Carter Bankshares, Inc.
For the period ended Sep 30, 2026. Filed Nov 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 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-Q
Period ended 2026-06-30; filed 2026-08-06.
0001829576-26-000077
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-05.
0001829576-26-000097
Item 2. 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 271 previous paragraphs and 286 current paragraphs.
164 unchanged; 81 reworded; 39 added; 24 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 27 previous and 27 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 (39)
Current report
During the third quarter of 2026, the Company launched a dedicated SBA lending team focused on SBA 7(a) financing. The initiative expands the Company’s ability to serve small businesses nationwide by providing access to financing solutions designed to support a range of business needs and growth opportunities. The team will provide relationship-based banking and personalized service to help eligible small business owners identify financing solutions that support their business objectives.
Current report
On August 17, 2026, the Company and the Bank announced that the lawsuit filed against the Company and the Bank (along with certain other unaffiliated persons and entities) in the Circuit Court of Greenbrier County, West Virginia, by James C. Justice, II, his son James C. Justice, III, his daughter Jillean L. Justice, and various related entities that he and/or they own or in which they have an investment, was voluntarily dismissed with prejudice.
Current report
Establishment of Dividend Reinvestment and Stock Purchase Plan
Current report
During the third quarter of 2026, the Company established the Carter Bankshares, Inc. Dividend Reinvestment and Stock Purchase Plan (the “DRIP”). The Company will offer up to 1.0 million shares of its common stock to existing shareholders of the Company for purchase under the DRIP. The DRIP provides enrolled shareholders with the opportunity to acquire additional shares of the Company’s common stock through the reinvestment of cash dividends and optional cash purchases. Shareholders may enroll in the DRIP at any time, with dividend reinvestments beginning with the first dividend, if any, declared and paid after August 24, 2026. The DRIP is administered by Computershare Trust Company, N.A., the Company’s transfer agent.
Current report
•Net interest income totaled $41.2 million, an increase of $7.5 million, or 22.3% compared to the same period in 2025;
Current report
•Net interest margin increased 65 basis points to 3.51%, compared to 2.86% for the same period in 2025;
Current report
•The provision for credit losses was $10.5 million, compared to a provision for credit losses of $2.9 million for the same period in 2025;
Current report
•Total noninterest income decreased $0.4 million to $5.0 million compared to the same period in 2025;
Current report
•Income tax provision decreased $3.1 million, resulting in an income tax benefit of $1.4 million, compared to an income tax provision of $1.7 million for the same period in 2025. The decrease was primarily attributable to tax benefits associated with the Company’s investment tax credit purchases and lower state income tax expense during the quarter.
Current report
Highlights for the Nine Months Ended September 30, 2026
Current report
◦Net interest income totaled $117.1 million, an increase of $20.9 million, or 21.7%, compared to the same period in 2025;
Current report
◦Net interest margin increased 54 basis points to 3.32%, compared to 2.78% for the same period in 2025;
Current report
•The available-for-sale securities portfolio decreased $14.0 million and was 14.3% of total assets at both periods;
Current report
The average cost on total interest-bearing liabilities decreased 36 basis points to 2.34% from 2.70% compared to the third quarter of 2025, primarily reflecting lower rates paid across several deposit categories, and a significant reduction in average FHLB borrowings compared to the prior year quarter.
Current report
These factors resulted in an expansion of net interest margin to 3.51% for the third quarter of 2026 compared to 2.86% for the third quarter of 2025. On an FTE basis (non-GAAP), net interest margin increased to 3.55% for the third quarter of 2026 from 2.87% for the same period in 2025.
Current report
During the three months ended September 30, 2026, the Company recorded a provision for credit losses of $10.5 million, compared to $2.9 million for the same period in 2025. The provision for the third quarter of 2026 was primarily attributable to $12.1 million in net charge-offs and increased loan volume, partially offset by a reduction in specific reserves.
Current report
During the third quarter of 2026, the Company recorded an $8.0 million charge-off related to a commercial and industrial relationship consisting of three loans that were placed on nonaccrual status during the second quarter of 2026. The charge-off followed updated third-party collateral valuations obtained during the third quarter of 2026, and subsequent collection developments, including a voluntary Chapter 11 bankruptcy filing, which created uncertainty regarding the timing and magnitude of expected cash flows during the exclusivity period and reduced the Company’s expected recovery on the relationship. The charge-off reduced the associated specific reserve from $3.1 million at June 30, 2026 to zero at September 30, 2026.
Current report
During the third quarter of 2026, the Company also recorded a $4.0 million charge-off related to a commercial real estate loan that was placed on nonaccrual status during the third quarter of 2025. The charge-off followed updated third-party collateral valuations obtained during the third quarter of 2026, which supported a reduction in the estimated value of the underlying property and reduced the Company’s expected recovery on the loan. The charge-off reduced the associated specific reserve from $0.6 million at June 30, 2026 to zero at September 30, 2026. These reductions in specific reserves were partially offset by a $0.9 million increase in specific reserves associated with a commercial real estate relationship comprising three loans, primarily due to updated market conditions.
Current report
Noninterest income for the three months ended September 30, 2026 totaled $5.0 million, a decrease of $0.4 million compared to the same period in 2025. The decrease was primarily attributable to the Insurance Transaction completed during the second quarter of 2026 and the resulting reduction in ongoing insurance commission income. Other noninterest income decreased $0.2 million, primarily reflecting $0.5 million of unrealized losses on an equity security recognized during the third quarter of 2026, partially offset by a $0.3 million gain on a bank owned life insurance (“BOLI”) death benefit recognized during the same period. The decrease in noninterest income was further offset by a $0.6 million increase in service charges, commissions and fees, primarily reflecting higher fee income associated with deposit account services.
Current report
Noninterest expense for the three months ended September 30, 2026 totaled $29.5 million, an increase of $0.8 million, or 2.8%, compared to the same period in 2025. The increase was primarily driven by $2.3 million in salaries and employee benefits, $0.6 million in data processing expense, and $0.3 million in debit card expense. These increases were partially offset by decreases of $1.0 million in FDIC insurance expense, $0.9 million in other noninterest expense and $0.8 million in other taxes.
Current report
The increase in salaries and employee benefits was primarily attributable to higher base salaries, incentive compensation, medical costs and restricted stock expense, partially offset by higher deferred costs associated with loan originations. Data processing expense increased primarily due to new and expanded service agreements implemented in early 2026. Debit card expenses increased primarily due to the timing of expense recognition during the quarter. FDIC insurance expense decreased primarily due to the favorable impact of the Loan Sale Transaction completed during the first quarter of 2026, which improved the Company’s risk profile and resulted in lower FDIC assessments. Other noninterest expense decreased primarily due to a $0.9 million net gain recognized on the sale of two OREO properties during the third quarter of 2026, including a property that had been written down by $0.8 million during the second quarter of 2026 based on an updated appraisal. Other taxes decreased $0.8 million, primarily due to refunds associated with amended prior year tax filings approved during the third quarter of 2026.
Current report
For the nine months ended September 30, 2026, noninterest expense totaled $90.5 million, an increase of $4.5 million, or 5.2%, compared to the same period in 2025. The increase primarily reflected increases of $3.5 million in salaries and employee benefits, $1.8 million in data processing expense, $0.8 million in other noninterest expense, $0.8 million in occupancy expense, $0.5 million in professional and legal fees and $0.4 million in debit card expense, partially offset by decreases of $2.6 million in FDIC insurance expense and $1.0 million in other taxes.
Current report
(Benefit ) Provision for Income Taxes
Current report
The (benefit) provision for income taxes decreased $3.1 million and increased $25.2 million for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025.
Current report
For the three months ended September 30, 2026, the benefit for income taxes was primarily driven by the purchase of investment tax credits and lower state income tax expense during the third quarter of 2026.
Current report
Total cash and cash equivalents decreased $3.4 million, or 3.3%, to $101.7 million at September 30, 2026, compared to December 31, 2025. During the nine months ended September 30, 2026, liquidity generated from the Loan Sale Transaction during the first quarter of 2026 and the Insurance Transaction during the second quarter of 2026 was utilized in part to reduce higher-cost wholesale borrowings and was strategically redeployed among liquid assets, including into higher-yielding interest-bearing deposits with other financial institutions. During the third quarter of 2026, cash and cash equivalents returned to more normalized levels as available liquidity was deployed to fund loan growth and securities purchases during the quarter.
Current report
Equity securities increased $11.2 million to $21.5 million at September 30, 2026, from $10.3 million at December 31, 2025, reflecting purchases of two new equity security investments of other financial institutions during the third quarter of 2026.
Current report
Other Restricted Stock, at cost decreased $7.4 million to $9.4 million at September 30, 2026, primarily reflecting lower FHLB stock holdings associated with the reduction in FHLB borrowings.
Current report
Portfolio loans decreased $108.9 million, or 3.8% annualized, to $3.8 billion at September 30, 2026, from $3.9 billion at December 31, 2025. The decrease primarily reflected the Loan Sale Transaction completed during the first quarter of 2026. Excluding the impact of the Loan Sale Transaction, the Company generated net organic loan growth during the first nine months of 2026, reflecting new loan originations despite elevated loan payoff activity.
Current report
FHLB borrowings decreased $158.5 million to $20.0 million at September 30, 2026 from $178.5 million at December 31, 2025. The decrease primarily reflected the repayment of higher cost wholesale borrowings using liquidity generated from the Company’s strategic transactions during 2026, improving the Company’s funding mix and reducing its reliance on wholesale funding.
Current report
Shareholders’ equity increased $107.2 million, or 25.5%, to $526.9 million at September 30, 2026, from $419.7 million at December 31, 2025. The increase was primarily attributable to net income of $122.4 million and $1.4 million of restricted stock activity recognized during the nine months ended September 30, 2026. These increases were partially offset by a $7.0 million increase in accumulated other comprehensive loss, $5.1 million of common stock repurchases, $4.4 million of cash dividends declared, and $0.1 million of equity issuance costs associated with the Company’s DRIP.
Current report
Portfolio loans decreased $108.9 million, or 3.8% annualized, to $3.8 billion at September 30, 2026, from $3.9 billion at December 31, 2025. The decrease primarily reflected the Loan Sale Transaction completed during the first quarter of 2026. Excluding the impact of the Loan Sale Transaction, the Company generated net organic loan growth during the first nine months of 2026, as new loan originations more than offset approximately $450.8 million of loan payoffs during the period.
Current report
CRE nonperforming loans decreased $6.3 million during the first nine months of 2026. The decrease primarily reflected a $4.0 million charge-off during the third quarter of 2026 related to a loan that had been placed on nonaccrual status during the third quarter of 2025. The charge-off followed updated third-party collateral valuations obtained during the third quarter of 2026 that supported a reduction in the estimated value of the underlying property and reduced the Company’s expected recovery on the loan. The decrease in CRE nonperforming loans also reflected $1.5 million in proceeds received from the sale of a property in receivership during the first quarter of 2026.
Current report
Residential mortgage nonperforming loans decreased $0.7 million during the first nine months of 2026. During the first quarter of 2026, two residential mortgage loans totaling $2.9 million were transferred to OREO and subsequently sold. The decreases were partially offset by two residential mortgage loans totaling $2.0 million that were placed on nonaccrual status during the third quarter of 2026.
Current report
Commercial and industrial (“C&I”) nonperforming loans increased $4.9 million during the first nine months of 2026. During the second quarter of 2026, a C&I relationship consisting of three loans with an aggregate principal balance of $13.4 million was downgraded to substandard and placed on nonperforming status. During the third quarter of 2026, the Company recorded an $8.0 million charge-off on the relationship following updated third-party collateral valuations obtained during the third quarter of 2026, and subsequent collection developments, including a voluntary Chapter 11 bankruptcy filing, which created uncertainty regarding the timing and magnitude of expected cash flows during the exclusivity period and reduced the Company’s expected recovery on the relationship. The charge-off reduced the aggregate principal balance of the relationship to $5.4 million at September 30, 2026.
Current report
OREO increased to $1.2 million at September 30, 2026 from $0.1 million at December 31, 2025, primarily reflecting the transfer of a closed branch location and a closed corporate office to OREO during the first and second quarters of 2026, respectively. OREO activity during the nine months ended September 30, 2026 also included the transfer of two residential mortgage properties to OREO during the first quarter of 2026, both of which were subsequently sold during the third quarter of 2026.
Current report
At both September 30, 2026 and December 31, 2025, the Company had no loans classified as doubtful. Special mention loans decreased $11.5 million to $0.2 million at September 30, 2026 from $11.7 million at December 31, 2025, while substandard loans decreased $197.2 million to $53.3 million from $250.5 million.
Current report
These reductions were partially offset by additions to substandard loans during 2026. C&I substandard loans increased as a result of a $5.4 million relationship previously classified as doubtful that was subsequently classified as substandard during the third quarter of 2026. CRE substandard loans increased primarily due to the addition of two relationships totaling approximately $19.9 million during the third quarter of 2026. Construction substandard loans decreased primarily due to the downgrade of a $17.2 million loan during the first quarter of 2026 and the downgrade of an additional $3.3 million relationship during the third quarter of 2026.
Current report
During the three and nine months ended September 30, 2026, the Company repurchased 74,151 and 182,752 shares of its common stock at a total cost of $2.2 million and $5.1 million, respectively, representing a weighted average cost per share of $29.85 and $27.86, respectively.
Removed paragraphs (24)
Previous report
•Net interest income totaled $40.0 million, an increase of $7.6 million, or 23.5% compared to the same period in 2025, despite approximately $132.6 million in commercial real estate loan payoffs during the second quarter of 2026;
Previous report
•Net interest margin, increased 58 basis points to 3.38%, compared to 2.80% for the same period in 2025;
Previous report
•The provision for credit losses was $2.0 million, compared to a recovery for credit losses of $2.3 million for the same period in 2025;
Previous report
Highlights for the Six Months Ended June 30, 2026
Previous report
◦Net interest income totaled $75.9 million, an increase of $13.4 million, or 21.4% compared to the same period in 2025;
Previous report
◦Net interest margin, increased 49 basis points to 3.23%, compared to 2.74% for the same period in 2025;
Previous report
◦Income tax provision increased $28.3 million to $32.6 million compared to $4.3 million for the same period in 2025.
Previous report
•The available-for-sale securities portfolio decreased $51.3 million and is currently 13.3% of total assets compared to 14.3% of total assets;
Previous report
The increase was primarily attributable to higher average interest-earning assets, led by growth in the commercial real estate, commercial and industrial, construction, and residential mortgage loan portfolios, as well as a reduction in the average costs of interest-bearing liabilities. The average yield on total interest-earning assets increased 22 basis points to 5.23% from 5.01% primarily as a result of the redeployment of funds from the Loan Sale Transaction, while the average cost of total interest-bearing liabilities declined 37 basis points to 2.39% from 2.76%, primarily due to continued reductions in funding costs, as well as stabilization in deposit pricing, partially reflecting the broader interest rate environment, resulting in expansion of the net interest margin to 3.40%, compared to 2.82% for the second quarter of 2025.
Previous report
Funding costs continued to improve during the quarter as the average costs of interest-bearing liabilities declined to 2.39% from 2.76%, and the Company eliminated FHLB borrowings outstanding compared to the prior-year quarter, further reducing interest expense.
Previous report
Noninterest income for the three months ended June 30, 2026 totaled $28.7 million, an increase of $23.8 million compared to the same period in 2025. The increase was primarily attributable to the $35.9 million net gain recognized on the Insurance Transaction and a $0.7 million increase in service charges on deposit accounts, partially offset by the $12.5 million loss on the sale of securities recognized in connection with the Portfolio Repositioning completed during the second quarter of 2026 and a $0.6 million decline in insurance commissions. The decrease in insurance commissions primarily reflected the Insurance Transaction, which reduced ongoing insurance commission income.
Previous report
Noninterest expense for the three months ended June 30, 2026 totaled $30.0 million, an increase of $0.7 million compared to the same period in 2025. The increase was primarily driven by $1.1 million of higher other noninterest expense, $0.8 million of higher data processing expense and $0.4 million of higher occupancy expense, partially offset by a $1.7 million decline in FDIC insurance expense.
Previous report
FDIC insurance expense declined during the second quarter of 2026, primarily reflecting the favorable impact of the Company’s improved risk profile following the Loan Sale Transaction completed during the first quarter of 2026, which reduced FDIC assessment costs. Other noninterest expense increased primarily due to a $0.8 million write-down of an OREO property based on an updated appraisal received during the second quarter of 2026, as well as a $0.5 million write-down on a closed corporate office building. Data processing expense increased due to new and expanded service agreements implemented in early 2026. Occupancy expense increased primarily as a result of higher costs associated with service agreements, software licenses, maintenance contracts, and other infrastructure investments.
Previous report
For the six months ended June 30, 2026, noninterest expense totaled $61.0 million, compared to $57.3 million for the same period in 2025, an increase of $3.7 million. The increase primarily reflected $1.6 million of higher other noninterest expense, $1.2 million of higher data processing expense, $1.2 million of higher salaries and employee benefits, $0.7 million of higher occupancy expense and $0.4 million of higher professional and legal fees, partially offset by a $1.6 million decline in FDIC insurance expense.
Previous report
Provision for Income Taxes
Previous report
The provision for income taxes increased $6.2 million and $28.3 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increases were primarily attributable to higher pre-tax income, which increased $26.6 million and $125.5 million for the three and six month periods, respectively.
Previous report
The $0.8 million reversal of a federal valuation allowance related to the realization of capital loss carryforwards from prior tax years, which were created by the exit of tax equity investments and sales of securities. Management assesses all available positive and negative evidence to estimate whether sufficient taxable income of the appropriate character would be available to utilize the capital loss carryforwards prior to their expiration. Management believes that the gains resulting from the second quarter Insurance Transaction create sufficient capital gain income to realize the entirety of the capital loss carryforwards. Consequently, the $0.8 million federal valuation allowance was reversed.
Previous report
Total cash and cash equivalents increased $171.4 million, or 163.0%, to $276.5 million at June 30, 2026, from $105.2 million at December 31, 2025. The increase primarily reflected liquidity generated from the Loan Sale Transaction during the first quarter of 2026 and the Insurance Transaction during the second quarter of 2026. A portion of these proceeds were strategically redeployed from Federal Reserve Bank excess reserve balances into higher-yielding interest-bearing deposits with other financial institutions.
Previous report
Portfolio loans decreased $145.0 million, or 7.5% annualized, to $3.7 billion at June 30, 2026, compared to $3.9 billion at December 31, 2025. The decline primarily reflected the first quarter Loan Sale Transaction. Excluding the Loan Sale Transaction, the Company continued to generate organic loan growth through new loan originations, partially offset by normal loan repayments and payoffs.
Previous report
On the funding side, the Company had no FHLB borrowings outstanding at June 30, 2026, as higher cost wholesale borrowings were repaid with proceeds from the Company’s recent strategic transactions, improving its funding profile and reducing interest expense.
Previous report
Shareholders’ equity increased $119.4 million, or 28.5%, to $539.1 million at June 30, 2026. The increase was primarily attributable to net income generated during the first six months of 2026 and an improvement in accumulated other comprehensive loss primarily resulting from the Portfolio Repositioning as well as changes in the fair value of the available-for-sale securities portfolio partially offset by dividends declared and share repurchases.
Previous report
Total portfolio loans decreased $145.0 million to $3.7 billion at June 30, 2026, compared to December 31, 2025 largely reflecting the Loan Sale Transaction completed during the first quarter of 2026, partially offset by net loan growth during the first half of the year.
Previous report
Net recoveries totaled $0.7 million and $15.6 million for the three and six months ended June 30, 2026, respectively, compared to net charge-offs of $0.2 million for both the three and six month periods ended June 30, 2025. As a percentage of average portfolio loans, net recoveries were 0.07% and 0.82% for the three and six months ended June 30, 2026, respectively, compared to net charge-offs of 0.02% and 0.01% for the same periods in 2025. The six month results for 2026 included a $15.0 million recovery recognized in connection with the first quarter 2026 Loan Sale Transaction, representing the recovery of the previously charged-off principal balance associated with the “Other” segment of the loan portfolio.
Previous report
At June 30, 2026, the Company had $13.4 million of loans classified as doubtful, compared to none at December 31, 2025. The increase during the second quarter of 2026 was attributable to a change in the classification of a relationship from Substandard in May 2026 to Doubtful in June 2026. The relationship was transferred to nonaccrual status in June 2026. The borrower’s financial condition continued to deteriorate with the most recent results indicating inadequate working capital due to an exacerbated cash conversion cycle. The levels of special mention and substandard loans at June 30, 2026, compared to December 31, 2025, reflected a decrease of $10.3 million in special mention and a decrease of $208.1 million in substandard loans.
Reworded paragraphs (81)
Previous wording
This section reviews the Company’s financial condition and results of operations and highlights material changes in its financial condition and results of operations as of and for the three and six month periods ended June 30, 2026 and June 30, 2025. 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.
Current wording
This section reviews the Company’s financial condition and results of operations and highlights material changes in its financial condition and results of operations as of and for the three and nine month periods ended September 30, 2026 and September 30, 2025. 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
This Quarterly Report on Form 10-Q contains or incorporates certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include statements relating to the financial consequences of the Loan Sale Transaction, Insurance Transaction and Portfolio Repositioning, including the expected enhancement of future earnings, asset yields, and net interest income from the Portfolio Repositioning, our expansion in the Carolinas and the anticipated results of such expansion, our financial condition, market conditions, results of operations, plans, including our strategic plan, brand strategy, and guiding principles and the anticipated results of the foregoing, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, loan pipeline and nonaccrual and nonperforming loans (“NPL”). Forward looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.
Current wording
This Quarterly Report on Form 10-Q contains or incorporates certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include statements relating to the financial consequences of the Loan Sale Transaction, Insurance Transaction and Portfolio Repositioning, our Small Business Administration (“SBA”) lending team and the anticipated benefits of such team, our expansion in the Carolinas and the anticipated results of such expansion, our financial condition, market conditions, results of operations, plans, including our strategic plan, brand strategy, and guiding principles and the anticipated results of the foregoing, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, loan pipeline and nonaccrual and nonperforming loans (“NPL”). Forward-looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.
Previous wording
•changes in accounting policies, practices, or guidance, for example, our adoption of Current Expected Credit Losses (“CECL”) methodology, including potential volatility in the Company’s operating results due to application of the CECL methodology;
Current wording
•changes in accounting policies, practices, or guidance;
Previous wording
•the soundness of other financial institutions and any indirect exposure related to large bank failures and their impact on the broader market through other customers, suppliers and partners or that the conditions which resulted in the liquidity concerns with those failed banks may also adversely impact, directly or indirectly, other financial institutions and market participants with which the Company has commercial or deposit relationships with;
Current wording
•the soundness of other financial institutions and any indirect exposure related to large bank failures and their impact on the broader market through other customers, suppliers and partners or that the conditions which resulted in the liquidity concerns with those failed banks may also adversely impact, directly or indirectly, other financial institutions and market participants with which the Company has commercial or deposit relationships;
Previous wording
Please also refer to such other factors as discussed throughout Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and any of the Company’s subsequent filings with the Securities and Exchange Commission (“SEC”). Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events are expressed in or implied by a forward-looking statement may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and the Company undertakes no obligation to update, revise or clarify any forward-looking statement to reflect developments occurring after the statement is made, except as required by law.
Current wording
Please also refer to such other factors as discussed throughout Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and any of the Company’s subsequent filings with the Securities and Exchange Commission (“SEC”). Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events that are expressed in or implied by a forward-looking statement may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and the Company undertakes no obligation to update, revise or clarify any forward-looking statement to reflect developments occurring after the statement is made, except as required by law.
Previous wording
Carter Bankshares, Inc. (the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.8 billion at June 30, 2026. 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 63 branches in Virginia and North Carolina. The Bank became a member of the Federal Reserve System on November 13, 2025. The Company provides a full range of commercial banking, consumer banking, mortgage and other services through the Bank. 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 $4.7 billion at September 30, 2026. 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 63 branches in Virginia and North Carolina. The Bank became a member of the Federal Reserve System on November 13, 2025. The Company provides a full range of commercial banking, consumer banking, mortgage and other services through the Bank. The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “CARE”.
Previous wording
Three strategic milestones during the first half of 2026:
Current wording
Strategic milestones during the first nine months of 2026:
Previous wording
•The Insurance Transaction was accretive to diluted earnings per share by $1.30 for the quarter; and
Current wording
•The Insurance Transaction was accretive to diluted earnings per share by $1.30 for the second quarter of 2026; and
Previous wording
•The Insurance Transaction increased tangible book value per share by $1.28.
Current wording
•The Insurance Transaction increased book value per share by $1.28 for the second quarter of 2026.
Previous wording
As a result of the successful completion of the Insurance Transaction and the Loan Sale Transaction during the second and first quarters of 2026, respectively, the Company generated approximately $100.9 million of aggregate nonrecurring gains during the first six months of 2026. These gains afforded an opportunity to optimize the Company’s balance sheet, improve future earnings potential and enhance interest rate risk positioning. As part of this process, the Company completed a strategic Portfolio Repositioning, which is discussed below, during the second quarter of 2026, resulting in a pre-tax loss of $12.5 million. The Portfolio Repositioning is expected to enhance future earnings performance through improved asset yields and balance sheet positioning.
Current wording
As a result of the successful completion of the Insurance Transaction during the second quarter of 2026 and the Loan Sale Transaction during the first quarter of 2026, the Company generated approximately $100.9 million of aggregate nonrecurring gains during the first six months of 2026. These gains afforded an opportunity to optimize the Company’s balance sheet, improve future earnings potential and enhance interest rate risk positioning. As part of this process, the Company completed a strategic Portfolio Repositioning, which is discussed below, during the second quarter of 2026, resulting in a pre-tax loss of $12.5 million. The Portfolio Repositioning has enhanced earnings performance through improved asset yields and balance sheet positioning.
Previous wording
•Total noninterest expense increased $0.7 million to $30.0 million compared to the same period in 2025; and
Current wording
•Total noninterest expense increased $0.8 million to $29.5 million compared to the same period in 2025; and
Previous wording
◦The recovery for credit losses was $31.9 million, compared to a recovery for credit losses of $4.4 million for the same period in 2025;
Current wording
◦The recovery for credit losses was $21.4 million, compared to a recovery for credit losses of $1.5 million for the same period in 2025;
Previous wording
◦Total noninterest income increased $87.9 million to $99.7 million compared to the same period in 2025 primarily attributable to the $65.0 million gain from the Loan Sale Transaction during the first quarter of 2026 and the $35.9 million net gain recognized from the Insurance Transaction during the second quarter of 2026, partially offset by the $12.5 million of losses on sales of securities recognized in connection with the Portfolio Repositioning during the second quarter of 2026;
Current wording
◦Total noninterest income increased $87.5 million to $104.7 million compared to the same period in 2025 primarily attributable to the $65.0 million gain from the Loan Sale Transaction during the first quarter of 2026 and the $35.9 million net gain recognized from the Insurance Transaction during the second quarter of 2026, partially offset by the $12.5 million of losses on sales of securities recognized in connection with the Portfolio Repositioning during the second quarter of 2026;
Previous wording
◦Total noninterest expense increased $3.7 million to $61.0 million compared to the same period in 2025; and
Current wording
◦Total noninterest expense increased $4.5 million to $90.5 million compared to the same period in 2025; and
Previous wording
•Income tax provision increased $6.2 million to $8.3 million compared to $2.1 million for the same period in 2025.
Current wording
◦Income tax provision increased $25.2 million to $31.2 million compared to $6.0 million for the same period in 2025.
Previous wording
•Total portfolio loans decreased $145.0 million primarily due to the Loan Sale Transaction in the first quarter of 2026, partially offset by net loan growth during the first half of the year;
Current wording
•Total portfolio loans decreased $108.9 million primarily due to the Loan Sale Transaction in the first quarter of 2026, partially offset by net loan growth during the nine months ended September 30, 2026;
Previous wording
•The portfolio loans to deposit ratio was 89.0%, compared to 92.1%;
Current wording
•The portfolio loans to deposit ratio was 91.6%, compared to 92.1%;
Previous wording
•Nonperforming loans (“NPLs”) decreased by $206.4 million to $37.6 million compared to $244.0 million due to the Loan Sale Transaction and NPLs to total portfolio loans were 1.01% compared to 6.29%;
Current wording
•Nonperforming loans (“NPLs”) decreased by $216.1 million to $27.9 million compared to $244.0 million due to the Loan Sale Transaction and NPLs to total portfolio loans were 0.74% compared to 6.29%;
Previous wording
•The allowance for credit losses to total portfolio loans was 1.48%, compared to 1.84%, primarily reflecting the reversal of specific reserves of $18.0 million related to the Judgments;
Current wording
•The allowance for credit losses to total portfolio loans was 1.42%, compared to 1.84%, primarily reflecting the reversal of specific reserves of $18.0 million related to the Judgments;
Previous wording
•Total deposits decreased $13.3 million, or 0.64%, on an annualized basis, to $4.2 billion, compared to December 31, 2025; and
Current wording
•Total deposits decreased $93.6 million, or 2.97%, on an annualized basis, to $4.1 billion, compared to December 31, 2025; and
Previous wording
•FHLB borrowings decreased $178.5 million, reflecting the repayment of borrowings utilizing proceeds from the Loan Sale Transaction.
Current wording
•FHLB borrowings decreased $158.5 million, reflecting the repayment of borrowings utilizing proceeds from the Loan Sale Transaction.
Previous wording
The Company reported net income of$28.9 million, or $1.31 diluted earnings per share, and$114.7 million, or $5.18 diluted earnings per share for thethree and six months ended June 30, 2026, respectively, compared to net income of$8.5 million, or $0.37 diluted earnings per share, and$17.5 million, or $0.76 diluted earnings per share, for thethree and six months ended June 30, 2025, respectively.
Current wording
The Company reported net income of$7.8 million, or $0.35 diluted earnings per share, and$122.4 million, or $5.53 diluted earnings per share for thethree and nine months ended September 30, 2026, respectively, compared to net income of$5.4 million, or $0.24 diluted earnings per share, and$22.9 million, or $1.00 diluted earnings per share, for thethree and nine months ended September 30, 2025, respectively.
Previous wording
Net interest income for the three months ended June 30, 2026 increased $7.6 million, or 23.5%, to $40.0 million, compared to $32.4 million for the same period in 2025. On a fully taxable equivalent (“FTE”) basis (non-GAAP), net interest income increased $7.7 million, or 23.5%, to $40.2 million, compared to $32.5 million for the second quarter of 2025.
Current wording
Net interest income for the three months ended September 30, 2026 increased $7.5 million, or 22.3%, to $41.2 million, compared to $33.7 million for the same period in 2025. On a fully taxable equivalent (“FTE”) basis (non-GAAP), net interest income increased $7.8 million, or 22.9%, to $41.6 million, compared to the third quarter of 2025. The increase was primarily attributable to higher yields on average interest-earning assets and lower funding costs.
Previous wording
Average loan balances decreased compared to the prior-year quarter, as a result of the Loan Sale Transaction, and the average yield on total loans improved to 5.71% from 5.39%, reflecting higher market interest rates on new originations and portfolio mix. While average security balances declined from the prior-year period, the Company’s strategic balance sheet initiatives, including the second quarter Portfolio Repositioning of a portion of the available-for-sale securities portfolio into higher-yielding investments, are expected to enhance future interest income. In addition, interest-bearing deposits with banks increased from the prior-year period due to elevated liquidity following the Company’s strategic transactions completed during the first half of 2026.
Current wording
The yield on average interest-earning assets increased 30 basis points to 5.33% from 5.03% compared to the third quarter of 2025. The increase reflected higher yields on the investment securities portfolio, including due to the impact of the Portfolio Repositioning completed during the second quarter of 2026, favorable loan repricing and approximately $0.5 million of additional loan prepayment penalties compared to the prior year quarter. While average loan balances decreased compared to the prior-year quarter, as a result of the Loan Sale Transaction completed during the first quarter of 2026, the average yield on total loans increased to 5.71% from 5.41%, reflecting favorable loan repricing, higher yields on new originations and changes in portfolio mix. Average interest-bearing deposits with banks also increased from the prior year period, reflecting elevated liquidity following the Company’s strategic transactions completed during the first half of 2026.
Previous wording
Net interest income for the six months ended June 30, 2026 increased $13.4 million, or 21.4% to $75.9 million, compared to $62.5 million for the same period in 2025. On an FTE basis (non-GAAP), net interest income increased $13.4 million, or 21.4%, to $76.3 million, compared to $62.8 million for the same period in 2025.
Current wording
Net interest income for the nine months ended September 30, 2026 increased $20.9 million, or 21.7% to $117.1 million, compared to $96.2 million for the same period in 2025. On an FTE basis (non-GAAP), net interest income increased $21.2 million, or 21.9%, to $117.9 million, compared to $96.7 million for the same period in 2025. The increase was primarily attributable to higher average interest-earning assets, improved yields on interest-earning assets and lower funding costs.
Previous wording
The increase was primarily driven by growth in average interest-earning assets and lower funding costs. Average interest-earning assets increased to $4.7 billion from $4.6 billion, while the average yield on interest-earning assets increased 14 basis points to 5.15% from 5.01%. At the same time, the average cost of total interest-bearing liabilities declined 38 basis points to 2.44% from 2.82%, contributing to an increase in the net interest margin to 3.24%, compared to 2.76% for the same period in 2025.
Current wording
Average interest-earning assets increased to $4.7 billion from $4.6 billion, while the average yield on interest-earning assets increased 19 basis points to 5.21% from 5.02%. At the same time, the average cost of total interest-bearing liabilities decreased 37 basis points to 2.41% from 2.78%. These factors contributed to a 54 basis point increase in net interest margin to 3.34% from 2.80% for the same period in 2025.
Previous wording
Average loan balances increased across the commercial real estate, commercial and industrial, construction and residential mortgage portfolios, with the average yield on total loans improving to 5.59% from 5.39%. While average securities balances declined from the prior-year period, the Company’s strategic balance sheet initiatives, including the second quarter Portfolio Repositioning into higher-yielding investments, are expected to enhance future interest income. Average interest-bearing deposits with banks also increased as excess liquidity generated from the Company’s strategic transactions was deployed into higher-yielding interest-bearing accounts.
Current wording
Average loan balances increased from the prior year period, primarily reflecting growth in the commercial real estate, commercial and industrial, construction and residential mortgage portfolios, partially offset by the impact of the Loan Sale Transaction completed during the first quarter of 2026. The average yield on total average loans increased 24 basis points to 5.63% from 5.39%, contributing to higher interest income. Average securities balances declined from the prior-year period; however, the Portfolio Repositioning completed during the second quarter of 2026 contributed to higher yields on the investment securities portfolio during the nine months ended September 30, 2026. Average interest-bearing deposits with banks also increased as excess liquidity generated from the Company’s strategic transactions was deployed into higher-yielding interest-bearing accounts.
Previous wording
Interest expense declined as deposit pricing improved and average FHLB borrowings were lower than the prior-year period, reflecting the Company’s continued emphasis on optimizing its funding mix and reducing overall funding costs.
Current wording
Interest expense decreased as deposit costs improved and average borrowings declined from the prior-year period. The average cost of interest-bearing deposits decreased to 2.38% from 2.73%, while average FHLB borrowings decreased to $53.2 million from $99.7 million. These changes reflect the Company’s continued focus on optimizing its funding mix and reducing overall funding costs.
Previous wording
The following table presents information regarding the provision (recovery) for credit losses and net (recoveries) / charge-offs for the periods presented:
Current wording
The following table presents information regarding the provision (recovery) for credit losses and net charge-offs / (recoveries) for the periods presented:
Previous wording
During the three months ended June 30, 2026, the Company recorded a provision for credit losses of $2.0 million, compared to a recovery of $2.3 million for the same period in 2025. The provision for the quarter ended June 30, 2026 was primarily attributable to a commercial and industrial credit relationship consisting of three loans that transferred to NPL status during the quarter, resulting in the establishment of a $3.1 million specific reserve. This increase was partially offset by $0.7 million net recoveries received during the period. During the six months ended June 30, 2026, the Company recorded a recovery for credit losses of $31.9 million, compared to a recovery of $4.3 million for the same period in 2025. The recovery for credit losses during the six months ended June 30, 2026 primarily reflects the release of previously established specific reserves of $18.0 million, as well as a $15.0 million net recovery associated with the Judgments, in each case related to the Loan Sale Transaction. This recovery was offset by the previously mentioned $3.1 million specific reserve recorded in the second quarter. The recovery for credit losses in the first six months of 2025 was primarily driven by a decline in the Other segment reserve rate, specifically the Company’s former largest nonperforming credit relationship due to curtailment payments received during the period.
Current wording
During the nine months ended September 30, 2026, the Company recorded a recovery for credit losses of $21.4 million, compared to a recovery of $1.5 million for the same period in 2025. The recovery for the first nine months of 2026 primarily reflected the release of $18.0 million in previously established specific reserves and $15.0 million in net recovery associated with the Judgments, both related to the Loan Sale Transaction completed during the first quarter of 2026. These favorable impacts were partially offset by $12.1 million in net charge-offs recognized during the third quarter of 2026, as discussed above, as well as changes in reserves associated with the remaining loan portfolio. The recovery for credit losses during the nine months ended September 30, 2025 was primarily attributable to a decline in the Other segment reserve rate, principally related to the Company’s former largest nonperforming credit relationship following curtailment payments received during the period.
Previous wording
The Company also recorded a recovery for unfunded loan commitments of $0.6 million and $0.8 million for the three and six months ended June 30, 2026, respectively compared to $0.3 million and $0.4 million for the same periods in 2025, respectively. The increases from the three and six months ended June 30, 2025 were primarily due to a reduction in unfunded loan commitments, which is reflective of the increase in construction loans in the loan composition.
Current wording
The Company also recorded recoveries for unfunded loan commitments of $0.1 million and $0.9 million for the three and nine months ended September 30, 2026, respectively, compared to a provision of $0.3 million and a recovery of $0.1 million for the same periods in 2025, respectively. The change from the prior year periods was primarily attributable to a reduction in unfunded loan commitments, including the funding of construction loan commitments as projects progressed.
Previous wording
As a result of these factors, the allowance for credit losses to total portfolio loans declined to 1.48% at June 30, 2026 from 1.90% at June 30, 2025. While the Company recorded a provision for credit losses during the second quarter of 2026, the year-to-date recovery for credit losses, primarily driven by the first quarter of 2026 Loan Sale Transaction and related reserve release and recovery discussed above, remained a significant contributor to earnings for the six months ended June 30, 2026.
Current wording
As a result of these factors, the allowance for credit losses to total portfolio loans declined to 1.42% at September 30, 2026 from 1.92% at September 30, 2025. While the Company recorded a provision for credit losses during the third quarter of 2026, the year-to-date recovery for credit losses, primarily driven by the first quarter of 2026 Loan Sale Transaction and related reserve release and recovery discussed above, remained a significant contributor to earnings for the nine months ended September 30, 2026.
Previous wording
Net recoveries totaled $0.7 million and $15.6 million for the three and six months ended June 30, 2026, respectively, compared to net charge-offs of $0.2 million for both the three and six months ended June 30, 2025. Net recoveries (annualized) to average portfolio loans, were 0.07% and 0.82% for the three and six months ended June 30, 2026, respectively, compared to net charge-offs of 0.02% and 0.01% for the same periods in 2025, respectively.
Current wording
Net charge-offs totaled $12.1 million for the three months ended September 30, 2026, while net recoveries totaled $3.5 million for the nine months ended September 30, 2026, compared to net charge-offs of $0.2 million and $0.4 million, respectively, for the same periods in 2025. Net charge-offs (recoveries), annualized as a percentage of average portfolio loans, were 1.28% and (0.12)% for the three and nine months ended September 30, 2026, respectively, compared to 0.02% and 0.01% for the same periods in 2025.
Previous wording
For the six months ended June 30, 2026, noninterest income totaled $99.7 million, compared to $11.8 million for the same period in 2025. The increase was primarily attributable to the $65.0 million gain recognized on the Loan Sale Transaction during the first quarter of 2026, the $35.9 million net gain recognized on the Insurance Transaction during the second quarter of 2026, and a $1.0 million increase in service charges on deposit accounts. These increases were partially offset by the $12.5 million loss on the sale of securities recognized in connection with the Portfolio Repositioning during the second quarter of 2026 and the $1.9 million BOLI death benefit recognized during the first quarter of 2025.
Current wording
Noninterest income for the nine months ended September 30, 2026 totaled $104.7 million, compared to $17.2 million for the same period in 2025, an increase of $87.5 million. The increase was primarily attributable to the $65.0 million gain recognized from the Loan Sale Transaction during the first quarter of 2026, the $35.9 million net gain recognized from the Insurance Transaction during the second quarter of 2026, a $1.6 million increase in service charges, commissions and fees due to higher fee income associated with deposit account services, the $0.3 million gain on a BOLI death benefit recognized during the third quarter of 2026, and a $0.3 million increase in debit card interchange fees. These increases were partially offset by the $12.5 million of losses on sales of securities recognized in connection with the Portfolio Repositioning during the second quarter of 2026, a $2.2 million decrease in other noninterest income, and a $1.0 million decrease in insurance commission income. The decrease in other noninterest income primarily reflected a $1.9 million gain on a BOLI death benefit recognized during the first quarter of 2025. The decrease in insurance commission income primarily reflected the impact of the Insurance Transaction and the resulting reduction in ongoing insurance commission income.
Previous wording
Consistent with the quarterly discussion above, other noninterest expense increased primarily due to the OREO property write-down and the write-down on the closed corporate office building, while data processing expense increased due to new and expanded service agreements implemented in early 2026. Occupancy expense increased primarily as a result of higher costs associated with service agreements, software licenses, maintenance contracts, and related infrastructure investments. Salaries and employee benefits increased primarily due to higher incentive compensation, increased medical benefit costs and annual merit increases, partially offset by higher deferred costs on loan originations. Professional and legal fees increased primarily due to costs associated with the Loan Sale Transaction and higher expenses related to the management of special assets. FDIC insurance expense declined as a result of the Company’s improved risk profile following the Loan Sale Transaction completed during the first quarter of 2026.
Current wording
Salaries and employee benefits increased primarily due to higher incentive compensation, restricted stock expense, medical benefit costs and annual merit increases, partially offset by higher deferred costs associated with loan originations. Data processing expense increased primarily due to new and expanded service agreements implemented in early 2026. Other noninterest expense increased primarily due to the OREO property write-down discussed above and the write-down on a closed corporate office building both recognized during the second quarter of 2026, partially offset by the net gain on the sale of OREO properties recognized during the third quarter and a $0.6 million write-down on a separate OREO property during the first quarter of 2026. Occupancy expense increased primarily reflected higher costs associated with new and existing service agreements, software licenses, maintenance contracts, and related infrastructure investments, as well as higher depreciation and rent expense. Professional and legal fees increased primarily due to costs associated with the Loan Sale Transaction and higher expenses related to the management of special assets. FDIC insurance expense decreased primarily as a result of the Company’s improved risk profile following the Loan Sale Transaction completed during the first quarter of 2026. The changes in debit card expense and other taxes for the nine months ended September 30, 2026 were primarily attributable to similar factors discussed above for the three month period including the timing of expense recognition and refunds associated with amended prior-year tax filings, respectively.
Previous wording
For the six months ended June 30, 2026, the increase in pre-tax income primarily reflected the first quarter 2026 Loan Sale Transaction, which resulted in a $65.0 million gain on sale, an $18.0 million release of specific reserves, and a $15.0 million recovery for credit losses. In addition, the second quarter Insurance Transaction resulted in a $35.9 million pre-tax gain, partially offset by the $12.5 million loss recognized in connection with the strategic Portfolio Repositioning. Comparability to the prior-year period was also affected by a $1.9 million tax-exempt gain recognized on a BOLI death benefit during the first quarter of 2025.
Current wording
For the nine months ended September 30, 2026, the increase in pre-tax income primarily reflected the first quarter of 2026 Loan Sale Transaction, which resulted in a $65.0 million gain on sale, an $18.0 million release of specific reserves, and a $15.0 million recovery for credit losses. In addition, the second quarter of 2026 Insurance Transaction resulted in a $35.9 million pre-tax gain, partially offset by the $12.5 million loss recognized in connection with the strategic Portfolio Repositioning. These increases to pre-tax income were partially offset by the purchases of investment tax credits in the third quarter of 2026. Comparability between the nine month periods of 2026 and 2025 was also affected by tax-exempt gains recognized on BOLI death benefits of $0.3 million during the third quarter of 2026 and $1.9 million during the first quarter of 2025.
Previous wording
The effective income tax rate was 22.4% and 22.1% for the three and six months ended June 30, 2026, respectively compared to 19.9% and 19.8% for the same periods in 2025. The effective tax rates for 2026 exceeded the statutory federal tax rate of 21.0%, primarily due to state income taxes and the expiration of certain tax credits associated with historic tax credit investments. These items were partially offset by the tax benefits associated with tax-exempt interest income, BOLI income and rehabilitation tax credits. In contrast, the effective tax rate for the prior-year periods benefited from the $1.9 million tax-exempt BOLI death benefit recognized during the first quarter of 2025.
Current wording
The effective income tax rate was (21.7)% and 20.3% for the three and nine months ended September 30, 2026, respectively compared to 24.3% and 20.9% for the same periods in 2025. The effective tax rates for 2026 were below the statutory federal tax rate of 21.0%, primarily due to the purchase of investment tax credits, tax benefits associated with tax-exempt interest income, and BOLI income. Tax-exempt interest income during 2026 also benefited from changes in the composition of the securities portfolio following the Portfolio Repositioning completed during the second quarter of 2026. In comparison, the effective tax rates for the prior-year periods benefited from the $1.9 million tax-exempt BOLI death benefit recognized during the first quarter of 2025.
Previous wording
Refer to Note 12, Provision for Income Taxes, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Current wording
Refer to Note 12, (Benefit) Provision for Income Taxes, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Previous wording
Total assets were $4.8 billion at June 30, 2026, a decrease of $50.0 million, or 1.0%, from $4.9 billion at December 31, 2025. The decrease primarily reflected lower portfolio loans and available-for-sale securities partially offset by higher cash and cash equivalents, higher other real estate owned, and increased interest-bearing deposits with other financial institutions.
Current wording
Total assets were $4.7 billion at September 30, 2026, a decrease of $121.0 million, or 2.5%, from $4.9 billion at December 31, 2025. The decrease primarily reflected lower portfolio loans, a decline in available-for-sale securities and a decrease in FRB excess reserves, partially offset by increases in equity securities, interest-bearing deposits with other financial institutions and other real estate owned.
Previous wording
Available-for-sale securities decreased $51.3 million, or 7.4%, to $640.3 million at June 30, 2026. During the second quarter of 2026, the Company completed the Portfolio Repositioning of approximately $139.4 million of lower-yielding available-for-sale securities, recognizing a pre-tax loss while reinvesting a portion of the proceeds into higher-yielding securities. This Portfolio Repositioning is expected to enhance future net interest income and improve the overall earning asset mix. Available-for-sale securities represented 13.3% of total assets at June 30, 2026, compared to 14.3% at December 31, 2025. FHLB stock, included in Other Restricted Stock, at cost on the Consolidated Balance Sheets, declined $8.4 million in line with lower borrowing levels.
Current wording
Available-for-sale securities decreased $14.0 million, or 2.0%, to $677.6 million at September 30, 2026 from $691.6 million at December 31, 2025. During the second quarter of 2026, the Company completed the Portfolio Repositioning and sold approximately $139.4 million of lower-yielding available-for-sale securities, recognizing a pre-tax loss while reinvesting a portion of the proceeds into higher-yielding securities. This Portfolio Repositioning has enhanced net interest income and improved the overall earning asset mix. Available-for-sale securities represented 14.3% of total assets at both September 30, 2026 and December 31, 2025.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Company’s investment policy, which is approved annually by the Board of Directors and administered by ALCO and the treasury function.
Current report — wording carried from elsewhere
2 These deposits are presented on an estimated basis. This estimate was determined based on the same methodologies and assumptions used for regulatory reporting requirements.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•Total noninterest income increased $23.8 million to $28.7 million compared to the same period in 2025 primarily due to the net gain recognized from the Insurance Transaction, during the second quarter of 2026, partially offset by the $12.5 million of losses on sales of securities recognized in connection with the Portfolio Repositioning during the second quarter of 2026;
Previous report — wording carried elsewhere
For the three months ended June 30, 2026, the increase in pre-tax income was primarily driven by the Insurance Transaction, which resulted in a $35.9 million pre-tax gain, partially offset by a $12.5 million pre-tax loss recognized in connection with the strategic Portfolio Repositioning completed during the second quarter of 2026.