Carter Bankshares Net Interest Margin Expands Again

The Tip Desk · November 10, 2026 · 4 min read

Net interest income was $41.2 million in the third quarter as the margin reached 3.51% and loans rose to $3.8 billion.

Carter Bankshares, Inc. (CARE), the Martinsville, Virginia holding company of Carter Bank, reported net interest income of $41.2 million for the third quarter of 2026, up $1.3 million, or 3.2%, from the second quarter. The sequential gain was slower than the $4.1 million, or 11.2%, increase in the prior quarter. Fully taxable equivalent net interest income was $41.6 million.

The net interest margin expanded 13 basis points to 3.51% from 3.38% in the second quarter, after a 31 basis point expansion in that prior quarter. On an FTE basis the margin was 3.55%. The company attributed the linked-quarter FTE net interest income increase to a 10 basis point rise in the yield on average interest-earning assets and a 5 basis point decline in the cost of average interest-bearing liabilities. Higher yields on the investment securities portfolio after the second-quarter repositioning and lower deposit and borrowing costs were cited.

That repositioning, completed in the second quarter, sold $139.4 million in book value of lower-yielding available-for-sale securities and purchased about $88.5 million of higher-yielding securities, recognizing a $12.5 million pre-tax loss. The company said the move contributed to improved interest income in the third quarter.

Portfolio loans increased $36.0 million to $3.8 billion at September 30, 2026, despite about $161.0 million of payoffs, versus a $6.1 million increase in the prior quarter. Commercial real estate, construction and residential mortgage loans led growth. Chief Executive Officer Litz H. Van Dyke said loans increased approximately 4.53% from a year ago excluding the first-quarter Loan Sale Transaction, and that the company continues to see a healthy lending pipeline and growing momentum in small business and commercial and industrial lending, with construction commitments expected to fund over the next 12 to 18 months.

Cash and cash equivalents fell $174.8 million to $101.7 million as available liquidity was deployed to fund loan growth and securities purchases and to support a decline in deposits. Total deposits decreased $80.2 million to $4.1 billion, including a $62.0 million drop in certificates of deposit. FHLB borrowings were $20.0 million versus none at June 30. Securities available-for-sale increased $37.3 million to $677.6 million.

Nonperforming loans decreased $9.6 million to $27.9 million, or 0.74% of portfolio loans, after a $13.6 million increase in the prior quarter. The company recorded $12.1 million of net charge-offs, or 1.28% annualized of average portfolio loans, versus net recoveries of $0.7 million in the second quarter. An $8.0 million charge-off related to a commercial and industrial relationship and a $4.0 million charge-off on a commercial real estate loan accounted for the bulk of the activity. Provision for credit losses was $10.5 million. The allowance for credit losses on loans decreased $1.6 million to $53.6 million, or 1.42% of loans, and coverage of nonperforming loans rose to 191.79% from 146.88%.

Noninterest income fell $23.7 million to $5.0 million after the $35.9 million Insurance Transaction gain and the $12.5 million securities-repositioning loss in the second quarter. Noninterest expense decreased $0.5 million to $29.5 million. The efficiency ratio was 63.84%, versus 43.66% in the second quarter, when the Insurance Transaction gain flattered the ratio.

Net income was $7.8 million, or $0.35 a share, compared with $28.9 million, or $1.31 a share, in the second quarter. Adjusted net income was $7.6 million. The company recorded an income tax benefit of $1.4 million, primarily from investment tax credits and lower state income tax expense. Tier 1 capital was 14.24% and total risk-based capital 15.49%. The company repurchased 74,151 shares for $2.2 million and launched a dividend reinvestment plan offering up to 1.0 million shares.