accounts, rather than flighty, large commercial deposits.

The Company Authorized a $20.0 Million Stock Repurchase Program Through May 2026

Management is committed to returning capital to shareholders, which is a strong signal of confidence in the bank's valuation and future cash flow. On May 20, 2025, the Board of Directors authorized a stock repurchase program of up to $20.0 million, which is valid through May 14, 2026. This program is already active, with the company having utilized $9.1 million of the authorization as of the Q2 2025 report. This action can be accretive to earnings per share (EPS) and helps support the stock price, which is a clear, tangible benefit to investors.

Carter Bankshares, Inc. (CARE) - SWOT Analysis: Weaknesses

High Concentration Risk from One Major Credit Relationship

You need to be acutely aware of Carter Bankshares' single largest credit exposure; it's a significant vulnerability that overshadows the balance sheet. This major nonperforming loan (NPL) relationship, tied to the Justice Entities, carried an aggregate principal balance of $245.1 million as of March 31, 2025 (Q1 2025).

To put that in perspective, this one relationship alone represented 93.7% of the bank's total Nonperforming Loans and 6.6% of its total portfolio loans at the end of Q1 2025. While the bank received curtailment payments, reducing the balance to $235.5 million by the end of Q2 2025, the sheer concentration means any adverse development with this borrower could cause a massive, immediate hit to capital and earnings. It's a classic single-point-of-failure risk.

Nonperforming Loans (NPLs) Remain Elevated

Despite efforts to reduce problem assets, the Nonperforming Loans (NPLs) ratio remains elevated, which is a clear sign of persistent credit quality issues. As of June 30, 2025 (Q2 2025), NPLs as a percentage of total portfolio loans stood at 6.69%. This is an improvement from 7.09% in Q1 2025, but it is still far above the average for regional banks.

High NPLs tie up capital, increase provisioning needs (Allowance for Credit Losses to total portfolio loans was 1.90% in Q2 2025), and drag down net interest income because these loans are on nonaccrual status. The bank has been negatively impacted by $71.9 million in aggregate interest income since this largest credit was placed on nonaccrual status in Q2 2023. That's a huge opportunity cost.

• NPLs to Total Portfolio Loans (Q2 2025): 6.69%
• Total NPLs (Q2 2025): $250.6 million
• Largest NPL Relationship Balance (Q2 2025): $235.5 million

Q3 2025 Earnings Missed Analyst Consensus

The company's recent earnings performance has been a disappointment, which hurts investor confidence and the stock's valuation multiple. Carter Bankshares reported Q3 2025 earnings per share (EPS) of just $0.26 on October 23, 2025. This figure missed the analyst consensus estimate of $0.39 by a significant $0.13 per share.

Here's the quick math: the miss was a negative surprise of -33.33%. While quarterly revenue of $39.09 million was only slightly below the consensus of $39.20 million, the EPS miss signals that the bank's profitability and cost management are defintely under pressure, especially when factoring in the nonaccrual loans. This kind of miss often triggers analyst downgrades and a lower forward-looking price target.

Recent Insider Selling Activity

Insider selling activity, especially by a director, creates a negative sentiment signal that investors cannot ignore. In November 2025, SEC filings disclosed that Director Robert M. Bolton sold 1,901 shares of Carter Bankshares stock. This transaction occurred on October 30, 2025, at an average price of $17.23 per share, totaling $32,754.23.

To be fair, the dollar amount isn't massive, but the signal matters. The sale represented a 14.94% decrease in his total position. When a director, who has the most intimate knowledge of the company's near-term outlook, reduces their stake, it suggests a lack of confidence in the stock's immediate future performance, particularly following a significant earnings miss.

Carter Bankshares, Inc. (CARE) - SWOT Analysis: Opportunities

Strategic expansion into high-growth markets in North and South Carolina.

You're seeing Carter Bankshares, Inc. (CARE) make a smart, deliberate push into the Carolinas, which are some of the fastest-growing markets in the US. This isn't just opening a few doors; it's a focused strategy to capture deposit and loan growth in vibrant economies.

The company's expansion has been building all year, and it culminated in the November 2025 announcement of entry into Greenville, South Carolina. This move is an extension of their existing footprint along the I-85 corridor, adding to recent growth in key North Carolina markets like Charlotte, Winston-Salem, Raleigh, and Gastonia. To lead this, they've hired experienced market executives, which is defintely the right way to build trust and relationships in a new region. This expansion supports the overall growth of the bank, which reported total assets of $4.8 billion as of September 30, 2025.

Branch acquisition strategy successfully added $55.9 million in deposits in May 2025, strengthening the funding base.

The May 2025 acquisition of two First Reliance Bank branches in North Carolina was a textbook example of a low-risk, high-impact deposit-gathering strategy. Instead of waiting years to build a customer base from scratch, Carter Bank secured a ready-made funding source overnight.

Specifically, the transaction, completed on May 27, 2025, brought in a total of $55.9 million in deposits. This is a critical point because deposits are the lifeblood of a bank, providing a stable and often lower-cost source of funds for lending. Importantly, the deal involved acquiring only deposits and 10 new banking professionals, with no loans included, which kept the credit risk profile clean. This immediately strengthened the bank's funding base and expanded its presence, particularly by entering the Winston-Salem market for the first time.

Here's the quick math on the branch acquisition's immediate impact on the balance sheet:

Lower funding costs due to the Federal Reserve's short-term interest rate cuts positively impacted NIM.

The Federal Reserve's pivot to an easing cycle in 2025 is a clear opportunity for community banks like Carter Bankshares. The Fed began cutting the federal funds rate in September 2025, with a 25-basis-point (0.25%) reduction, setting the target range at 4.00%-4.25%. Lower rates mean the cost of funding-what the bank pays on deposits and borrowings-starts to fall.

This is already showing up in the financials. The bank's Net Interest Margin (NIM)-the difference between interest earned on loans and interest paid on deposits-expanded to 2.86% in the third quarter of 2025, up from 2.80% in the second quarter. This margin expansion directly boosted Net Interest Income (NII), which totaled $33.7 million in Q3 2025, a jump of $1.4 million (or 4.2%) from the prior quarter. The rate environment is shifting in their favor, allowing them to manage their funding costs down faster than their loan yields, which is a great tailwind for earnings.

New status as a state member bank of the Federal Reserve Bank of Richmond may enhance regulatory oversight and market trust.

A major, under-the-radar opportunity is the regulatory change announced on November 13, 2025: Carter Bank received approval to become a state member bank of the Federal Reserve Bank of Richmond. This means the subsidiary bank is now regulated by the Federal Reserve Board of Governors, alongside the Virginia State Corporation Commission.

Why does this matter? It's a stamp of approval that can enhance market trust and streamline operations. CEO Litz Van Dyke noted that the transition will streamline the regulatory structure and enhance operational efficiency. Plus, the recent conversion to a financial holding company status gives the firm greater flexibility to innovate and grow into new business lines. It's a move that signals maturity and stability to investors and large commercial clients.

• Streamlines regulatory reporting and oversight.
• Enhances market perception of stability and governance.
• Aligns with future strategic objectives for growth.
• Complements recent conversion to a financial holding company for greater flexibility.

Carter Bankshares, Inc. (CARE) - SWOT Analysis: Threats

The Nonaccrual Loan Headwind Persists

The single largest threat to Carter Bankshares, Inc. remains the performance of its nonaccrual loan portfolio, which continues to act as a significant drag on core earnings. This issue is primarily tied to the Bank's largest credit relationship, known as the Justice Entities loans, which were reduced to judgments but remain on nonaccrual status.

This situation directly reduces the interest income you expect to see. For the first quarter of 2025 alone, the negative impact on interest income was $6.8 million. The headwind slightly lessened in the second quarter of 2025, but still cost the Bank $6.7 million in lost interest income. The aggregate principal balance of these loans was $245.1 million as of March 31, 2025, and $235.5 million as of June 30, 2025, so this isn't a small, isolated problem. You need to see a clear resolution here to unlock the stock's full potential.

Here's the quick math on the ongoing impact:

Mixed Analyst Sentiment and Downgrade Risk

The investment community's view of Carter Bankshares, Inc. is mixed, which creates uncertainty and limits upward stock momentum. The consensus rating from Wall Street analysts is currently a Hold rating, based on an analysis of recent ratings. This isn't a ringing endorsement, and it signals that the market is waiting for better clarity on the nonaccrual issue before committing to a strong Buy.

To be fair, the average 12-month price target is $22.00, representing a potential upside from the November 2025 price, but the recent action shows volatility in opinion. Over the 90 days leading up to November 2025, the stock saw two downgrades compared to one upgrade, indicating that some analysts are moving toward a more cautious or even bearish stance. This mixed signal makes it defintely harder for new institutional money to jump in.

• Consensus Rating: Hold
• Average 12-Month Price Target: $22.00
• Recent Analyst Actions (90 days): Two downgrades, one upgrade

Technical Analysis Shows Bearish Trend

From a technical standpoint, the stock's chart action suggests a bearish trend for long-term investors. As of November 2025, Carter Bankshares, Inc. stock price of approximately $17.05 is trading below critical long-term moving averages, which is a classic sell signal for technical traders.

Specifically, the stock is lower than both the 100-day and 200-day Exponential Moving Averages (EMAs), suggesting that the longer-term trend is pointing down. The long-term average being above the short-term average also generates a general sell signal. While there are some short-term buy signals, the overall technical picture is one of weakness, and breaking below the short-term support level of $16.87 could trigger a stronger, more rapid fall.

Potential Volatility from CECL Accounting

The adoption of the Current Expected Credit Losses (CECL) accounting method, while standard, introduces a new layer of potential volatility to the Bank's operating results. CECL requires financial institutions to estimate and reserve for all expected credit losses over the life of a loan at the time the loan is originated, rather than waiting for a loss event to be probable.

This forward-looking model relies heavily on economic forecasts and management judgment, which can lead to larger, more unpredictable swings in the provision for credit losses (PCL) line item on the income statement. Carter Bankshares, Inc. itself has acknowledged the risk of 'potential volatility in the Company's operating results due to application of the CECL methodology' in its 2025 financial disclosures. Any unexpected downturn in the economic outlook for their operating region could force a material, immediate increase in the PCL, directly hitting net income. That's a risk you have to factor into your valuation models.