Carter Bankshares (CARE) Earnings Date & Reports

Key Takeaways

• Carter Bankshares reported Q2 2026 GAAP diluted earnings per share (EPS) of $1.31, driven by a $35.9 million pre-tax gain from the sale of its Bearing Insurance Group membership interest.
• Adjusted EPS of $0.53 fell short of consensus estimates, as core operating profitability came in below analyst expectations.
• Net interest income climbed 23.5% year-over-year to $40.0 million, and net interest margin (NIM) expanded 58 basis points to 3.38%.
• Nonperforming loans (NPLs) increased to $37.6 million, or 1.01% of total portfolio loans, up from $24.0 million in the prior quarter.
• The company executed a securities portfolio repositioning, selling $139.4 million in low-yield assets to improve future earnings potential.
• Shares declined approximately 3% following the release as investors balanced encouraging core banking trends against the adjusted earnings miss.

Earnings Context and Why It Matters

Carter Bankshares entered the second quarter of 2026 with considerable momentum following a transformative first quarter, during which the sale of its largest nonperforming credit relationship generated an $80 million gain and sharply improved asset quality. The Q2 report marks another pivotal chapter, as the company completed the sale of its insurance subsidiary and initiated a balance sheet repositioning. For investors, this quarter offers a critical window into whether the regional bank can sustain its operational turnaround after stripping away the outsized one-time gains that have dominated recent results. The report also tests whether management's strategic decisions to exit non-core businesses and optimize the securities portfolio can translate into durable earnings power and improved shareholder returns.

Reported Results

Carter Bankshares announced Q2 2026 net income of $28.9 million, or $1.31 diluted EPS, compared to $85.8 million, or $3.88 diluted EPS, in the first quarter of 2026 and $8.5 million, or $0.37 diluted EPS, in the second quarter of 2025. The headline GAAP (Generally Accepted Accounting Principles) result was heavily influenced by non-recurring items, most notably a $35.9 million pre-tax gain from the completed sale of Bearing Insurance Group, which added approximately $1.30 to diluted EPS and increased tangible book value per share by $1.28.

On an adjusted basis, which excludes the insurance gain and a $12.5 million pre-tax loss from the securities portfolio repositioning, net income was $11.6 million, or approximately $0.53 per share. That adjusted figure came in below the consensus analyst estimate of roughly $0.77, disappointing investors who had expected stronger core operating earnings. Net interest income reached $40.0 million, up 11.2% from the prior quarter and 23.5% from the year-ago period. The net interest margin expanded to 3.38%, compared to 3.07% in Q1 2026 and 2.80% in Q2 2025, reflecting declining funding costs and improved asset yields. Total portfolio loans grew modestly by $6.1 million during the quarter, even as the bank absorbed $132.6 million in commercial real estate loan payoffs.

Capital ratios strengthened meaningfully, with the Tier 1 capital ratio rising to 14.26% from 13.52% in the prior quarter and the total risk-based capital ratio reaching 15.51%. The company also repurchased 108,601 shares at a weighted average cost of $26.50 per share during the quarter.

AI Screener

Tickeron's AI Screener is an AI-powered stock and ETF discovery tool designed to help traders and investors efficiently filter the market using a combination of technical patterns, fundamental metrics, trend signals, volatility indicators, and AI-driven insights. Users can scan thousands of stocks and ETFs by applying customizable filters such as industry classification, market capitalization, technical indicators, price patterns, and performance metrics. Whether identifying trade ideas, breakout candidates, or trending stocks, the AI Screener aims to streamline the research process and uncover market opportunities faster than manual screening. Explore how the AI Screener can support your investment workflow by visiting the platform today.

Market Reaction and Investor Sentiment

Carter Bankshares shares declined approximately 3% following the Q2 earnings release, trading near $31.93 after opening lower. The sell-off reflected investor disappointment with the adjusted EPS miss, which exposed a gap between headline profitability and the bank's underlying earnings power. The uptick in nonperforming loans to $37.6 million, a reversal from the sharp improvement achieved in Q1, also weighed on sentiment. However, the revenue beat and the expansion in net interest margin provided some offsetting support, suggesting that the bank's core lending franchise continues to strengthen even as non-recurring items complicate the earnings picture. With a price-to-earnings ratio of approximately 6.8 and a beta of 0.51, the stock remains relatively low volatility compared to the broader market, though the mixed quarterly results have introduced fresh uncertainty into the near-term outlook.

Forward Outlook and Key Factors to Monitor

Looking ahead, investors will want to track several developments that could shape Carter Bankshares' trajectory through the remainder of 2026.

The securities portfolio repositioning stands out as a potentially significant earnings catalyst. By selling $139.4 million in securities yielding just 2.28% and reinvesting approximately $88.5 million into AAA- and AA-rated securities yielding roughly 5.27%, management expects to generate meaningfully higher interest income in future quarters. The remaining proceeds are earmarked to fund organic loan growth, which could further support top-line expansion if demand holds steady.

Credit quality deserves continued scrutiny. While the NPL ratio of 1.01% remains manageable and is dramatically improved from 6.69% a year ago, the $13.6 million sequential increase is a reminder that asset quality can fluctuate quarter to quarter. The allowance for credit losses stands at 1.48% of total portfolio loans, providing a reasonable buffer, but any further deterioration in commercial real estate exposures would draw close attention.

The bank's capital position offers flexibility for additional share repurchases or strategic investments. With the insurance sale now closed and the large nonperforming credit resolved earlier this year, Carter Bankshares enters the second half of 2026 with a cleaner balance sheet, no Federal Home Loan Bank borrowings outstanding, and an improved funding profile. The adjusted efficiency ratio improved to 62.66% from 75.55% a year ago, signaling progress on cost management that could support margin expansion if revenue growth continues. Investors will look for evidence that the operational turnaround can deliver consistent, recurring earnings growth without relying on further one-time gains.

Disclaimer

The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.

Disclaimers and Limitations