Carter Bankshares Inc (NASDAQ:CARE) Reports Mixed Q3 2025 Results

Carter Bankshares Inc (NASDAQ:CARE) reported mixed third-quarter 2025 results, with earnings falling short of analyst expectations while demonstrating underlying operational strength. The regional bank's performance reflects both ongoing challenges with a significant nonperforming loan relationship and positive trends in core banking activities.

Earnings Performance Versus Estimates

The company's quarterly results presented a contrasting picture between top-line performance and bottom-line profitability. Revenue figures showed relative strength while earnings per share significantly trailed analyst projections.

• Revenue: $39.25 million reported versus $39.98 million estimated
• EPS: $0.26 reported versus $0.42 estimated

The modest revenue miss of approximately 1.8% contrasts sharply with the substantial earnings shortfall of nearly 38%. This discrepancy highlights how the company's large nonperforming credit relationship continues to weigh heavily on profitability, despite relatively stable operational revenue generation.

Market Reaction and Price Action

Investors responded negatively to the earnings release, with the stock declining in pre-market trading. This reaction appears focused on the significant earnings miss and ongoing concerns about the bank's credit quality issues. The market's response suggests investors remain cautious about the company's ability to resolve its nonperforming loan challenges and return to consistent earnings growth.

Key Financial Highlights

The quarter presented several positive operational trends alongside persistent credit quality concerns. Net interest income showed meaningful improvement, increasing to $33.7 million from $32.4 million in the previous quarter and $28.8 million in the same period last year. This 4.2% sequential growth and 17.1% year-over-year improvement reflects expanding net interest margins, which rose to 2.86% from 2.80% in the second quarter.

Loan growth emerged as a particular strength, with total portfolio loans increasing $88.5 million, representing 9.4% annualized growth. This expansion was primarily driven by commercial real estate and construction lending, indicating healthy demand in the bank's core markets.

Credit Quality Challenges

The company's results continue to be significantly impacted by its relationship with various entities connected to James C. Justice, II, which remains the bank's largest credit relationship. These loans, with an aggregate principal balance of $228.6 million, have been on nonaccrual status since the second quarter of 2023.

• Nonperforming loans totaled $258.6 million, representing 6.74% of total portfolio loans
• Interest income was negatively impacted by $6.5 million during the quarter due to nonaccrual status
• Specific reserves for the Justice Entities relationship stood at $21.7 million

Despite these challenges, the company has received $73.4 million in aggregate curtailment payments, reducing the nonperforming loan balance from $301.9 million in June 2023.

Management Outlook and Analyst Expectations

CEO Litz H. Van Dyke expressed optimism about the company's positioning, noting "We continue to believe we are well positioned for a strong remainder of 2025 and continuing into 2026." Management highlighted the bank's liability-sensitive balance sheet as a potential benefit if the Federal Reserve continues to reduce short-term interest rates.

Looking ahead, analysts project fourth-quarter 2025 revenue of $41.57 million with earnings per share of $0.84. For the full year 2025, estimates stand at $156.15 million in sales and $2.01 in EPS.

For detailed earnings estimates and future projections, view the complete earnings analysis for Carter Bankshares.

Disclaimer: This article is not investment advice. Investors should conduct their own research and consider their individual financial circumstances before making investment decisions.