On October 26, 2023, Carter Bankshares Inc (CARE, Financial) announced its financial results for the third quarter of 2023. The company reported a net income of $3.6 million, or $0.16 diluted earnings per share (EPS), a decrease from the second quarter of 2023, which saw a net income of $5.7 million, or $0.24 diluted EPS. The net income for the nine months ended September 30, 2023, was $25.3 million, or $1.07 diluted EPS, compared to $34.5 million, or $1.38 diluted EPS for the same period in 2022.
Financial Performance
The company's financial results for Q3 2023 were significantly impacted by the placement of loans with an aggregate principal value of $301.9 million on nonaccrual status during Q2 2023. This had a negative impact of $9.3 million and $11.3 million on interest income during the third and second quarters of 2023, respectively.
Financial Highlights
For the three and nine months ended September 30, 2023, the company reported a net income of $3.6 million, or $0.16 diluted EPS, and $25.3 million, or $1.07 diluted EPS, respectively. The annualized quarterly return on average assets (ROA) was 0.33% and the annualized quarterly return on average equity (ROE) was 4.19%. The annualized year-to-date ROA and ROE were 0.78% and 9.71%, respectively.
Income Statement Highlights
Net interest income increased by $0.7 million, or 2.6%, to $27.4 million compared to Q2 2023, primarily due to a 38 basis point increase in the yield on earning assets. However, it decreased by $10.3 million, or 27.4%, compared to Q3 2022, primarily due to a 194 basis point increase in funding costs.
Balance Sheet Highlights
Total portfolio loans increased by $80.5 million, or 9.6%, on an annualized basis, to $3.4 billion at the end of Q3 2023. Total deposits decreased by $20.8 million, or 2.31% on an annualized basis, compared to the end of Q2 2023. Nonperforming loans to total portfolio loans were 9.04% for Q3 2023, a significant increase from 0.23% for Q3 2022.
CEO Commentary
We are obviously disappointed that our largest lending relationship remains in nonaccrual status and continues to have a negative impact on our financial results. However, aside from this issue, our financial performance for the quarter continued to be solid. We continue to feel positive about the structure of our balance sheet. Capital levels continue to be strong as does our liquidity position. In addition, we believe our bond portfolio is well positioned to outperform many of our peers in what appears to be a protracted period of higher interest rates. As with most of our peers, we are seeing continued pressure on funding costs. This trend will continue to impact our margin in the coming quarters. We do expect the net interest margin will return to a more normalized level once the large nonperforming loans (“NPL”) are resolved. In terms of loans, we experienced another strong quarter with annualized growth of 9.6%. Lending pipelines are slowing somewhat, but we are still expecting modest loan growth in the near term. Other than the large NPL relationship, our asset quality remains strong across all credit metrics,” stated Litz H. Van Dyke, Chief Executive Officer.
Explore the complete 8-K earnings release (here) from Carter Bankshares Inc for further details.
