8-K: Carter Bankshares Reports Q2 2026 Results

Carter Bankshares, Inc. released its second quarter 2026 financial results, highlighting improved net interest income and adjusted net income, alongside strategic portfolio adjustments.

Summary

• Carter Bankshares, Inc. reported financial results for the second quarter of 2026.
• Net Interest Income increased by $4.0 million quarter-over-quarter and $7.6 million year-over-year.
• Adjusted Net Income saw a positive trend, increasing by $3.0 million quarter-over-quarter and $2.3 million year-over-year.
• The company completed a strategic repositioning of $139.4 million of its AFS securities portfolio, yielding higher returns.
• Loan production for the year-to-date 2026 was $370.6 million, with a weighted average rate of 6.18%.
• The company maintained strong capital and liquidity positions, with a CET1 ratio of 14.26% and total available liquidity of $1.8 billion.
• Asset quality remains a focus, with Nonperforming Loans (NPLs) at 1.01% of total portfolio loans.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing, with strong capital and liquidity, and improved net interest income, but tempered by a sequential decline in net income due to one-time items and a decrease in total deposits.

Positives

• Net Interest Income increased by $4.0 million Q/Q and $7.6 million Y/Y.
• Adjusted Net Income increased by $3.0 million Q/Q and $2.3 million Y/Y.
• Strategic repositioning of $139.4 million of the AFS securities portfolio resulted in higher yields (from 2.28% to 5.27%).
• Strong capital position with CET1 ratio at 14.26%.
• Robust liquidity with $1.8 billion in total available liquidity, covering 237.9% of uninsured deposits.
• Year-to-date loan production of $370.6 million at a weighted average rate of 6.18%.
• Nonperforming Loans (NPLs) decreased significantly to 1.01% of total portfolio loans from 6.69% in Q2 2025.
• Allowance for Credit Losses (ACL) coverage of NPLs is strong at 146.88%.

Negatives

• Noninterest Income decreased by $42.2 million Q/Q, largely due to a $35.9M gain on an insurance transaction in Q1 2026 and $12.5M losses on securities sales in Q2 2026.
• Net Income decreased by $56.8 million Q/Q, impacted by significant one-time gains in the prior quarter.
• Total Deposits decreased by $37.7 million Q/Q and $24.7 million Y/Y.
• Commercial Real Estate (CRE) Non-Owner Occupied loans represent a significant portion of the loan portfolio ($1.58B), which can be sensitive to market conditions.
• The company experienced $226.1M in commercial loan payoffs greater than $1M each year-to-date, offsetting new loan production.

Risks

• Market interest rates and their impact on economic conditions, customer behavior, net interest margin, and funding costs.
• Inflation, market, and monetary fluctuations.
• Changes in trade policies, tariffs, and U.S. government monetary and fiscal policies.
• Cyber-security threats, attacks, or events.
• Rapid technological developments, including AI, which could lead to legal or regulatory action or increased cybersecurity threats.
• Concentrations of loans secured by real estate, particularly commercial real estate (CRE) loans, and potential impacts of market changes on collateral value.
• Increased delinquency and foreclosure rates on CRE loans.
• The soundness of other financial institutions and indirect exposure related to large bank failures.

Future Outlook

The company aims to be a high-performing regional community bank by executing a strategy through three pillars: Invest, Enhance, and Expand, underpinned by Financial Performance and Operational Excellence. This strategy focuses on strengthening foundational capabilities, elevating performance, and enabling sustainable growth.

Management Comments

• The company executed a strategic repositioning of $139.4 million (18.7%) of the AFS securities portfolio, replacing securities with a 2.28% weighted average yield with $88.5 million of new investments yielding 5.27% in 2Q2026.
• The successful resolution of our largest nonperforming credit relationship during the first quarter of 2026 reduced total portfolio loans by $209.5 million and contributed to a more favorable loan composition, including lower levels of nonperforming and higher risk loans.
• YTD 2026 Loan Production of $370.6M of which 71.18% was funded at a weighted average rate of 6.18%. The YTD production was offset by $226.1M in commercial loan payoffs > $1M each.
• The CD Portfolio ($1.8B) is relatively short with 79.2% of the portfolio scheduled to mature within 12 months and 94.6% of the portfolio scheduled to mature within 24 months, allowing for opportunities to lower deposit costs quickly when short term rates begin to ease.
• The company repurchased 108,601 shares of its common stock at a total cost of $2.9 million and a weighted average cost per share of $26.50 during the three and six months ended June 30, 2026.

Industry Context

StockSavvy.ai notes that Carter Bankshares' focus on strategic portfolio repositioning and maintaining strong capital and liquidity aligns with broader trends in the regional banking sector, which is navigating interest rate volatility and evolving credit market conditions. The emphasis on technology and customer experience is also a key differentiator in a competitive landscape.

Comparison to Industry Standards

• Carter Bankshares' CET1 ratio of 14.26% is well above the regulatory minimum of 6.50% and the 'well-capitalized' threshold of 10.00%, indicating a strong capital buffer compared to industry peers.
• The Net Interest Margin (NIM) of 3.40% (FTE) for Q2 2026 is competitive within the regional banking sector, reflecting effective management of interest-earning assets and interest-bearing liabilities.
• The Adjusted Efficiency Ratio of 62.66% for Q2 2026 suggests room for operational improvement compared to highly efficient banks, but shows a positive trend from previous quarters.
• The NPL ratio of 1.01% is a key indicator of asset quality. While improved from prior periods, it warrants continued monitoring, especially in relation to commercial real estate concentrations.

Stakeholder Impact

• Shareholders: The reinstatement of the quarterly cash dividend and share repurchase program are positive indicators for shareholders. Continued focus on profitability and capital strength supports long-term shareholder value.
• Customers: The company's focus on customer experience and expanding deposit offerings aims to benefit customers. Efforts in financial education also support community members.
• Associates: The company highlights volunteer hours and community support, indicating a positive impact on associates' engagement and community involvement.
• Community: Significant charitable donations, sponsorships, and volunteer hours demonstrate a commitment to the communities served.

Next Steps

• Continue to invest in people, infrastructure, technology, governance, and organizational capabilities.
• Enhance operational performance and customer/associate experience through continuous improvement.
• Drive sustainable growth by expanding market presence and strengthening relationships.
• Continue to grow all non-maturity deposit accounts with a focus on lower cost of funds.
• Execute on the product roadmap and expand deposit offerings for retail and commercial customers.
• Manage internal growth and potential acquisitions.

Key Dates

Recommendation

The filing shows a stable regional bank with strong capital and liquidity, and improved core profitability (NII, adjusted net income). However, the sequential drop in net income due to one-time items, a slight decrease in deposits, and ongoing risks in the CRE portfolio suggest a 'hold' rating. Continued monitoring of loan quality and deposit trends is warranted.

Keywords

Carter Bankshares, Community Bank, Regional Bank, Commercial Real Estate, Loan Portfolio, Deposit Growth, Capital Ratios, Interest Margin