Carter Bankshares, Inc.
For the period ended Dec 31, 2025. Filed Mar 5, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 5, 2026
CARE$28.69+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001829576-25-000016
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-05.
0001829576-26-000018
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 213 previous paragraphs and 248 current paragraphs.
70 unchanged; 74 reworded; 96 added; 69 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 31 previous and 32 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (96)
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•The Company’s Business and Strategy;
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•Inflation; and
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Management believes these non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results across periods in a meaningful manner. These measures also assist in assessing the Company’s underlying operating performance and performance trends and facilitate comparisons with other financial services companies.
Current report
The Company believes that presenting interest and dividend income, yield on interest earning assets, net interest income, and net interest margin on an FTE basis improves comparability between income derived from taxable and tax-exempt sources and is consistent with industry practice. Accordingly, GAAP measures presented in the Consolidated Statements of Income are reconciled to their corresponding FTE amounts, including:
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•interest and dividend income,
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•yield on interest earning assets,
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•net interest income, and
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•net interest margin.
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While management believes these non-GAAP measures provide meaningful supplemental information, they should not be considered as an alternative to GAAP results, as more relevant than financial results prepared in accordance with GAAP, or as necessarily comparable to similarly titled measures used by other companies. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of the Company’s financial condition or results of operations as reported under GAAP. Investors are encouraged to review the Company’s GAAP financial results and all other relevant information when evaluating its performance and financial condition.
Current report
The preparation of the Company’s consolidated financial statements in accordance with GAAP requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates, and such differences could be material to the Company’s financial condition or results of operations in the period in which they become known.
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Management considers the determination of the allowance for credit losses to be a critical accounting estimate. This estimate is made in accordance with GAAP and requires significant judgment, including the use of subjective and complex assumptions regarding economic conditions, borrower behavior, and credit risk. Changes in these assumptions or estimates have had a material impact on the Company’s financial condition and results of operations in the past and are reasonably likely to do so in future periods.
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The ACL is reduced by charge-offs, net of recoveries, and increased by a provision or decreased by a recovery through the (recovery) provision for credit losses, which is recorded as a component of operating expense. Determining an appropriate ACL is inherently complex and requires the use of significant judgment and highly subjective assumptions. Management reviews the adequacy of the ACL on a quarterly basis and believes the allowance recorded as of December 31, 2025 reflects the best estimate of expected credit losses based on information available at that time.
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The ACL is subject to review by various regulatory agencies as part of their examination process, and the Company periodically engages an independent third-party to validate its credit loss model. Because future events and economic conditions cannot be predicted with precision, actual results may differ materially from management’s estimates.
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The Company’s Business and Strategy
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During 2025, the Company acquired two leased branch facilities, along with the associated deposits, located in Mooresville, North Carolina and Winston Salem, North Carolina, from First Reliance Bank (the “Branch Purchase”). In connection with the Branch Purchase, the Bank acquired $55.9 million in deposits, along with cash, personal property, and other fixed assets associated with the branch locations, and welcomed ten associates to its team. No loans were acquired as part of the Branch Purchase. The Branch Purchase closed during the second quarter of 2025.
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•Net interest income increased $16.4 million, or 14.3%, to $130.8 million for the year ended December 31, 2025 compared to the same period in 2024;
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•The (recovery) for credit losses was $(3.6) million for the year ended December 31, 2025, compared to a (recovery) for credit losses of $(5.0) million for the same period in 2024;
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•Income tax provision increased $2.3 million to $8.6 million for the year ended December 31, 2025 compared to the same period in 2024.
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•Total portfolio loans increased $254.7 million, or 7.0%, due to loan growth during the year ended December 31, 2025;
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•At December 31, 2025, NPLs declined by $15.4 million to $244.0 million compared to December 31, 2024. NPLs as a percentage of total portfolio loans were 6.29% compared to 7.15%;
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•FHLB borrowings increased $108.5 million to $178.5 million at December 31, 2025 compared to $70.0 million at December 31, 2024.
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The composition and mix of interest-earning assets and interest-bearing liabilities are actively managed by the Company’s Asset and Liability Committee (“ALCO”) to mitigate interest rate risk and liquidity risk within the balance sheet. ALCO utilizes a variety of strategies within established risk parameters to manage exposure to changing interest rate environments and to achieve what management believes to be an appropriate and sustainable level of net interest income.
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Additional discussion regarding the Company’s uses of non-GAAP financial measures is included in the “Explanation of Use of Non-GAAP Financial Measures” section above.
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The following table reconciles interest and dividend income, yield on interest-earning assets, net interest income, and net interest margin as reported under GAAP to the corresponding amounts presented on an FTE basis for the periods presented:
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Net interest income increased to $130.8 million for the year ended December 31, 2025, compared to $114.5 million for the year ended December 31, 2024. On an FTE basis (non-GAAP), net interest income increased to $131.5 million for the year ended December 31, 2025, compared to $115.2 million for the year ended December 31, 2024. The increase was primarily driven by growth in average interest-earning assets, higher yields on loans, and a reduction in the overall cost of interest-bearing liabilities. As a result, net interest margin increased 25 basis points to 2.82% for 2025 compared to 2.57% for 2024. On an FTE basis (non-GAAP), net interest margin increased 25 basis points to 2.83% for 2025 compared to 2.58% for 2024.
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Average interest-earning assets increased to $4.6 billion in 2025 from $4.5 billion in 2024, reflecting growth in the loan portfolio, particularly in commercial real estate (“CRE”), residential mortgages, and construction loans. Average investment securities declined compared to the prior year, reflecting active balance sheet management to deploy the proceeds from securities maturities and principal curtailments into higher yielding loans, rather than reinvesting those proceeds back into the securities portfolio. Noninterest-earning assets increased slightly year over year, consistent with overall balance sheet growth.
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The yield on total interest-earning assets (GAAP) increased slightly to 5.00% in 2025 compared to 4.97% in 2024. The yield on total interest-earning assets (FTE)(non-GAAP) increased slightly to 5.01% in 2025 compared to 4.99% in 2024, reflecting improved loan yields driven by higher market interest rates and loan repricing activity. The yields on total loans (FTE)(non-GAAP) increased to 5.39% in 2025 from 5.32% in 2024. These increases were partially offset by lower yields on total investment securities, reflecting lower interest rates on the floating rate portion of the portfolio and changes in portfolio mix. Overall, loan growth and improved loan yields more than offset the decline in securities yields.
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Average interest-bearing liabilities increased to $3.7 billion in 2025 from $3.5 billion in 2024, primarily due to growth in interest-bearing deposits. Average interest-bearing deposits increased to $3.6 billion in 2025 compared to $3.3 billion in 2024, led by growth in CDs, money market accounts and interest-bearing demand deposits. The cost of total interest-bearing deposits declined to 2.69% in 2025 from 2.91% in 2024, as we have lowered our deposit rate offerings on higher-yielding interest bearing demand, money market and short-term promotional CD products throughout 2025 in response to the Federal Open Market Committee’s (“FOMC”) short-term rate reduction efforts that began September 18, 2024 and continued through December 10, 2025. Average borrowings declined significantly year-over-year, resulting in a reduction in borrowing costs and contributing to a lower overall cost of interest-bearing liabilities, which decreased to 2.74% in 2025 from 3.06% in 2024.
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The (recovery) for credit losses was $(3.6) million for the year ended December 31, 2025, compared to a (recovery) of $(5.0) million for the same period in 2024. The increases compared to the same period in 2024 was primarily driven by higher loan growth in 2025, the establishment of a new reserve of $1.0 million on a CRE loan during the fourth quarter of 2025 due to an updated appraisal, a reserve of $0.6 million on an existing CRE relationship with four loans that are under contract to sell and $12.0 million lower curtailment payments during the year ended December 31, 2025 compared to the same period in 2024. The Other segment reserve rate declined to 8.43% at December 31, 2025 from 12.01% at December 31, 2024.
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The (recovery) for unfunded commitments was $(194) thousand compared to a (recovery) of $(7) thousand for the same period in 2024. The change from the prior year was primarily due to decreased unfunded commitments in construction loans.
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Discussion of (recovery) provision for credit losses for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “(Recovery) Provision for Credit Losses” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.
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Total noninterest income increased $1.0 million, or 4.8%, for the year ended December 31, 2025, compared to the same period in 2024. The increase was primarily driven by other noninterest income of $2.0 million, which included a $1.9 million gain on a BOLI death benefit recognized in the first quarter of 2025. This increase was partially offset by a $1.0 million decrease in insurance commission income, reflecting lower activity levels compared to the prior year.
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Noninterest expense totaled $117.1 million for the year ended December 31, 2025, representing an increase of $7.1 million, or 6.4% compared to 2024. The increase was driven by higher expenses across several categories reflecting operational growth, strategic initiatives and inflationary pressures.
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Total salaries and employee benefits expense was basically flat as compared to December 31, 2024 due to higher salary cost deferrals of $5.7 million as a result of updated loan origination cost studies performed in 2024 and implemented in the latter half of 2024 coupled with higher loan growth, which reduced the amount of salary expense recognized during 2025. Excluding the $5.7 million of higher salary cost deferrals, salaries and employee benefits increased $5.5 million. The increase is primarily attributable to normal merit increases, strategic new hires, higher incentives and increased medical costs during 2025.
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Other noninterest expense increased $2.3 million, primarily due to $1.1 million of other real estate owned (“OREO”) related activity, $0.7 million of fees associated with 1035 exchanges, resulting from the early surrender of certain company owned life insurance policies (“BOLI”) during 2025, $0.4 million in acquisition costs and $0.2 million in amortization expense related to core deposit intangibles.
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Occupancy expenses, net increased $2.0 million, driven by higher software maintenance costs, rebranding expenses, building and equipment maintenance and increased depreciation related to the Branch Purchase. Professional and legal fees rose $1.2 million, primarily attributable to acquisition-related activity, consulting costs associated with troubled and NPLs and increased expenses related to the management of special assets.
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Data processing expenses increased $0.8 million, primarily reflecting inflationary cost increases related to both existing and new service agreements. Debit card expense increased $0.8 million, driven by higher miscellaneous fees and elevated costs associated with automated teller machine and debit card fraud activity. Advertising expense increased $0.6 million, primarily due to higher spending related to rebranding initiatives and expanded new account promotions and advertising campaigns.
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These increases were partially offset by a $0.4 million decrease in FDIC insurance expense, primarily related to a lower assessment base resulting from decreased loan balances associated with the Company’s large nonperforming lending relationship.
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The effective tax rate was 21.6% for the year ended December 31, 2025 compared to 20.6% for the year ended December 31, 2024. For the period ended December 31, 2025, the annual effective tax rate was greater than the statutory rate of 21%, primarily due to the surrender of certain BOLI policies, which resulted in taxable gains of $2.4 million and $0.2 million in related Modified Endowment Contract (“MEC”) penalties, partially offset by the receipt of a $1.9 million tax-exempt BOLI death benefit.
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Additional information related to the surrender of BOLI policies and the related MEC penalty is included in Note 18, Federal and State Income Taxes, in Item 8. of this Annual Report on Form 10-K.
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Removed paragraphs (69)
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•Our Business and Strategy
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Although management believes that this non-GAAP financial measure enhances investors’ understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP or considered to be more relevant than financial results determined in accordance with GAAP, nor is it necessarily comparable with similar non-GAAP measures which may be presented by other companies.
Previous report
The Company’s preparation of financial statements in accordance with GAAP requires management to make estimates, assumptions and judgments that could affect the amounts reported in the financial statements and accompanying notes. Over time, these estimates, assumptions and judgments may prove to be inaccurate or vary from actual results and may significantly affect our reported results and financial position for the periods presented or in future periods. We currently view the determination of the allowance for credit losses to be critical, because it is made in accordance with GAAP, is highly dependent on subjective or complex judgments, assumptions and estimates made by management and have had or is reasonably likely to have a material impact on the Company’s financial condition and results of operations.
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We have identified the following critical accounting estimate:
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Determination of an appropriate ACL is inherently complex and includes the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management.
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Management will periodically assess the appropriateness of qualitatively adjusting the ACL based on their assessment of current expected credit losses and other economic factors. Principally, these adjustments are centered on potential variances to current economic indices. Various regulatory agencies also review the allowance for credit losses as an integral part of their examination process. The Company periodically engages a third party to validate the model. We believe the level of the allowance for credit losses is appropriate as recorded in the consolidated financial statements as of December 31, 2024. As future events cannot be determined with precision, actual results could differ significantly from our estimates.
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Our Business and Strategy
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The Company has entered into a definitive purchase and assumption agreement to acquire two branch facilities and the deposits associated therewith, located in Mooresville, North Carolina and Winston Salem, North Carolina, from First Reliance Bank. The Company expects this transaction to close during the first half of 2025, subject to obtaining required regulatory approvals
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•Net interest income decreased $7.9 million, or 6.4%, to $114.5 million for the year ended December 31, 2024 compared to the same period in 2023, reflecting the impact of higher funding costs during the year ended December 31, 2024, which more than offset loan growth and higher loan and securities yields;
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•The (recovery) provision for credit losses decreased $10.5 million to a recovery of $5.0 million for the year ended December 31, 2024, compared to a provision for credit losses of $5.5 million for the same period in 2023 primarily driven by the updated analysis of the individually evaluated loans and Other segment reserves released of $6.6 million due to $49.9 million of curtailment payments during the year ended December 31, 2024, offset by loan growth during 2024;
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•Total portfolio loans increased $118.9 million, or 3.4%, due to loan growth, primarily in the commercial real estate (“CRE”) and construction segments during the year ended December 31, 2024, partially offset by $80.0 million in loan payoffs on two large CRE loans and the above mentioned curtailment payments;
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•At December 31, 2024, nonperforming loans declined by $50.2 million to $259.3 million compared to December 31, 2023. Nonperforming loans as a percentage of total portfolio loans were 7.15% compared to 8.83%. The decline was due to the year-to-date curtailment payments totaling $49.9 million made by the Bank’s largest nonperforming credit relationship that was placed on nonaccrual status during the second quarter of 2023. These loans are contained in the
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Other segment with an aggregate principal balance of $252.0 million as of December 31, 2024 and comprise 97.2% of nonperforming loans at December 31, 2024;
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•FHLB borrowings decreased $323.4 million to $70.0 million at December 31, 2024 compared to $393.4 million at December 31, 2023 primarily due to deposit growth.
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The following table reconciles interest and dividend income (GAAP), yield on interest-earning assets (GAAP), net interest margin (GAAP) and net interest income (GAAP) per the Consolidated Statements of Income to interest and dividend income on an FTE basis (non-GAAP), yield on interest-earning assets on an FTE basis (non-GAAP), net interest margin on an FTE basis (non-GAAP) and net interest income on an FTE basis (non-GAAP), respectively, for the periods presented:
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Net interest income decreased $7.9 million, or 6.4% to $114.5 million for the year ended December 31, 2024 compared to the same period in 2023. Net interest income, on an FTE basis (non-GAAP), decreased $8.1 million, or 6.6%, to $115.2 million for the year ended December 31, 2024 compared to $123.3 million for the same period in 2023. Net interest margin decreased 28 basis points to 2.57% for the year ended December 31, 2024 compared to 2.85% for the same period in 2023. Net interest margin, on an FTE basis (non-GAAP), decreased 29 basis points to 2.58% for the year ended December 31, 2024 compared to 2.87% for the same period in 2023.
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The decreases were primarily a result of higher funding costs that increased 83 basis points, offset by an increase of 39 basis points on the yield on earning assets for the year ended December 31, 2024 compared to the same period in 2023. During the year ended December 31, 2024, $1.2 billion of CDs matured and repriced from an average rate of 3.91% to an average rate of 4.02%. Average interest-earning assets increased by $164.8 million with the yield on average interest-earning assets increasing
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39 basis points. The most significant increase in interest-earning assets was a 41 basis point increase in the yield on average loans from 4.91% for the year ended December 31, 2023 to 5.32% for the year ended December 31, 2024. The decline in net interest income and net interest margin were significantly driven by the Bank’s largest nonperforming credit relationship that was placed on nonaccrual status during the second quarter of 2023, which negatively impacted interest income by $35.1 million for the year ended December 31, 2024 and by $30.0 million for the same period in 2023.
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Interest income increased to $221.7 million for the year ended December 31, 2024 from $196.4 million compared to the same period in 2023. Interest income, on an FTE basis (non-GAAP), increased $25.1 million, or 12.7%, to $222.5 million for the year ended December 31, 2024 compared to $197.4 million for the same period in 2023, resulting from average loan growth of $256.2 million in taxable loans. Average interest-earning assets increased primarily due to growth in average loans of $235.6 million and an increase of $23.8 million in average interest-bearing deposits with banks during the year ended December 31, 2024, and was partially offset by a decrease of $88.0 million in average investment securities and a decrease of $6.6 million in FHLB stock.
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Interest expense for the year ended December 31, 2024 increased $33.2 million, or 44.7%, to $107.3 million compared to the same period in 2023. The increase of $372.4 million in average interest-bearing deposits reflected solid growth in average CDs of $353.9 million, an increase of $100.7 million in average interest-bearing demand accounts and an increase of $63.0 million in average money market accounts, offset by a decrease of $145.2 million in average savings accounts as customer preferences shifted from lower cost non-maturing deposits to higher-yielding interest-bearing demand, money market and short-term CD products.
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The (recovery) provision for credit losses decreased $10.5 million for the year ended December 31, 2024 compared to the same period in 2023. The decrease was primarily driven by updated analysis of individually evaluated loans within the Other loan segment and $6.6 million of Other segment specific reserves released in connection with $49.9 million of curtailment payments during the year ended December 31, 2024, offset by loan growth during the year ended 2024.
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The (recovery) provision for unfunded commitments for the year ended December 31, 2024 was a recovery of $7 thousand compared to a provision of $0.9 million for the same period in 2023, a decrease of $0.9 million primarily due to changes in construction commitments.
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For the year ended December 31, 2024, total noninterest income was $21.4 million, an increase of $3.1 million, or 16.9%, from the same period in 2023. The most significant increases were primarily related to higher insurance commissions of $1.7 million, a decrease in net losses on sales of securities of $1.6 million during the year ended December 31, 2023, and a $0.2 million increase in service charges, commissions and fees, offset by a $0.4 million decrease in other noninterest income.
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The increase in insurance commissions primarily related to higher sales activity. The gains on sales of securities of $1.5 million were driven by the sale of approximately $30.0 million of available-for-sale securities during the fourth quarter of 2023 to reposition the securities portfolio and reinvest the proceeds in higher earning assets. The $0.4 million decrease in other noninterest income is related to lower fair value adjustment of our interest rate swap contracts with commercial customers.
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For the year ended December 31, 2024, total noninterest expense was $110.0 million, an increase of $4.5 million, or 4.3%, from the same period in 2023. The most significant variance for the comparable period related to increases of $2.1 million in salaries and employee benefits, $1.6 million in occupancy expenses, $1.3 million increase in FDIC insurance expense, $1.0 million in data processing expenses, $0.8 million in advertising expenses and $0.5 million in debit card expenses, offset by decreases of $2.1 million in other noninterest expense, $0.5 million in professional and legal fees and $0.4 million in telephone expenses, which was due to a phone system replacement in 2023.
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The increases in salaries and employee benefits resulted from higher salary expenses due to fewer open positions in retail, job grade assessment increases and normal merit increases. The increase in occupancy expenses was due to new software license and depreciation expense. The higher FDIC insurance expense was primarily due to the deterioration in asset quality as a direct result of the large nonperforming credit relationship that was placed into nonaccrual status in the second quarter of 2023, which is a component used to determine the assessment. The increase in data processing expenses relates primarily to general inflationary cost increases for existing and new service agreements. The increase in advertising expenses relates to costs incurred for the Company’s new brand refresh initiative described above. The increase in debit card expense relates to discounts received in March of 2023.
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The decline in other noninterest expense is related to a gain of $0.2 million on an other real estate owned (“OREO”) property sold in the fourth quarter of 2024, a $0.5 million gain on a closed office that was sold in the third quarter of 2024, a gain of $0.3 million on two other closed offices sold in the first quarter of 2024 that were previously written-down in the third quarter of 2023, write-downs of $0.6 million on three legacy OREO properties and $0.2 million on two additional closed offices in the third quarter of 2023, and a $0.4 million decrease in fair value due to our interest rate swap contracts with commercial customers. The decrease in professional and legal fees relates to higher legal expenses incurred in 2023 when the Company’s largest credit relationship transferred to nonperforming status and resolution of the Justice Entity litigation in 2024.
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Total assets increased $146.7 million, to $4.7 billion at December 31, 2024 compared to $4.5 billion at December 31, 2023. Total portfolio loans increased $118.9 million, or 3.4% to $3.6 billion at December 31, 2024 compared to December 31, 2023 primarily due to loan growth in the CRE and construction loan segments during the year ended December 31, 2024. Loan growth was partially offset by $80.0 million in loan payoffs of two large CRE loans in the first quarter of 2024 and the curtailment payments on the large NPL credit relationship. The variances in loan segments for portfolio loans related to increases of $199.2 million in CRE loans and a $26.6 million increase in construction loans, offset by decreases in all the other loan segments, such as a $49.9 million decrease in the Other loan segment due to curtailment payments made by the Bank’s largest nonperforming credit relationship, $41.0 million decrease in Commercial and Industrial (“C&I”) loans, a $10.5 million decrease in residential mortgages and a $5.4 million decrease in other consumer loans.
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The securities portfolio decreased $60.6 million and is currently 15.4% of total assets at December 31, 2024 compared to 17.3% of total assets at December 31, 2023. The decrease is due to ongoing maturities, principal curtailments, purchases and sales of available-for-sale securities and changes in market values driven by fluctuations in intermediate treasury yields. During the year ended December 31, 2024 there were three new security purchases totaling $15.1 million and sales of three bonds with sale proceeds of $18.0 million. As of December 31, 2024, the securities portfolio was comprised of 43.5% variable rate securities with approximately 84.6% that will reprice at least once over the next 12 months. At December 31, 2024, total gross unrealized gains in the available-for-sale portfolio were $0.1 million, offset by $82.4 million of gross unrealized losses. Refer to the “Securities” section below for further discussion of unrealized losses in the available-for-sale securities portfolio.
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FHLB stock, at cost decreased $15.1 million to $6.5 million at December 31, 2024 compared to December 31, 2023. The decrease is due to a lower level of FHLB borrowings due to deposit growth that funded paydowns of FHLB borrowings. Closed retail bank offices had a book value of $0.7 million at December 31, 2024 and $2.3 million at December 31, 2023, and are included in OREO on the Consolidated Balance Sheets.
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The ACL was 2.09% of total portfolio loans at December 31, 2024 compared to 2.77% as of December 31, 2023. The decrease is primarily related to an updated analysis of the individually evaluated loans, a $15.0 million charge-off related to the Other segment of the loan portfolio in the third quarter of 2024 and $6.6 million of Other segment specific reserves released in connection with $49.9 million of curtailment payments made by the Bank’s largest nonperforming credit relationship during the year ended December 31, 2024. General reserves as a percentage of total portfolio loans were 1.24% at December 31, 2024 and 1.22% at December 31, 2023. Management believes the ACL is adequate to absorb expected losses inherent in the loan portfolio. See the sections of this MD&A titled “(Recovery) Provision for Credit Losses,” “Credit Quality” and “Allowance for Credit Losses” for information about the factors that impacted the ACL and the provision for credit losses.
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Total capital of $384.3 million at December 31, 2024, reflects an increase of $33.1 million compared to $351.2 million at December 31, 2023. The increase in total capital from December 31, 2023 is primarily due to net income of $24.5 million for the year ended December 31, 2024, other comprehensive income of $6.9 million for the year ended December 31, 2024 due to positive changes in fair value of investment securities, and $1.7 million related to restricted stock activity all during the year ended December 31, 2024.
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The Company remains well capitalized. The Tier 1 capital ratio was 10.88% at December 31, 2024 compared to 11.08% at December 31, 2023. The leverage ratio was 9.56% at December 31, 2024, compared to 9.48% at December 31, 2023 and the total risk-based capital ratio was 12.13% at December 31, 2024 compared to 12.34% at December 31, 2023.
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The Bank also remained well capitalized as of December 31, 2024. The Bank’s Tier 1 capital ratio was 10.72% at December 31, 2024 compared to 10.99% at December 31, 2023. The Bank’s leverage ratio was 9.42% at December 31, 2024 compared to 9.41% at December 31, 2023. The Bank’s total risk-based capital ratio was 11.98% at December 31, 2024 compared to 12.25% at December 31, 2023.
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The securities portfolio decreased $60.6 million to $718.4 million at December 31, 2024 compared to $779.0 million at December 31, 2023. Securities comprise 15.4% of total assets at December 31, 2024 compared to 17.3% at December 31, 2023. The decrease is due to ongoing maturities, principal curtailments, purchases and sales of available-for-sale securities and changes in market values driven by fluctuations in intermediate treasury yields. During the year ended December 31, 2024, there were three new security purchases totaling $15.1 million and three bond sales with proceeds of $18.0 million. Liquidity generated by the securities portfolio was primarily deployed into higher yielding loans. As of December 31, 2024, the securities portfolio was comprised of 43.5% variable rate securities with approximately 84.6% that will reprice at least once over the next 12 months.
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The Company’s investment securities with intermediate and long-term maturities were the largest driver of these gross unrealized losses, as the market values of these securities are significantly impacted by the Treasury yield curve for similar durations (i.e., 5- and 10-year Treasury securities). This portion of the Treasury yield curve has moved lower over the past three months, driving unrealized losses on outstanding securities lower. Changes in short-term interest rates can affect the yield on floating rate securities. Yields on floating rate securities will fall as the Federal Reserve Board (“FRB”) lowers short-term rates. Changes in intermediate and long-term interest rates, which are market driven, affect the market value of fixed rate securities with similar maturities. The Company expects that market values on the Bank’s intermediate and long-term maturity holdings will continue to fluctuate in large part driven by treasury yield changes.
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At December 31, 2024 the 5-year and 10-year U.S. Treasury yields were 4.38% and 4.58%, respectively. At December 31, 2023, those same bond yields were 3.84% and 3.88%, respectively. Therefore, this increase of 54 bps and 70 bps, respectively in the intermediate part of the yield curve largely caused a reduction in bond prices for fixed rate bonds in that maturity range. Note, the effects were generally greater for longer maturity bonds, such as municipal bonds. On the other hand, floating rate bonds largely held consistent values, as those interest rates generally adjust in line with FRB interest rate hikes. While interest rates were higher at year-end 2024, our unrealized losses were actually lower because of the significant amount of bond maturities and amortizations throughout the year, with a portion of the proceeds of those maturities invested in the loan portfolio or in higher-yielding securities.
Previous report
The Basel rules permit most banking organizations to retain, through a one-time election, existing treatment for accumulated other comprehensive loss, which currently does not affect regulatory capital. The Company elected to retain this treatment which reduces the volatility of regulatory capital levels.
Previous report
During 2024, the Company purchased $10.0 million of equity securities. The equity securities consist of our investment in a market-rate, NASDAQ listed mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States. The mutual fund mainly focuses on providing affordable housing to low and moderate income borrowers and renters, including those in Majority Minority Census Tracts. The fund invests nationally, but individual bonds are designated to our bank that align with our current footprint. The Company’s investment in the mutual fund is eligible for investment credit under the CRA.
Previous report
At December 31, 2024 the Company had no held-to-maturity securities; however, if at a future date we classify securities as held-to-maturity, our disclosures will show the weighted average yield for each range of maturities.
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Reworded paragraphs (74)
Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Carter Bankshares, Inc., our operations, and our present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this Annual Report on Form 10-K. The MD&A includes the following sections:
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist readers in understanding Carter Bankshares, Inc.’s, operations, financial condition, and current business environment. The MD&A should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in Item 8. of this Annual Report on Form 10-K.
Previous wording
This section reviews our financial condition for each of the past two years and results of operations for each of the past three years. Certain reclassifications have been made to prior periods to place them on a basis comparable with the current period presentation. Some tables may include additional time periods to illustrate trends within our Consolidated Financial Statements and notes thereto. The results of operations reported in the accompanying Consolidated Financial Statements are not necessarily indicative of results to be expected in future periods.
Current wording
This section reviews the Company’s financial condition for each of the two most recent years and results of operations for each of the three most recent years. Certain prior-period amounts have been reclassified to conform to the current period presentation. In addition, certain tables may include additional periods to illustrate trends within the Company’s consolidated financial statements and related disclosures.
Previous wording
In addition to the results of operations presented in accordance with generally accepted accounting principles in the United States (“GAAP”), management uses, and this annual report references, interest and dividend income, yield on interest earning assets, net interest income and net interest margin on a fully taxable equivalent, (“FTE”) basis, which are non-GAAP financial measures. Management believes these measures provide information useful to investors in understanding our underlying business, operational performance and performance trends as it facilitates comparisons with the performance of other companies in the financial services industry. The Company believes the presentation of interest and dividend income, yield on interest earning assets, net interest income and net interest margin on an FTE basis ensures the comparability of interest and dividend income, yield on interest earning assets, net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest and dividend income (GAAP) per the Consolidated Statements of Income is reconciled to interest and dividend income adjusted on an FTE basis, yield on interest earning assets (GAAP) is reconciled to yield on interest earning assets adjusted on an FTE basis, net interest income (GAAP) is reconciled to net interest income adjusted on an FTE basis and net interest margin (GAAP) is reconciled to net interest margin adjusted on an FTE basis in the "Results of Operations and Financial Condition - Net Interest Income" section of this MD&A for the years ended 2024, 2023 and 2022.
Current wording
In addition to results presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), management uses, and this Annual Report contains or references, certain non-GAAP financial measures, including interest and dividend income, yield on interest earning assets, net interest income, and net interest margin on a fully taxable equivalent (“FTE”) basis.
Previous wording
The ACL represents an amount which, in management's judgment, is adequate to absorb expected credit losses over the life of outstanding loans as of the balance sheet date based on the evaluation of current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased by a provision or decreased by a recovery for credit losses, which is recorded as a current period operating expense.
Current wording
The ACL represents management's estimate of expected credit losses over the contractual life of outstanding loans as of the balance sheet date. The ACL is determined based on an evaluation of the loan portfolio’s current risk characteristics, historical loss experience, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset in accordance with GAAP.
Previous wording
Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL involves significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. Management uses available information for the periods presented to estimate expected future losses. However, future estimates could be impacted by a number of environmental changes, including but not limited to changes in the composition of the loan portfolio, changes in current and forecasted economic conditions and changes in the interest rate environment.
Current wording
Management believes it uses all relevant and available information to estimate expected future credit losses; however, actual losses may differ from those estimates. Future ACL levels may be materially impacted by changes in a number of factors, including but not limited to, the composition of the loan portfolio, changes in current and forecasted economic conditions, borrower performance, and changes in the interest rate environment. Management also periodically evaluates the need for qualitative adjustments to the ACL based on emerging risks, economic uncertainty, and other factors not fully captured in the quantitative model, including potential variances in key economic indices.
Previous wording
The ACL “base case” model is derived from various economic forecasts provided by widely recognized sources. Management evaluates the variability of market conditions by examining the peak and trough of economic cycles. These peaks and troughs are used to stress the base case model to develop a range of potential outcomes. Management then determines the appropriate reserve through an evaluation of these various outcomes relative to current economic conditions and known risks in the portfolio. For the year ended December 31, 2024 the range of outcomes would produce a 56.3% reduction or a 85.5% increase in reserves based on the best and worst case scenarios, respectively.
Current wording
The ACL “base-case” estimate is derived using economic forecasts from widely recognized third-party sources. Management evaluates the potential variability of economic conditions by analyzing historical economic cycles, including peak and trough periods, which are used to stress the base-case estimate and develop a range of possible outcomes. Management then determines the appropriate allowance by evaluating these outcomes relative to current economic conditions and known portfolio risks.
Previous wording
Carter Bankshares, Inc. (the “Company”) is a bank holding company headquartered in Martinsville, Virginia with assets of $4.7 billion at December 31, 2024. The Company is the parent company of its wholly owned subsidiary, Carter Bank & Trust (the “Bank”). The Bank is a Federal Deposit Insurance Corporation (“FDIC”) insured, Virginia state-chartered bank, which operates 65 branches in Virginia and North Carolina. The Company provides a full range of financial services with retail, and commercial banking products and insurance. The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “CARE”.
Current wording
Carter Bankshares, Inc. (the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.9 billion at December 31, 2025. The Company is the parent company of its wholly owned subsidiary, Carter Bank & Trust (the “Bank”). The Bank is a Federal Deposit Insurance Corporation (“FDIC”) insured, Virginia state-chartered bank, which operates 64 branches in Virginia and North Carolina. The Company provides a full range of financial services with retail and, commercial banking products and insurance. The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “CARE”.
Previous wording
The Company earns revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers. The Company incurs expenses for the cost of deposits, borrowings, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, FDIC expense, occupancy and income tax provision.
Current wording
The Company earns revenue primarily from interest on loans and investment securities and from fees charged for financial services provided to customers. Expenses consist principally of funding costs, the provision for credit losses, compensation and benefits, occupancy and equipment, technology and data processing, regulatory assessments, and other operating expenses.
Previous wording
Part of the Company’s current three-year strategic plan is to focus on refining and enhancing its brand image and position in the markets it serves. With this new brand strategy, the Company has embarked on a multi-year implementation plan to create a brand tailored to the needs of its critical growth audiences, with a focus on innovating brand experiences to exceed expectations and to build a brand that stands apart. This means a commitment to aligning processes, operations and systems around the Company’s brand while introducing new products and services, so that in time the Company can increase its brand awareness in the communities it serves. To strengthen and further shape the brand and culture of the Company, a new set of guiding principles were introduced to associates in June 2023. The guiding principles include a new purpose statement: To create opportunities for more people and businesses to prosper; supported by our new set of core values: Build Relationships, Earn Trust and Take Ownership. We believe these new guiding principles will help create alignment to support future growth by empowering our associates and igniting a passion for the Company. On October 30, 2024 the Company unveiled the new brand identity centered entirely around the people who matter most: customers and associates of Carter Bank and Trust and the communities it serves to help deliver on its promise of helping people experience a life lived full.
Current wording
Part of the Company’s current three-year strategic plan is to refine and enhance its brand image and position in the markets it serves. With this brand strategy, the Company has embarked on a multi-year implementation plan to create a brand tailored to the needs of its critical growth audiences, focusing on innovating brand experiences to exceed expectations and build a brand that stands apart. This means a commitment to aligning processes, operations, and systems around the Company’s brand while introducing new products and services, so that, over time, the Company can increase its brand awareness in the communities it serves. To strengthen and further shape the brand and culture of the Company, a new set of guiding principles was introduced to associates in June 2023. The guiding principles include a new purpose statement: To create opportunities for more people and businesses to prosper, supported by our new set of core values: Build Relationships, Earn Trust, and Take Ownership. We believe these new guiding principles will help create alignment to support future growth by empowering our associates and igniting a passion for the Company. On October 30, 2024, the Company unveiled its new brand identity and, in 2025, renovated 47 retail branch locations and seven corporate offices, and launched new websites for the Company and the Bank. The brand identity is centered entirely around the people who matter most: customers and associates of the Bank and the communities it serves to help deliver on its promise of helping people experience a life lived full.
Previous wording
The Company’s goal is to shift from restructuring the balance sheet to pursuing a prudent growth strategy when appropriate. We believe this strategy will be primarily targeted at organic growth, but will also consider opportunistic acquisitions that fit this strategic vision. We believe that the Bank’s strong capital and liquidity positions support this strategy. In addition to loan and deposit growth, the Company will seek to increase fee income while closely monitoring operating expenses.
Current wording
The Company’s goal is to shift from balance-sheet restructuring to pursuing a prudent growth strategy when appropriate. We believe this strategy will primarily focus on organic growth, but will also consider opportunistic acquisitions that align with this strategic vision. We believe that the Bank’s strong capital and liquidity positions support this strategy. In addition to loan and deposit growth, the Company will seek to increase fee income while closely monitoring operating expenses.
Previous wording
The Company is focused on executing this strategy to successfully support the new brand and grow its business in our current markets as well as any new markets it may enter. As part of executing this strategy, the Company continues to dedicate significant resources to the resolution of the Company’s nonaccrual loans, the significant majority of which are related to a single large credit relationship that the Company placed on nonaccrual status in the second quarter of 2023, in a manner that best protects the Company, the Bank and shareholders. The Company is closely monitoring all developments that may impact collateral values or potential recoveries on its nonperforming loans, including claims that may be asserted by other purported creditors.
Current wording
The Company is focused on executing this strategy to successfully support the new brand and grow its business in its current markets as well as any new markets it may enter. As part of executing this strategy, the Company continues to dedicate significant resources to the resolution of the Company’s nonaccrual loans, the significant majority of which are related to a single large credit relationship that the Company placed on nonaccrual status in the second quarter of 2023, in a manner that best protects the Company, the Bank, and shareholders.
Previous wording
As previously disclosed, during the second quarter of 2024, a federal court lawsuit filed against the Company and the Bank by West Virginia Governor James C. Justice II, his wife Cathy L. Justice, his son James C. Justice, III, and related entities that he and/or they own (the “Justice Entities”) was dismissed with prejudice. In connection with the dismissal of this litigation, the Justice Entities agreed upon a pathway of curtailment and payoff of the outstanding loans with the Bank. The Justice Entities have reduced the aggregate nonperforming loan balance from $301.9 million as of March 30, 2024 to $252.0 million as of December 31, 2024.
Current wording
As previously disclosed, during the second quarter of 2024, a federal court lawsuit filed against the Company and the Bank by then West Virginia Governor James C. Justice II, his wife Cathy L. Justice, his son James C. Justice, III, and related entities that he and/or they own (the “Justice Entities”) was dismissed with prejudice. In connection with the dismissal of this litigation, the Justice Entities agreed upon a pathway of curtailment and payoff of the outstanding loans with the Bank. The Justice Entities have reduced the aggregate nonperforming loan balance from $301.9 million as of June 30, 2023 to $214.0 million as of December 31, 2025.
Previous wording
The Company’s financial results continue to be significantly impacted by the single large credit relationship that the Company placed on nonaccrual status during the second quarter of 2023, which has an aggregate principal balance of $252.0 million as of December 31, 2024. Since placement of these loans, now reduced to judgements, on nonaccrual status during the second quarter of 2023, interest income has been negatively impacted by $35.1 million and $30.0 million during the years ended December 31, 2024 and 2023, respectively, or by $65.1 million in the aggregate.
Current wording
The Company’s financial results continue to be significantly impacted by the single large credit relationship that the Company placed on nonaccrual status during the second quarter of 2023, which has an aggregate principal balance of $214.0 million as of December 31, 2025. Since placement of these loans, now reduced to judgments, on nonaccrual status during the second quarter of 2023, interest income has been negatively impacted by $26.1 million, $35.1 million and $30.0 million during the years ended December 31, 2025, 2024 and 2023, respectively, or by $91.2 million in the aggregate.
Previous wording
•Total noninterest income increased $3.1 million to $21.4 million for the year ended December 31, 2024 compared to the same period in 2023;
Current wording
•Total noninterest income increased $1.0 million to $22.4 million for the year ended December 31, 2025 compared to the same period in 2024;
Previous wording
•Total noninterest expense increased $4.5 million to $110.0 million for the year ended December 31, 2024 compared to the same period in 2023; and
Current wording
•Total noninterest expense increased $7.1 million to $117.1 million for the year ended December 31, 2025 compared to the same period in 2024; and
Previous wording
•The available-for-sale securities portfolio decreased $60.6 million and is currently 15.4% of total assets compared to 17.3% of total assets;
Current wording
•The available-for-sale securities portfolio decreased $26.8 million and is currently 14.3% of total assets compared to 15.4% of total assets;
Previous wording
•The portfolio loans to deposit ratio was 87.3%, compared to 94.2%;
Current wording
•The portfolio loans to deposit ratio was 92.1%, compared to 87.3%;
Previous wording
•The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 2.09% compared to 2.77%. The ACL on portfolio loans totaled $75.6 million at December 31, 2024, compared to $97.1 million at December 31, 2023;
Current wording
•The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 1.84% compared to 2.09%. The ACL on portfolio loans totaled $71.5 million at December 31, 2025, compared to $75.6 million at December 31, 2024;
Previous wording
•Total deposits increased $431.5 million, or 11.6%, to $4.2 billion at December 31, 2024, compared to December 31, 2023; and
Current wording
•Total deposits increased $57.5 million, or 1.4%, to $4.2 billion at December 31, 2025, compared to December 31, 2024; and
Previous wording
The Company reported net income of$24.5 million, or $1.06 diluted earnings per share for the year ended December 31, 2024 compared to net income of$23.4 million, or $1.00 diluted earnings per share, for the year ended December 31, 2023.
Current wording
The Company reported net income of$31.4 million, or $1.38 diluted earnings per share for the year ended December 31, 2025 compared to net income of$24.5 million, or $1.06 diluted earnings per share, for the year ended December 31, 2024.
Previous wording
Our principal source of revenue is net interest income. Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities. Net interest income is affected by changes in the average balance of interest-earning assets, interest-bearing liabilities, as well as changes in interest rates and spreads. The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee (“ALCO”), in order to mitigate interest rate and liquidity risks of the balance sheet. A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what the Company believes is an acceptable level of net interest income.
Current wording
Net interest income is the Company’s primary source of revenue and represents the difference between interest and fee income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is influenced by changes in the average balances of interest-earning assets and interest-bearing liabilities, as well as changes in interest rates, asset yields, funding costs, and interest rate spreads.
Previous wording
Net interest income and the net interest margin are presented on an FTE basis. The FTE basis (non-GAAP) adjusts net interest income and net interest margin for the tax benefit of income on certain tax-exempt loans and securities using the applicable federal statutory tax rate for each period (which was 21% for the periods presented) and the dividend-received deduction for equity securities. The Company believes this FTE basis presentation provides a relevant comparison between taxable and non-taxable sources of interest income. Refer to the “Explanation of Use of Non-GAAP Financial Measures” above for additional discussion regarding the non-GAAP measures used in this Annual Report on Form 10-K.
Current wording
Net interest income and net interest margin are presented on an FTE basis, which are non-GAAP financial measures. The FTE presentation adjusts net interest income and net interest margin to reflect the tax-equivalent impact of income earned on certain tax-exempt loans and securities, using the applicable federal statutory income tax rate for each period presented, which was 21%, as well as the impact of the dividends-received deduction on equity securities. Management believes that the FTE basis presentation provides a more meaningful comparison between taxable and tax-exempt sources of interest income and is consistent with industry practice.
Previous wording
The following table provides information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the years ended December 31:
Current wording
The following table presents average balances, interest income and expense, and average yields and rates on interest-earning assets and interest-bearing liabilities for the years ended December 31:
Previous wording
The change in average investment securities is the result of active balance sheet management to deploy the proceeds from securities maturities and principal curtailments into higher yielding loans, rather than reinvesting those proceeds back into the securities portfolio. The portfolio has been diversified as to bond types, maturities, and interest rate structures. As of December 31, 2024, the securities portfolio was comprised of 43.5% variable rate securities with approximately 84.6% that will reprice at least once over the next 12 months. We believe having a balanced mix of variable and fixed rate securities is an important strategy, especially during times of rising interest rates because fixed-rate bond prices generally fall when interest rates increase, which can result in unrealized losses. However, variable rate securities do not carry as much interest rate risk as fixed rate securities, so there is much less price volatility. This variable rate strategy has limited the impact of past upward shifts in the yield curve on the Company’s unrealized losses on debt securities. If the Federal Reserve continues reducing short-term interest rates, the Bank may consider changes to this interest rate mix strategy going forward.
Current wording
As of December 31, 2025, the securities portfolio was comprised of 36.3% variable rate securities with approximately 94.9% that will reprice at least once over the next 12 months. We believe having a balanced mix of variable and fixed rate securities is an important strategy, especially during times of rising interest rates because fixed-rate bond prices generally fall when interest rates increase, which can result in unrealized losses. However, variable rate securities do not carry as much interest rate risk as fixed rate securities, so there is much less price volatility. This variable rate strategy has limited the impact of past upward shifts in the yield curve on the Company’s unrealized losses on debt securities. If the Federal Reserve continues reducing short-term interest rates, the Bank may consider changes to this interest rate mix strategy going forward.
Previous wording
Our balance sheet is currently exhibiting characteristics of a slightly liability sensitive position due to the short-term nature of our deposit portfolio and FHLB borrowings. Specifically, 80.3% of our CD portfolio and 35.7% of our outstanding FHLB borrowings will mature and reprice over the next 12 months. This strategy gives us flexibility to manage the structure and pricing of our deposit and borrowing portfolios to reduce future funding costs should the Federal Open Market Committee (“FOMC”) continue cutting short-term rates in the future.
Current wording
Our balance sheet is currently exhibiting characteristics of a slightly liability sensitive position due to the short-term nature of our deposit portfolio and FHLB borrowings. Specifically, 71.7% of our CD portfolio and 77.6% of our outstanding FHLB borrowings will mature and reprice over the next 12 months. This strategy gives the Company flexibility to manage the structure and pricing of its deposit and borrowing portfolios to reduce future funding costs should the FOMC continue cutting short-term rates in the future.
Previous wording
Discussion of net interest income compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Net Interest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.
Current wording
Discussion of net interest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Net Interest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.
Previous wording
The Company recognizes (recovery) provision for credit losses based on the difference between the existing balance of ACL reserves and the ACL reserve balance necessary to adequately absorb expected credit losses associated with the Company’s financial instruments. Similarly, the Company recognizes (recovery) provision for unfunded commitments based on the difference between the existing balance of reserves for unfunded commitments and the reserve balance for unfunded commitments necessary to adequately absorb expected credit losses associated with those commitments. (Recovery) provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan portfolio, after giving consideration to charge-offs and recoveries for the period.
Current wording
The Company records a provision or recovery for credit losses to adjust the allowance for credit losses (“ACL”) to the level deemed appropriate to absorb expected credit losses in the loan portfolio. Similarly, the Company records a provision or recovery for unfunded commitments to adjust the related reserve to the level considered appropriate to cover expected credit losses associated with those commitments. The provision or recovery for credit losses reflects management’s estimate of the ACL required to absorb expected life-of-loan losses in the loan portfolio, after consideration of net charge-offs and recoveries during the period.
Previous wording
The following table presents information regarding the (recovery) provision for credit losses and net charge-offs:
Current wording
The following table presents information regarding the recovery for credit losses and net charge-offs:
Previous wording
Net loan charge-offs were $16.4 million for the year ended December 31, 2024 compared to $2.3 million for the same period in 2023. During the year ended December 31, 2024, net loan charge-offs were significantly impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio. As a percentage of average portfolio loans, net loan charge-offs were 0.46% and 0.07% for the years ended 2024 and 2023, respectively.
Current wording
Net charge-offs were $0.5 million for the year ended December 31, 2025 compared to $16.4 million for the year ended December 31, 2024. As a percentage of average portfolio loans, net loan charge-offs were 0.01% and 0.46% for the years ended 2025 and 2024, respectively. During the year ended December 31, 2024, net loan charge-offs were significantly impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio.
Previous wording
For information regarding the $15.0 million principal charge-off related to the Other segment of the loan portfolio, see the “Our Business and Strategy” section of this MD&A.
Current wording
For information regarding the $15.0 million principal charge-off related to the Other segment of the loan portfolio, see the “The Company’s Business and Strategy” section of this MD&A.
Previous wording
Discussion of noninterest income compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.
Current wording
Discussion of noninterest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.
Previous wording
Discussion of noninterest expense compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.
Current wording
Condition and Results of Operations,” under the heading “Noninterest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.
Previous wording
•Provision for income taxes increased $1.0 million to $6.3 million for the year ended December 31, 2024 compared to the same period in 2023.
Current wording
The provision for income taxes increased $2.3 million to $8.6 million for the year ended December 31, 2025 compared to $6.3 million for December 31, 2024. The increase was primarily attributable to a $9.1 million increase in pre-tax income from the prior year, which was largely driven by a $16.4 million increase in net interest income, partially offset by a $7.1 million increase in noninterest expense.
Previous wording
Discussion of provision for income taxes compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Provision for Income Taxes” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.
Current wording
Discussion of provision for income taxes for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Provision for Income Taxes” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.
Previous wording
Total deposits increased $431.5 million to $4.2 billion at December 31, 2024 compared to December 31, 2023. The increase in deposits was primarily due to a $337.7 million increase in CDs and an increase of $245.5 million in interest-bearing demand accounts, offset by decreases of $99.4 million in savings accounts, $50.8 million in noninterest-bearing demand accounts and $1.5 million in money market accounts. The Company had $196.1 million brokered CDs at December 31, 2024, compared to $70.0 million at December 31, 2023.
Current wording
Total deposits increased $57.5 million to $4.2 billion at December 31, 2025 compared to December 31, 2024, which included $55.9 million related to the Branch Purchase completed during the second quarter of 2025. Deposit growth was driven by increases in interest-bearing demand accounts and money market accounts, partially offset by decreases in noninterest-bearing demand accounts, savings accounts and CDs.
Previous wording
FHLB borrowings decreased $323.4 million to $70.0 million at December 31, 2024 compared to $393.4 million at December 31, 2023 primarily due to deposit growth, offset by $126.1 million of new brokered CDs during 2024, and deposit growth. The Company had no outstanding federal funds purchased at December 31, 2024 and December 31, 2023.
Current wording
FHLB borrowings increased $108.5 million to $178.5 million at December 31, 2025 compared to $70.0 million at December 31, 2024, primarily to support loan growth. The Company had no outstanding federal funds purchased at December 31, 2025 or 2024.
Previous wording
1 Weighted -average yields are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.
Current wording
1 Weighted-average yields on tax-exempt obligations are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.
Previous wording
The Company invests in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of the ALCO to diversify and reposition the balance sheet for interest rate risk purposes. Securities are subject to market risks that could negatively affect the level of liquidity available to us. Security purchases are subject to our investment policy that is approved annually by our Board and administered through ALCO and our treasury function.
Current wording
The Company invests in various securities to maintain liquidity satisfy various pledging requirements, enhance net interest income, and support balance sheet diversification and interest rate risk management through oversight by ALCO. Securities are subject to market risk, which could adversely affect the level of liquidity available. All security purchases are governed by the Company’s investment policy, which is approved annually by the Board of Directors and administered by ALCO and the treasury function.
Previous wording
At December 31, 2024, total gross unrealized gains in the available-for-sale portfolio were $0.1 million offset by $82.4 million of gross unrealized losses. At December 31, 2023, total gross unrealized gains in the available-for-sale portfolio were $0.7 million offset by $92.3 million of gross unrealized losses.
Current wording
As of December 31, 2025, approximately 36.3% of the securities portfolio consisted of variable rate securities, with approximately 94.9% of the portfolio repricing at least once within the next 12 months. Total gross unrealized gains in the available-for-sale portfolio were $0.4 million at December 31, 2025, offset by $54.2 million of gross unrealized losses, compared to gross unrealized gains of $0.1 million and gross unrealized losses of $82.4 million at December 31, 2024.
Previous wording
The unrealized losses on debt securities are believed to be temporary primarily because these unrealized losses are due to reductions in market value caused by upward movement in interest rates since the securities purchase (as applicable), and not related to the credit quality of these securities. Our portfolio consists of 46.9% of securities issued by United States government sponsored entities and carry an implicit government guarantee. States and political subdivisions comprise 30.8% of the portfolio and are largely general obligations or essential purpose revenue bonds, which have performed very well historically over all business cycles, and are rated AA and AAA. We have the ability to hold these securities to maturity and expect full recovery of the amortized cost. We may occasionally sell securities to take advantage of market opportunities or as part of a strategic initiative.
Current wording
Management believes that unrealized losses on debt securities at December 31, 2025 are temporary and primarily attributable to changes in market interest rates since the time of purchase rather than deterioration in credit quality. Approximately 45.1% of the securities portfolio is comprised of obligations issued by U.S. government sponsored entities that carry implicit government guarantees. States and political subdivision securities comprise 33.9% and are largely general obligations and essential purpose revenue bonds, which have historically performed well across economic cycles and are predominantly rated AA and AAA. The Company has the ability and intent to hold these securities to maturity and expects to recover the full amortized cost of these investments. The Company may occasionally sell securities to take advantage of market opportunities or as part of a strategic initiative.
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Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
The MD&A includes the following sections:
Current report — wording carried from elsewhere
The results of operations presented in the consolidated financial statements are not necessarily indicative of future results.
Current report — wording carried from elsewhere
These reconciliations are provided in the "Results of Operations and Financial Condition - Net Interest Income" section of this MD&A for the years ended 2025, 2024 and 2023.
Current report — wording carried from elsewhere
Discussion of noninterest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial
Current report — wording carried from elsewhere
1 Weighted-average yields on tax-exempt obligations are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.
Current report — wording carried from elsewhere
Unsecured loans are generally charged-off in full, while secured loans are charged-off to the estimated fair value of the collateral, net of estimated cost to sell.
Current report — wording carried from elsewhere
The following is the allocation of the ACL balance by segment at December 31 for each of the years presented:
Current report — wording carried from elsewhere
14 – Deposits); (iii) Federal Home Loan Bank Borrowings and Federal Funds Purchased (Note 15); and(iv) commitments to extend credit, standby letters of credit, and purchase obligations (Note 20, Commitments and Contingencies).