Key Highlights

  • Net income reached $7.8 million, or $0.35 diluted EPS, for Q3 2026, up from $5.4 million, or $0.24 diluted EPS, in Q3 2025.
  • Net interest Margin expanded 13 basis points quarter-over-quarter to 3.51%, and improved 65 basis points versus Q3 2025.
  • Nonperforming loans declined to $27.9 million, representing just 0.74% of total portfolio loans, compared with 6.74% a year earlier.
  • The Company launched a dedicated SBA lending team and established a Dividend reinvestment and Stock Purchase Plan (DRIP) during the quarter.

Carter Bankshares, Inc. (NASDAQ:CARE), the Holding Company of Carter Bank, reported third-quarter 2026 Net Income of $7.8 million, or $0.35 per diluted share, marking a meaningful improvement from the $5.4 million, or $0.24 per diluted share, recorded in the same period a year ago. The quarterly results reflect continued progress in the company's core banking operations, driven primarily by net interest margin expansion and a materially cleaner Credit profile following strategic transactions completed earlier in the year. The Virginia-based community lender, which operates 63 branches across Virginia and North Carolina with $4.7 billion in total assets, also took steps to broaden its Business capabilities with new lending and Shareholder programs during the quarter.

Net Interest Income and Margin Continue to Climb

Net interest income totaled $41.2 million in the third quarter of 2026, an increase of $1.3 million, or 3.2%, from the prior quarter, and up $7.5 million, or 22.3%, from the third quarter of 2025. The net interest margin expanded 13 basis points sequentially to 3.51%, and rose 65 basis points compared with the 2.86% recorded in the year-ago period. On a fully taxable equivalent basis, the margin came in at 3.55%, up 15 basis points from the prior quarter.

The quarter-over-quarter improvement was driven by a 10 basis point increase in the Yield on average interest-earning assets, partly from higher investment securities yields following a portfolio repositioning completed in the second quarter, combined with a 5 basis point reduction in the cost of average interest-bearing liabilities. On a year-over-year basis, a 30 basis point increase in earning-asset yields and a 36 basis point decrease in funding costs both contributed to the improvement. Lower rates paid on several deposit categories and a significant reduction in reliance on higher-cost Federal Home Loan Bank borrowings also supported the year-over-year gain.

Credit Quality Shows Marked Improvement After Strategic Loan Sale

Nonperforming loans totaled $27.9 million at September 30, 2026, down from $37.6 million at the end of the prior quarter and sharply reduced from $258.6 million at September 30, 2025. The ratio of nonperforming loans to total portfolio loans fell to 0.74%, compared with 1.01% at June 30, 2026 and 6.74% a year earlier. The dramatic year-over-year improvement traces primarily to the completion of a large nonperforming credit relationship sale during the first quarter of 2026, which removed $209.5 million of nonperforming loans from the balance sheet.

The linked-quarter decrease in nonperforming loans was partially influenced by $12.1 million of net charge-offs during the quarter. These included an $8.0 million charge-off on a commercial and industrial relationship after a voluntary Chapter 11 Bankruptcy filing created uncertainty around recovery timing, and a $4.0 million charge-off on a Commercial Real Estate loan following updated Collateral valuations. These were partially offset by two residential Mortgage loans totaling $2.0 million placed on nonaccrual during the quarter. The allowance for credit losses stood at $53.6 million, or 1.42% of total portfolio loans, at September 30, 2026, versus 1.48% at June 30, 2026. Allowance coverage of nonperforming loans improved to 191.79%, up from 146.88% at the end of the prior quarter.

Loan Portfolio Grows Despite Elevated Payoffs; Balance Sheet Remains Well-Capitalized

Despite approximately $161.0 million in loan payoffs during the quarter, total portfolio loans grew $36.0 million, or 3.8% on an annualized basis, to $3.8 billion at September 30, 2026. Growth was concentrated in commercial real estate, construction and residential mortgage loans. When the impact of the first-quarter loan sale is excluded from the year-over-year comparison, portfolio loans increased approximately 4.53% from September 30, 2025, reflecting continued origination activity across the company's markets.

Total Assets were $4.7 billion at quarter end, a decline of approximately $71.0 million from June 30, 2026, largely due to a $174.8 million decrease in cash and cash equivalents as available Liquidity was deployed into loans and securities. Total deposits stood at $4.1 billion, down $80.2 million from the prior quarter, driven primarily by a $62.0 million reduction in certificates of deposit. Capital ratios remained well above regulatory minimums, with a Tier 1 capital ratio of 14.24%, a Leverage Ratio of 11.95% and a total risk-based capital ratio of 15.49%. The company also repurchased 74,151 shares at a weighted average cost of $29.85 per share during the quarter, returning approximately $2.2 million to shareholders.

New Initiatives Expand the Bank's Reach and Shareholder Offerings

Carter Bankshares launched two notable initiatives during the third quarter. The company introduced a dedicated Small Business Administration lending team focused on SBA 7(a) financing, designed to extend the bank's reach to small businesses across the Southeast and nationally. The team is intended to provide relationship-based banking and tailored financing solutions to eligible small business owners. In parallel, the company established a Dividend Reinvestment and Stock Purchase Plan, allowing existing shareholders to reinvest cash dividends and make optional cash purchases of up to 1.0 million newly offered shares. The plan is administered by Computershare Trust Company and became effective with dividends declared and paid after August 24, 2026.

Noninterest income totaled $5.0 million in the third quarter, compared with $28.7 million in the prior quarter, which had included a $35.9 million net gain from the sale of the company's membership interest in Bearing Insurance Group and $12.5 million in securities sale losses from the portfolio repositioning. Noninterest expense came in at $29.5 million, down slightly from $30.0 million in the second quarter, with lower other noninterest expense — including a $0.9 million net gain on the sale of two OREO properties — offset by higher salaries, employee benefits and FDIC insurance costs. The adjusted efficiency ratio for the quarter was 64.64%, compared with 62.66% in the second quarter and 73.37% in the third quarter of 2025.

Carter Bankshares enters the final quarter of 2026 with a materially improved credit profile, expanding net interest margin and a broadened set of business capabilities. The strategic actions taken over the first half of the year — including the disposal of large nonperforming credits and the securities portfolio repositioning — appear to have translated into measurably better operating metrics in the third quarter. With a healthy lending pipeline, growing SBA capabilities and capital ratios well above regulatory thresholds, the company's position heading into 2027 looks meaningfully different from where it stood twelve months ago.