# EDGAR Filing Document

**Accession Number:** 0001829576
**File Stem:** 0001829576-23-000003
**Filing Date:** 2023-1
**Character Count:** 66645
**Document Hash:** ff411c7ccbfb20cdff3065c547018f48
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001829576-23-000003.hdr.sgml**: 20230126

**ACCESSION NUMBER**: 0001829576-23-000003

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 13

**CONFORMED PERIOD OF REPORT**: 20230126

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230126

**DATE AS OF CHANGE**: 20230126

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Carter Bankshares, Inc.
- **CENTRAL INDEX KEY:** 0001829576
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATIONAL COMMERCIAL BANKS [6021]
- **IRS NUMBER:** 853365661
- **STATE OF INCORPORATION:** VA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39731
- **FILM NUMBER:** 23554227

**BUSINESS ADDRESS:**
- **STREET 1:** 1300 KINGS MOUNTAIN ROAD
- **CITY:** MARTINSVILLE
- **STATE:** VA
- **ZIP:** 24112
- **BUSINESS PHONE:** 276-656-1776

**MAIL ADDRESS:**
- **STREET 1:** 1300 KINGS MOUNTAIN ROAD
- **CITY:** MARTINSVILLE
- **STATE:** VA
- **ZIP:** 24112

?xml version="1.0" ? care-20230126

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20429**

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

Date of Report (Date of earliest event reported): **January 26, 2023**

**CARTER BANKSHARES, INC.**

(Exact name of registrant as specified in its charter)

Virginia 001-39731 85-3365661 <br> (State or other jurisdictionof incorporation) (Commissionfile number) (IRS EmployerIdentification No.)

1300 Kings Mountain Road, Martinsville, Virginia 24112

(Address of Principal Executive Offices) (Zip Code)

(276) 656-1776

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **<u>Title of each class</u>** | **<u>Trading Symbol(s)</u>** | **<u>Name of each exchange on which<br>registered</u>** |
| Common Stock, $1.00 par value | CARE | NASDAQ Global Select Market |

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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**ITEM 2.02.**&nbsp;&nbsp;&nbsp;&nbsp;**RESULTS OF OPERATIONS AND FINANCIAL CONDITION.**

On January 26, 2023, Carter Bankshares, Inc. announced by press release its earnings for the three and twelve months ended December 31, 2022. A copy of the press release is attached hereto as <u>[Exhibit 99.1](care-4q22_ex991xer.htm)</u>. The information contained in this Report on Form 8-K furnished pursuant to Item 2.02 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Exchange Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

**ITEM 9.01.**&nbsp;&nbsp;&nbsp;&nbsp;**FINANCIAL STATEMENTS AND EXHIBITS.**

&nbsp;&nbsp;&nbsp;&nbsp;(d) Exhibits.

**<u>Exhibit No.</u>**

<u>[Exhibit 99.1](care-4q22_ex991xer.htm)</u>&nbsp;&nbsp;&nbsp;&nbsp;Press Release announcing Fourth Quarter and Full Year 2022 Financial Results.

**Important Note Regarding Forward-Looking Statements** 

*Certain matters discussed in this Current Report on Form 8-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to the Company's financial condition, litigation to which the Company is a party and the potential impacts thereon, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Company and its future business and operations.. 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. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements. For a discussion of factors that could affect our business and financial results, see the "Risk Factors" outlined in our periodic and current report filings with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events 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 we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.*

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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| |
|:---|
| **CARTER BANKSHARES, INC.** |
| (Registrant) |

---

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| | | |
|:---|:---|:---|
| Date: January 26, 2023 | By: | /s/ Wendy S. Bell |
|  | Name: | Wendy S. Bell |
|  | Title: | Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

FOR IMMEDIATE RELEASE – January 26, 2023

**Carter Bankshares, Inc. Announces Record Fourth Quarter and Full Year 2022 Financial Results**

Martinsville, VA, January 26, 2023 – Carter Bankshares, Inc. (the "Company") (NASDAQ:CARE), the holding company of Carter Bank & Trust (the "Bank") today announced record net income of $15.6 million, or $0.65 diluted earnings per share ("EPS"), for the fourth quarter of 2022 compared to net income of $14.4 million, or $0.59 diluted EPS, in the third quarter of 2022 and $5.6 million, or $0.21 diluted EPS, for the fourth quarter of 2021. The quarterly pre-tax pre-provision income<sup>1</sup> was $19.4 million for the quarter ended December 31, 2022, $19.5 million for the quarter ended September 30, 2022 and $7.6 million for the quarter ended December 31, 2021.

**Fourth Quarter 2022 Financial Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Solid annualized quarterly performance metrics with return on average assets ("ROA") of 1.49% and return on average equity ("ROE") of 19.32%;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest income increased $3.8 million, or 10.1%, to $41.5 million compared to the third quarter of 2022 primarily due to an increase of 52 basis points in earning assets, offset by an increase of 26 basis points in funding costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest margin, on a fully taxable equivalent basis<sup>3</sup> ("FTE"), increased 32 basis points to 4.07% compared to 3.75% for the third quarter of 2022 and increased 125 basis points compared to 2.82% for the fourth quarter of 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total portfolio loans increased $117.6 million, or 15.4%, on an annualized basis, to $3.1 billion at December 31, 2022 compared to $3.0 billion at September 30, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total deposits decreased $95.6 million, or 2.6%, to $3.6 billion at December 31, 2022 compared to September 30, 2022 primarily due to decreased core deposits. Core deposits, including noninterest-bearing and interest-bearing demand deposits, money market accounts and savings accounts, decreased by $108.5 million, or 4.4%, compared to September 30, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total borrowings increased $168.4 million from the third quarter of 2022 to support loan growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nonperforming loans ("NPL") declined $0.4 million, or 5.2%, to $6.6 million at December 31, 2022 compared to September 30, 2022. NPLs as a percentage of total portfolio loans were 0.21% at December 31, 2022 compared to 0.23% at September 30, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The provision for credit losses totaled $0.1 million for the quarter ended December 31, 2022, compared to $(0.1) million for the quarter ended September 30, 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Expenses increased $4.2 million primarily due to the reversal of the tax credit amortization in the third quarter of 2022 and seasonal costs as discussed below. The efficiency ratio was 59.5% for the quarter ended December 31, 2022 compared to 57.1% for the quarter ended September 30, 2022.

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For the year ended December 31, 2022, net income was $50.1 million, or $2.03 diluted EPS, compared to $31.6 million, or $1.19 diluted EPS for the year ended December 31, 2021. Pre-tax pre-provision income<sup>1</sup> was $64.6 million for the full year December 31, 2022 and $37.8 million for December 31, 2021.

**Full Year 2022 Financial Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Solid annual performance metrics with return on average assets ("ROA") of 1.21% and return on average equity ("ROE") of 14.30%;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest income increased $28.7 million, or 25.9%, to $139.9 million for the full year 2022 compared to $111.2 million for the full year 2021 primarily due to an increase of 60 basis point in earning assets and a decline of nine basis points in funding costs during 2022 due to the intentional runoff of higher cost certificates of deposits ("CDs");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest margin, on an FTE basis<sup>3</sup>, increased 67 basis points to 3.51% for the year ended 2022 compared to 2.84% for the year ended 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total portfolio loans increased $336.8 million, or 12.0%, to $3.1 billion at December 31, 2022 compared to $2.8 billion at December 31, 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total deposits decreased $68.2 million from December 31, 2021 primarily due to the aforementioned intentional runoff of higher cost CDs of $82.8 million, offset by increased core deposits of $14.6 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total borrowings increased $191.4 million for the full year 2022 compared to the full year 2021 to support loan growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• NPLs decreased $0.8 million, or 10.2%, compared to December 31, 2021. NPLs as a percentage of total portfolio loans were 0.21% at December 31, 2022 compared to 0.26% at December 31, 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The provision for credit losses totaled $2.4 million for the year ended December 31, 2022, compared to $3.4 million for the full year December 31, 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Expenses were well controlled in 2022 with an efficiency ratio of 60.7% for the year ended December 31, 2022 compared to 73.5% for the year ended December 31, 2021.

"We are very pleased with another solid quarter of financial results for our Company. These results represent a second consecutive quarter with record earnings for our Company. We continue to see positive trends in net interest income expansion, loan growth and asset quality. Loans grew by an annualized rate of 15.4% since September 30, 2022. Our production was primarily in our commercial real estate and residential mortgage loan portfolios. Loan pipelines also remain healthy for the near term. While we are seeing some pressure on higher funding costs, the asset sensitivity of our balance sheet has us well positioned to further benefit from any additional Federal Reserve interest rate increases," stated Litz H. Van Dyke, Chief Executive Officer.

Van Dyke continued, "The above factors are driving improvement in operating leverage and financial performance. We expect this positive momentum to continue at least in the near term. In addition, the Company continues to be well capitalized with strong liquidity levels, improved asset quality and strong reserve levels, all of which will be beneficial to navigate the potential challenges should a recessionary environment develop in the coming year."

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**Fourth Quarter of 2022 Operating Highlights**

Net interest income increased $3.8 million, or 10.1%, to $41.5 million compared to the third quarter of 2022 and increased $13.5 million, or 48.0%, compared to the fourth quarter of 2021. The net interest margin, on an FTE basis<sup>3</sup>, increased 32 basis points to 4.07% for the fourth quarter of 2022 compared to 3.75% for the quarter ended September 30, 2022 and increased 125 basis points compared to the fourth quarter of 2021. The yield on interest-earning assets increased 52 basis points and 141 basis points compared to the quarters ended September 30, 2022 and December 31, 2021, respectively. Funding costs increased 26 basis points compared to the previous quarter and increased 21 basis points compared to the same quarter of 2021.

The Company continues to focus on the expansion of net interest income and net interest margin. The fourth quarter of 2022 was positively impacted by an increase in the yield on loans and investment securities, partially offset by an increase in funding costs due to the rising interest rate environment. The fourth quarter of 2022 was also positively impacted by enhanced pricing on loans related to one large credit relationship. Certain of these loans may not be renewed at maturity and/or may not otherwise impact the net interest income and net interest margin as significantly in future periods.

The provision (recovery) for credit losses increased $0.2 million to $0.1 million in the fourth quarter of 2022 compared to the third quarter of 2022 and decreased $0.8 million compared to the fourth quarter of 2021. The increase in the provision for credit losses from the prior quarter was primarily driven by increased loan volume, slowing prepayment and curtailment fees, net charge-offs of $0.4 million, offset by the reduction of $2.3 million in the other segment due to principal pay-downs.

The provision (recovery) for unfunded commitments in the fourth quarter of 2022 was a provision of $0.3 million compared to a provision of $0.2 million in the third quarter of 2022 and a recovery of $0.3 million in the fourth quarter of 2021. The increase to the provision for unfunded commitments in the fourth quarter of 2022 compared to the third quarter of 2022 and the fourth quarter of 2021 was related to increases in construction commitments.

At December 31, 2022, NPLs declined $0.4 million, or 5.2%, to $6.6 million since September 30, 2022, primarily due to general pay-downs during the quarter. Net charge-offs were $0.4 million for the fourth quarter of 2022 compared to $4.3 million in the same quarter of 2021. As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 0.05% and 0.60% for the fourth quarter of 2022 and 2021, respectively. NPLs as a percentage of total portfolio loans were 0.21%, 0.23% and 0.26% as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

Total noninterest income was $5.5 million for the fourth quarter of 2022, an increase of $0.3 million, or 5.9%, from the third quarter of 2022 and a decrease of $0.2 million, or 4.0%, compared to the fourth quarter of 2021. The increase of $0.3 million from the third quarter of 2022 primarily relates to an increase of $1.2 million in other noninterest income, offset by decreases of $0.6 million in insurance commissions and $0.3 million of losses on sales and write-downs of bank premises, net. The increase in other noninterest income is due to the unwind of two completed historic tax credit partnerships, which resulted in a gain of $1.2 million. The decrease in insurance commissions is due to reduced customer activity and higher overall expenses compared to the prior quarter. The losses on sales and write-downs of bank premises, net of $0.3 million is due to the retirement of a telephone system in the fourth quarter of 2022.

Compared to the fourth quarter of 2021, the decrease in noninterest income of $0.2 million was primarily driven by the following declines; $0.6 million in insurance commissions, $0.4 million in net security gains, $0.3 million in commercial loan swap fee income, as well as losses of $0.3 million on sales and write-downs of bank premises, net. These decreases were offset by an increase of $1.3 million in other noninterest income as well as an increase of $0.1 million in debit card interchange fees. The declines in insurance commissions were due to reduced customer activity and higher overall expenses. Lower security gains were due to the rising interest rate environment resulting in lower securities prices in the market that discouraged sales. The decline in commercial loan swap fee income is related to the timing and demand for this product in the current rising interest rate

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environment. The increase in other noninterest income during the period compared to the year ago quarter is consistent with the above mentioned unwind of two completed historic tax credit partnerships.

Total noninterest expense was $27.6 million for the fourth quarter of 2022, an increase of $4.2 million, or 17.7%, from the third quarter of 2022 and an increase of $1.4 million, or 5.3%, compared to the fourth quarter of 2021. The increase from the third quarter of 2022 was driven by the following increases; $1.2 million in salaries and employee benefits, $0.9 million in tax credit amortization, $0.8 million in professional and legal fees, $0.7 million in data processing fees, $0.5 million in other noninterest expense and an increase of $0.2 million in advertising expenses. Offsetting these increases was a decrease of $0.1 million in debit card expense. The higher salaries and employee benefits resulted from 2022 vacation carryover, higher medical costs and accruals for performance based awards. The vacation accrual totaled $0.5 million for carryover from 2022 and medical expenses increased $0.4 million primarily due to higher claims. The increase of $0.9 million in tax credit amortization was primarily due to reversing amortization expense as a result of updated information from the developer which extended the in-service date to 2023 for one of the Company's historic tax credit partnerships during the third quarter of 2022. Professional and legal fees related to an increase of $0.4 million in legal fees from employment related issues and normal year-end accruals and $0.4 million increase in professional fees due to increased consulting fees in our retail and operations areas. The increase in data processing was related to our online banking platform. The increase in other noninterest expense of $0.5 million was primarily related to higher state exam fees, capital assessments and losses on customer-related accounts.

Compared to the fourth quarter of 2021 the increase of $1.4 million in total noninterest expense was primarily driven by the following increases; $0.7 million in professional and legal fees, $0.7 million in data processing expenses, $0.3 million in other noninterest expense, $0.2 million in occupancy expense, net, $0.2 million in FDIC Insurance expense, and $0.2 million in advertising expenses. These increases were offset by lower salary and employee benefits of $0.4 million, decreased tax credit amortization of $0.3 million, and losses on sales and write-downs of bank premises, net of $0.1 million. The variances mentioned above for professional and legal fees, data processing, other noninterest expense and advertising expenses are consistent as compared to the third quarter of 2022; however the increase in occupancy primarily relates to an increase in real estate taxes and software maintenance and the increase in FDIC insurance expenses was due to a higher accrual in 2022 as a result of FDIC assessment amounts. The declines in salaries and employee benefits were due to lower medical expenses, our retail branch optimization project, offset by a $1.0 million one-time inflationary bonus for associates in 2022. The decrease in tax credit amortization of $0.3 million relates to the above mentioned reversal of historic tax credit amortization.

**Full Year 2022 Operating Highlights**

Net interest income increased $28.7 million, or 25.9%, to $139.9 million for the full year 2022 compared to $111.2 million for the full year 2021. The net interest margin, on an FTE basis<sup>3</sup>, increased 67 basis points to 3.51% for the year ended 2022 compared to 2.84% for the year ended 2021. The yield on interest-earning assets increased 60 basis points compared to December 31, 2021 and funding costs declined nine basis points compared to the same period.

The provision for credit losses decreased $0.9 million to $2.4 million for the year ended 2022 compared to the year ended 2021.

The provision (recovery) for unfunded commitments increased $1.8 million to $0.5 million for the year ended 2022. The increase to the provision for unfunded commitments for the full year 2022 compared to the same period in 2021 was related to an increase in construction commitments.

Net charge-offs were $4.5 million for the full year 2022 compared to $23.1 million for the full year 2021. The decrease in charge-offs is primarily attributable to the resolution of five problem relationships during 2021, in which the majority were anticipated and previously reserved. As a percentage of average portfolio loans, net charge-offs were 0.15% and 0.79% for the years ended 2022 and 2021, respectively.

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Total noninterest income decreased $7.2 million to $21.7 million for the full year 2022 compared to $28.9 million for the full year 2021. The decrease primarily related to $6.8 million in net gains on sales of securities due to the rising interest rate environment resulting in lower securities prices in the market that discouraged sales and $1.6 million in lower commercial loan swap fee income due to the timing and demand for this product in the current rising interest rate environment. These decreases were offset by increases of $0.5 million in other noninterest income related to the above mentioned unwind of two completed historic tax credit partnerships, $0.5 million in service charges, commission and fees, due to volume, and $0.2 million in debit card interchange fees due to usage.

Total noninterest expense decreased $5.3 million to $97.0 million for the full year 2022 compared to $102.3 million compared to the full year 2021. The decline was driven primarily by a $3.2 million decrease in losses on sales and write-downs of other real estate owned ("OREO"), net, due to nonrecurring write-downs related to closed bank branches in 2021. Also impacting the decrease was $1.8 million in salaries and employee benefits, $1.1 million in tax credit amortization, $0.4 million in telephone expenses and $0.2 million in losses on sales and write-downs of bank premises, net. Offsetting these decreases were increases of $0.3 million in data processing expense, $0.5 million in advertising expenses and $0.6 million in professional and legal fees. The year-to-date decrease in salaries and employee benefits was lower salaries of $1.3 million, lower medical expenses of $1.7 million, our retail branch optimization project offset by the above mentioned $1.0 million one-time inflationary bonus for associates in 2022. The decrease in historic tax credit amortization relates to the above mentioned reversal of tax credit amortization. The variances mentioned above for data processing, advertising expenses, and professional and legal fees are consistent as compared to the fourth quarter of 2021.

**Financial Condition**

Total assets increased $90.2 million to $4.2 billion at December 31, 2022 compared to September 30, 2022. Total portfolio loans increased $117.6 million, or 15.4% on an annualized basis, to $3.1 billion at December 31, 2022 compared to September 30, 2022 primarily due to strong loan growth during the year. The variances in loan segments for portfolio loans related to increases of $105.2 million in commercial real estate loans, $40.3 million in residential mortgages, and $3.5 million in construction loans, offset by decreases of $16.2 million in C&I loan, $12.8 million in the other category, and $2.4 million in other consumer loans. OREO also increased $0.3 million at December 31, 2022 compared to September 30, 2022.

Closed retail bank office carrying values increased $0.3 million and have a remaining book value of $1.1 million at December 31, 2022 compared to $0.8 million at September 30, 2022. During the quarter ended December 31, 2022, $0.7 million in properties sold that were under contract and two properties totaling $1.0 million were closed but not sold.

Federal Reserve Bank excess reserves decreased $16.5 million to $5.3 million at December 31, 2022 from $21.8 million at September 30, 2022 due to strong loan growth and a decline in deposits during the fourth quarter of 2022.

The securities portfolio decreased $14.9 million and is currently 19.9% of total assets at December 31, 2022 compared to 20.7% of total assets at September 30, 2022. The decrease was due to redeploying security maturities into higher yielding loan growth.

Total deposits decreased $95.6 million to $3.6 billion at December 31, 2022 compared to September 30, 2022. All core deposit categories decreased by a total of $108.5 million, with a $47.5 million decline in savings accounts, $32.8 million decline in money market accounts, $15.2 million decrease in noninterest-bearing demand accounts and $13.0 million decrease in interest-bearing demand accounts. The decrease in core deposits was offset by an increase of $12.9 million in CDs. At December 31, 2022, noninterest-bearing deposits comprised 19.4% compared to 19.3% and 20.2% of total deposits at September 30, 2022 and December 31, 2021, respectively. CDs comprised 34.7%, 33.5% and 36.3% of total deposits at December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

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Total Federal Home Loan Bank ("FHLB"), borrowings increased $150.6 million at December 31, 2022 to $180.6 million compared to $30.0 million at September 30, 2022 primarily due to the decline in deposits during the fourth quarter and strong loan growth. The Company had $17.9 million of outstanding federal funds purchased at December 31, 2022 and did not have any outstanding at September 30, 2022. The available borrowing capacity under unsecured lines of credit with the correspondent banks was $127.1 million and $145.0 million at December 31, 2022 and September 30, 2022, respectively.

The Company remains well capitalized. The Company's Tier 1 Capital ratio was 12.61% at December 31, 2022 as compared to 12.80% at September 30, 2022. The Company's leverage ratio was 10.29% at December 31, 2022 as compared to 10.11% at September 30, 2022. The Company's Total Risk-Based Capital ratio was 13.86% at December 31, 2022 as compared to 14.06% at September 30, 2022.

Total capital increased $13.8 million to $328.6 million at December 31, 2022 compared to September 30, 2022. The increase in total capital from the previous quarter is primarily due to net income of $15.6 million for the three months ended December 31, 2022 an increase of $0.7 million in other comprehensive income due to changes in fair value of available-for-sale investment securities, offset by $2.8 million due to the repurchase of common stock. The remaining difference of $0.3 million is related to restricted stock activity for the quarter ended December 31, 2022.

At December 31, 2022, funding sources accessible to the Company include borrowing availability at the FHLB equal to 25.0% of the Company's assets or approximately $1.0 billion, subject to the amount of eligible collateral pledged, federal funds unsecured lines with six other correspondent financial institutions in the amount of $145.0 million and access to the institutional CD market. In addition to the above funding resources, the Company also has $611.8 million of unpledged available-for-sale investment securities as an additional source of liquidity.

**About Carter Bankshares, Inc.**

Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ: CARE) provides a full range of commercial banking, consumer banking, mortgage and services through its subsidiary Carter Bank & Trust. The Company has $4.2 billion in assets and 66 branches in Virginia and North Carolina. For more information or to open an account visit www.CBTCares.com.

**Important Note Regarding Non-GAAP Financial Measures**

In addition to traditional measures presented in accordance with GAAP, our management uses, and this press release contains or references, certain non-GAAP financial measures and should be read along with the accompanying tables in our definitions and reconciliations of GAAP to non-GAAP financial measures. This press release and the accompanying tables discuss financial measures that we believe are useful because they enhance the ability of investors and management to evaluate and compare the Company's operating results from period to period in a meaningful manner. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

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**Important Note Regarding Forward-Looking Statements**

*This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements made in Mr. Van Dyke's quotes and relate to our financial condition, market conditions, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels and asset quality. 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.*

*Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements including, but not limited to the effects of:*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• market interest rates and the impacts of market interest rates on economic conditions, customer behavior, and the Company's loan and securities portfolios;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• monetary and fiscal policies of the U.S. government, including policies of the Federal Reserve;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• changes in accounting policies, practices, or guidance, for example, our adoption of CECL, including potential volatility in the Company's operating results due to application of the CECL methodology;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• cyber-security threats, attacks or events; rapid technological developments and changes;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• changes in the Company's liquidity and capital positions;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• concentrations of loans secured by real estate, particularly commercial real estate, and the potential impacts of changes in market conditions on the value of real estate collateral;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• an insufficient ACL;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, war and other military conflicts (such as the ongoing war between Russia and Ukraine) or public health events (such as the COVID-19 pandemic), and of any governmental and societal responses thereto; these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company's liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• a change in spreads on interest-earning assets and interest-bearing liabilities;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• regulatory supervision and oversight;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• legislation affecting the financial services industry as a whole, and the Company and the Bank, in particular;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• the outcome of pending and future litigation and governmental proceedings;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• increasing price and product/service competition;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• the ability to continue to introduce competitive new products and services on a timely, cost-effective basis;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• managing our internal growth and acquisitions;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or more costly than anticipated;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• material increases in costs and expenses;*

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• reliance on significant customer relationships;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• general economic or business conditions, including unemployment levels, continuing supply chain disruptions and slowdowns in economic growth;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• expansions or consolidations in the Company's branch network, including that the anticipated benefits of the Company's branch network optimization project are not fully realized in a timely manner or at all;*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• deterioration of the housing market and reduced demand for mortgages; and*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*• re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.*

*Many of these factors, as well as other factors, are described in our filings with the SEC including in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2021. All risk factors and uncertainties described herein and therein should be considered in evaluating the Company's forward-looking statements. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are prepared. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events 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 we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.*

*Carter Bankshares, Inc.<br>Wendy Bell, 276-656-1776<br>Senior Executive Vice President & Chief Financial Officer<br>wendy.bell@CBTCares.com*

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**BALANCE SHEETS**

---

| | | | |
|:---|:---|:---|:---|
| **(Dollars in Thousands, except per share data)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** |
| **(Dollars in Thousands, except per share data)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** |
| **(Dollars in Thousands, except per share data)** | **(unaudited)** | **(unaudited)** | **(audited)** |
| **ASSETS** | | | |
| Cash and Due From Banks, including Interest-Bearing Deposits of $4,505 at December 31, 2022, $26,959 at September 30, 2022 and $241,101 at December 31, 2021 | $46869 | $65708 | $277799 |
| Securities Available-for-Sale, at Fair Value | 836273 | 851211 | 922400 |
| Loans Held-for-Sale |  | 1513 | 228 |
| Portfolio Loans | 3148913 | 3031349 | 2812129 |
| Allowance for Credit Losses | (93852) | (94164) | (95939) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Portfolio Loans, net** | **3055061** | **2937185** | **2716190** |
| Bank Premises and Equipment, net | 72114 | 73344 | 75297 |
| Other Real Estate Owned, net | 8393 | 8134 | 10916 |
| Federal Home Loan Bank Stock, at Cost | 9740 | 3192 | 2352 |
| Bank Owned Life Insurance | 56734 | 56387 | 55378 |
| Other Assets | 119335 | 117636 | 73186 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $**4204519** | $**4114310** | $**4133746** |
| **LIABILITIES** |  |  |  |
| Deposits: |  |  |  |
| &nbsp;&nbsp;&nbsp;Noninterest-Bearing Demand | $703334 | $718549 | $747909 |
| &nbsp;&nbsp;&nbsp;Interest-Bearing Demand | 496948 | 509949 | 452644 |
| &nbsp;&nbsp;&nbsp;Money Market | 484238 | 517031 | 463056 |
| &nbsp;&nbsp;&nbsp;Savings | 684287 | 731747 | 690549 |
| &nbsp;&nbsp;&nbsp;Certificates of Deposit | 1261526 | 1248653 | 1344318 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Deposits** | **3630333** | **3725929** | **3698476** |
| Federal Home Loan Bank Borrowings | 180550 | 30000 | 7000 |
| Federal Funds Purchased | 17870 |  |  |
| Other Liabilities | 47139 | 43565 | 20674 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities** | **3875892** | **3799494** | **3726150** |
| **SHAREHOLDERS' EQUITY** |  |  |  |
| Common Stock, Par Value $1.00 Per Share, Authorized 100,000,000 Shares; |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outstanding- 23,956,772 shares at December 31, 2022, <br>24,111,171 shares at September 30, 2022 and <br>26,430,919 shares at December 31, 2021 | 23957 | 24111 | 26431 |
| Additional Paid-in Capital | 104693 | 107031 | 143988 |
| Retained Earnings | 285593 | 269984 | 235475 |
| Accumulated Other Comprehensive (Loss) Income | (85616) | (86310) | 1702 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Shareholders' Equity** | **328627** | **314816** | **407596** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities and Shareholders' Equity** | $**4204519** | $**4114310** | $**4133746** |
| **PERFORMANCE RATIOS** |  |  |  |
| Return on Average Assets (QTD Annualized) | 1.49% | 1.38% | 0.54% |
| Return on Average Assets (YTD Annualized) | 1.21% | 1.12% | 0.76% |
| Return on Average Shareholders' Equity (QTD Annualized) | 19.32% | 16.75% | 5.47% |
| Return on Average Shareholders' Equity (YTD Annualized) | 14.30% | 12.80% | 7.92% |
| Portfolio Loans to Deposit Ratio | 86.74% | 81.36% | 76.03% |
| Allowance for Credit Losses to Total Portfolio Loans | 2.98% | 3.11% | 3.41% |
| **CAPITALIZATION RATIOS** |  |  |  |
| Shareholders' Equity to Assets | 7.82% | 7.65% | 9.86% |
| Tier 1 Leverage Ratio | 10.29% | 10.11% | 10.62% |
| Risk-Based Capital - Tier 1 | 12.61% | 12.80% | 14.21% |
| Risk-Based Capital - Total | 13.86% | 14.06% | 15.46% |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**INCOME STATEMENTS**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| **(Dollars in Thousands, except per share data)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| **(Dollars in Thousands, except per share data)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| **(Dollars in Thousands, except per share data)** | **(unaudited)** | **(unaudited)** | **(audited)** | **(unaudited)** | **(audited)** |
| Interest Income | $48216 | $42327 | $32933 | $160182 | $133897 |
| Interest Expense | 6694 | 4602 | 4883 | 20254 | 22714 |
| &nbsp;&nbsp;**NET INTEREST INCOME** | **41522** | **37725** | **28050** | **139928** | **111183** |
| Provision (Recovery) for Credit Losses | 52 | (77) | 939 | 2419 | 3350 |
| Provision (Recovery) for Unfunded Commitments | 319 | 157 | (324) | 509 | (1269) |
| &nbsp;&nbsp;**NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR CREDIT LOSSES** | **41151** | **37645** | **27435** | **137000** | **109102** |
| **NONINTEREST INCOME** |  |  |  |  |  |
| (Losses) Gains on Sales of Securities, net | (2) | (4) | 419 | 46 | 6869 |
| Service Charges, Commissions and Fees | 1716 | 1750 | 1704 | 7168 | 6662 |
| Debit Card Interchange Fees | 1857 | 1788 | 1770 | 7427 | 7226 |
| Insurance Commissions | 248 | 876 | 802 | 1961 | 1901 |
| Bank Owned Life Insurance Income | 348 | 341 | 349 | 1357 | 1380 |
| (Losses) Gains on Sales and Write-downs of Bank Premises, net | (269) | (4) |  | 73 |  |
| Other Real Estate Owned Income | 15 | 13 | 8 | 50 | 90 |
| Commercial Loan Swap Fee Income |  | 18 | 359 | 774 | 2416 |
| Other | 1631 | 457 | 365 | 2862 | 2337 |
| &nbsp;&nbsp;**TOTAL NONINTEREST INCOME** | **5544** | **5235** | **5776** | **21718** | **28881** |
| **NONINTEREST EXPENSE** |  |  |  |  |  |
| Salaries and Employee Benefits | 14678 | 13520 | 15073 | 52399 | 54157 |
| Occupancy Expense, net | 3467 | 3412 | 3258 | 13527 | 13556 |
| FDIC Insurance Expense | 475 | 543 | 275 | 2015 | 2157 |
| Other Taxes | 848 | 848 | 824 | 3319 | 3129 |
| Advertising Expense | 560 | 368 | 366 | 1434 | 952 |
| Telephone Expense | 391 | 448 | 501 | 1781 | 2208 |
| Professional and Legal Fees | 2087 | 1310 | 1347 | 5818 | 5255 |
| Data Processing | 1535 | 833 | 865 | 4051 | 3758 |
| Losses on Sales and Write-downs of Other Real Estate Owned, net | 164 | 169 | 199 | 432 | 3622 |
| Losses on Sales and Write-downs of Bank Premises, net |  |  | 117 |  | 231 |
| Debit Card Expense | 661 | 797 | 732 | 2750 | 2777 |
| Tax Credit Amortization | 155 | (764) | 427 | 621 | 1708 |
| Other Real Estate Owned Expense | 123 | 38 | 127 | 343 | 407 |
| Other | 2473 | 1941 | 2125 | 8511 | 8368 |
| &nbsp;&nbsp;**TOTAL NONINTEREST EXPENSE** | **27617** | **23463** | **26236** | **97001** | **102285** |
| **INCOME BEFORE INCOME TAXES** | **19078** | **19417** | **6975** | **61717** | **35698** |
| Income Tax Provision | 3469 | 5009 | 1365 | 11599 | 4108 |
| **NET INCOME** | $**15609** | $**14408** | $**5610** | $**50118** | $**31590** |
| Shares Outstanding, at End of Period | 23956772 | 24111171 | 26430919 | 23956772 | 26430919 |
| Average Shares Outstanding-Basic & Diluted | 23907447 | 24265075 | 26350877 | 24595789 | 26342729 |
| **PER SHARE DATA** |  |  |  |  |  |
| Basic Earnings Per Common Share\* | $0.65 | $0.59 | $0.21 | $2.03 | $1.19 |
| Diluted Earnings Per Common Share\* | $0.65 | $0.59 | $0.21 | $2.03 | $1.19 |
| Book Value | $13.72 | $13.06 | $15.42 | $13.72 | $15.42 |
| Market Value | $16.59 | $16.10 | $15.39 | $16.59 | $15.39 |
| **PROFITABILITY RATIOS (non-GAAP)** |  |  |  |  |  |
| Net Interest Margin (FTE)<sup>3</sup> | 4.07% | 3.75% | 2.82% | 3.51% | 2.84% |
| Core Efficiency Ratio<sup>4</sup> | 59.49% | 57.07% | 76.58% | 60.69% | 73.51% |

---

\*All outstanding unvested restricted stock awards are considered participating securities for the earnings per share calculation. As such, these shares have been allocated to a portion of net income and are excluded from the diluted earnings per share calculation.

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**NET INTEREST MARGIN (FTE) (QTD AVERAGES)**

**(Unaudited)**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **September 30, 2022** | **September 30, 2022** | **September 30, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| **(Dollars in Thousands)** | **Average <br>Balance** | **Income/<br>Expense** | **Rate** | **Average <br>Balance** | **Income/<br>Expense** | **Rate** | **Average <br>Balance** | **Income/<br>Expense** | **Rate** |
| **ASSETS** | | | | | | | | | |
| Interest-Bearing Deposits with Banks | $9074 | $84 | 3.67% | $25151 | $134 | 2.11% | $220871 | $89 | 0.16% |
| Tax-Free Investment Securities<sup>3</sup> | 29876 | 214 | 2.84% | 30073 | 215 | 2.84% | 25586 | 210 | 3.26% |
| Taxable Investment Securities | 924148 | 6680 | 2.87% | 942571 | 5466 | 2.30% | 881866 | 3154 | 1.42% |
| &nbsp;&nbsp;**Total Securities** | **954024** | **6894** | **2.87%** | **972644** | **5681** | **2.32%** | **907452** | **3364** | **1.47%** |
| Tax-Free Loans<sup>3</sup> | 136441 | 1089 | 3.17% | 141082 | 1115 | 3.14% | 164587 | 1288 | 3.10% |
| Taxable Loans | 2967780 | 40334 | 5.39% | 2883790 | 35652 | 4.90% | 2689767 | 28483 | 4.20% |
| &nbsp;&nbsp;**Total Loans** | **3104221** | **41423** | **5.29%** | **3024872** | **36767** | **4.82%** | **2854354** | **29771** | **4.14%** |
| Federal Home Loan Bank Stock | 6304 | 88 | 5.54% | 2213 | 24 | 4.30% | 2475 | 23 | 3.69% |
| &nbsp;&nbsp;**Total Interest-Earning Assets** | **4073623** | **48489** | **4.72%** | **4024880** | **42606** | **4.20%** | **3985152** | **33247** | **3.31%** |
| Noninterest Earning Assets | 84580 |  |  | 109307 |  |  | 160952 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $**4158203** |  |  | $**4134187** |  |  | $**4146104** |  |  |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |  |  |  |  |  |  |  |
| Interest-Bearing Demand | $504796 | $496 | 0.39% | $500281 | $462 | 0.37% | $446506 | $280 | 0.25% |
| Money Market | 493700 | 853 | 0.69% | 552718 | 395 | 0.28% | 449229 | 253 | 0.22% |
| Savings | 709435 | 183 | 0.10% | 731931 | 192 | 0.10% | 682018 | 175 | 0.10% |
| Certificates of Deposit | 1249717 | 3804 | 1.21% | 1257907 | 3420 | 1.08% | 1371829 | 4099 | 1.19% |
| &nbsp;&nbsp;**Total Interest-Bearing Deposits** | **2957648** | **5336** | **0.72%** | **3042837** | **4469** | **0.58%** | **2949582** | **4807** | **0.65%** |
| Federal Home Loan Bank Borrowings | 106617 | 1116 | 4.15% | 3913 | 31 | 3.14% | 10272 | 36 | 1.39% |
| Federal Funds Purchased | 16227 | 161 | 3.94% | 3432 | 23 | 2.66% | 1 |  | 1.15% |
| Other Borrowings | 6621 | 81 | 4.85% | 6326 | 79 | 4.95% | 3396 | 40 | 4.67% |
| &nbsp;&nbsp;**Total Borrowings** | **129465** | **1358** | **4.16%** | **13671** | **133** | **3.86%** | **13669** | **76** | **2.21%** |
| &nbsp;&nbsp;**Total Interest-Bearing Liabilities** | **3087113** | **6694** | **0.86%** | **3056508** | **4602** | **0.60%** | **2963251** | **4883** | **0.65%** |
| Noninterest-Bearing Liabilities | 750620 |  |  | 736441 |  |  | 775914 |  |  |
| Shareholders' Equity | 320470 |  |  | 341238 |  |  | 406939 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities and Shareholders' Equity** | $**4158203** |  |  | $**4134187** |  |  | $**4146104** |  |  |
| **Net Interest Income**<sup>3</sup> |  | $**41795** |  |  | $**38004** |  |  | $**28364** |  |
| **Net Interest Margin**<sup>3</sup> |  |  | **4.07%** |  |  | **3.75%** |  |  | **2.82%** |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**NET INTEREST MARGIN (FTE) (YTD AVERAGES)**

**(Unaudited)**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| **(Dollars in Thousands)** | **Average <br>Balance** | **Income/<br>Expense** | **Rate** | **Average <br>Balance** | **Income/<br>Expense** | **Rate** |
| **ASSETS** | | | | | | |
| Interest-Bearing Deposits with Banks | $50797 | $341 | 0.67% | $194492 | $271 | 0.14% |
| Tax-Free Investment Securities<sup>3</sup> | 30109 | 877 | 2.91% | 34171 | 1116 | 3.27% |
| Taxable Investment Securities | 950557 | 20330 | 2.14% | 798672 | 12442 | 1.56% |
| &nbsp;&nbsp;**Total Securities** | **980666** | **21207** | **2.16%** | **832843** | **13558** | **1.63%** |
| Tax-Free Loans<sup>3</sup> | 144617 | 4569 | 3.16% | 189716 | 5991 | 3.16% |
| Taxable Loans | 2844303 | 135054 | 4.75% | 2751169 | 115448 | 4.20% |
| &nbsp;&nbsp;**Total Loans** | **2988920** | **139623** | **4.67%** | **2940885** | **121439** | **4.13%** |
| Federal Home Loan Bank Stock | 3251 | 154 | 4.74% | 3420 | 121 | 3.54% |
| &nbsp;&nbsp;**Total Interest-Earning Assets** | **4023634** | **161325** | **4.01%** | **3971640** | **135389** | **3.41%** |
| Noninterest Earning Assets | 117135 |  |  | 170856 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Assets** | $**4140769** |  |  | $**4142496** |  |  |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |  |  |  |  |
| Interest-Bearing Demand | $489298 | $1578 | 0.32% | $413714 | $1007 | 0.24% |
| Money Market | 521269 | 1842 | 0.35% | 383391 | 1130 | 0.29% |
| Savings | 720682 | 742 | 0.10% | 663382 | 682 | 0.10% |
| Certificates of Deposit | 1271548 | 14454 | 1.14% | 1484436 | 19427 | 1.31% |
| &nbsp;&nbsp;**Total Interest-Bearing Deposits** | **3002797** | **18616** | **0.62%** | **2944923** | **22246** | **0.76%** |
| Federal Home Loan Bank Borrowings | 29849 | 1163 | 3.90% | 25986 | 313 | 1.20% |
| Federal Funds Purchased | 5711 | 188 | 3.29% |  |  | —% |
| Other Borrowings | 5885 | 287 | 4.88% | 3167 | 155 | 4.89% |
| &nbsp;&nbsp;**Total Borrowings** | **41445** | **1638** | **3.95%** | **29153** | **468** | **1.61%** |
| &nbsp;&nbsp;**Total Interest-Bearing Liabilities** | **3044242** | **20254** | **0.67%** | **2974076** | **22714** | **0.76%** |
| Noninterest-Bearing Liabilities | 746117 |  |  | 769401 |  |  |
| Shareholders' Equity | 350410 |  |  | 399019 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Liabilities and Shareholders' Equity** | $**4140769** |  |  | $**4142496** |  |  |
| **Net Interest Income**<sup>3</sup> |  | $**141071** |  |  | $**112675** |  |
| **Net Interest Margin**<sup>3</sup> |  |  | **3.51%** |  |  | **2.84%** |

---

**LOANS AND LOANS HELD-FOR-SALE**

**(Unaudited)**

---

| | | | |
|:---|:---|:---|:---|
| **(Dollars in Thousands)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** |
| **Commercial** | | | |
| &nbsp;&nbsp;&nbsp;Commercial Real Estate | $1470562 | $1365348 | $1323252 |
| &nbsp;&nbsp;&nbsp;Commercial and Industrial | 309792 | 325973 | 345376 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Commercial Loans** | **1780354** | **1691321** | **1668628** |
| **Consumer** |  |  |  |
| &nbsp;&nbsp;&nbsp;Residential Mortgages | 657948 | 617681 | 457988 |
| &nbsp;&nbsp;&nbsp;Other Consumer | 44562 | 47006 | 44666 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total Consumer Loans** | **702510** | **664687** | **502654** |
| &nbsp;&nbsp;&nbsp;Construction | 353553 | 350037 | 282947 |
| &nbsp;&nbsp;Other<sup>5</sup> | 312496 | 325304 | 357900 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Portfolio Loans** | **3148913** | **3031349** | **2812129** |
| Loans Held-for-Sale |  | 1513 | 228 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Loans** | $**3148913** | $**3032862** | $**2812357** |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**ASSET QUALITY DATA**

**(Unaudited)**

---

| | | | |
|:---|:---|:---|:---|
| | **For the Periods Ended** | **For the Periods Ended** | **For the Periods Ended** |
| **(Dollars in Thousands)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** |
| **Nonperforming Loans** | | | |
| Commercial Real Estate | $2304 | $2416 | $3337 |
| Commercial and Industrial | 204 | 201 | 451 |
| Residential Mortgages | 3265 | 3509 | 2551 |
| Other Consumer | 8 | 9 | 73 |
| Construction | 864 | 875 | 985 |
| Other |  |  |  |
| &nbsp;&nbsp;**Total Nonperforming Loans** | **6645** | **7010** | **7397** |
| Other Real Estate Owned | 8393 | 8134 | 10916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Nonperforming Assets** | $**15038** | $**15144** | $**18313** |

---

---

| | | | |
|:---|:---|:---|:---|
| Nonperforming Loans to Total Portfolio Loans | 0.21% | 0.23% | 0.26% |
| Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned | 0.48% | 0.50% | 0.65% |
| Allowance for Credit Losses to Total Portfolio Loans | 2.98% | 3.11% | 3.41% |
| Allowance for Credit Losses to Nonperforming Loans | 1412.37% | 1343.28% | 1297.00% |
| Net Loan Charge-offs (Recoveries) QTD | $364 | $3740 | $4294 |
| Net Loan Charge-offs (Recoveries) YTD | $4506 | $4142 | $23127 |
| Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans QTD | 0.05% | 0.49% | 0.60% |
| Net Loan Charge-offs (Recoveries) (Annualized) to Average Portfolio Loans YTD | 0.15% | 0.19% | 0.79% |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**ALLOWANCE FOR CREDIT LOSSES**

**(Unaudited)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| **(Dollars in Thousands)** | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| Balance Beginning of Period | $94164 | $97981 | $99294 | $95939 | $54074 |
| Impact of CECL Adoption |  |  |  |  | 61642 |
| Provision (Recovery) for Credit Losses | 52 | (77) | 939 | 2419 | 3350 |
| Charge-offs: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial Real Estate |  |  | 2237 |  | 19662 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial and Industrial | 4 | 3432 | 178 | 3436 | 374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential Mortgages | 1 |  |  | 46 | 273 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Consumer | 433 | 418 | 423 | 1677 | 2256 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction |  |  | 1859 |  | 1859 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Charge-offs** | **438** | **3850** | **4697** | **5159** | **24424** |
| Recoveries: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial Real Estate |  |  | 10 |  | 159 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial and Industrial |  |  | 286 | 1 | 291 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential Mortgages | 2 | 1 |  | 99 | 168 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Consumer | 72 | 109 | 107 | 404 | 586 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction |  |  |  | 149 | 93 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Recoveries** | **74** | **110** | **403** | **653** | **1297** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Net Charge-offs** | **364** | **3740** | **4294** | **4506** | **23127** |
| **Balance End of Period** | $**93852** | $**94164** | $**95939** | $**93852** | $**95939** |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

**(Unaudited)**

**(Dollars in Thousands, except per share data)**

**DEFINITIONS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES:**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <sup>1</sup> **Pre-tax Pre-provision Income (Non-GAAP)** | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| Net Interest Income | $41522 | $37725 | $28050 | $139928 | $111183 |
| Noninterest Income | 5544 | 5235 | 5776 | 21718 | 28881 |
| Noninterest Expense | 27617 | 23463 | 26236 | 97001 | 102285 |
| &nbsp;&nbsp;**Pre-tax Pre-provision Income** | $**19449** | $**19497** | $**7590** | $**64645** | $**37779** |
| Losses (Gains) on Sales of Securities, net | $2 | $4 | $(419) | $(46) | $(6869) |
| Losses (Gains) on Sales and Write-downs of Bank Premises, net | 269 | 4 | 117 | (73) | 231 |
| Losses on Sales and Write-downs of OREO, net | 164 | 169 | 199 | 432 | 3622 |
| Branch Consolidation Severance and Expenses |  |  | 13 |  | 579 |
| Non-recurring Fees<sup>5</sup> |  | (1) | (130) | (70) | (2028) |
| OREO Income | (15) | (13) | (8) | (50) | (90) |
| Gain on Sale of Branches |  |  |  |  | (506) |
| FHLB Prepayment Penalty |  |  | 39 | 18 | 43 |
| Contingent Liability | 35 |  |  | 185 |  |
| Gain on Loans Held-for-Sale | (295) |  |  | (295) |  |
| Gain on Tax Credit Exits | (1209) |  |  | (1209) |  |
| Professional Finder's Fee<sup>6</sup> |  |  | 150 |  | 724 |
| Tax Credit Amortization Reversal<sup>7</sup> |  | (1379) |  | (1379) |  |
| &nbsp;&nbsp;**Core Pre-tax Pre-provision Income (Non-GAAP)** | $**18400** | $**18281** | $**7551** | $**62158** | $**33485** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <sup>2</sup> **Core Net Income (Non-GAAP)** | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| Net Income | $15609 | $14408 | $5610 | $50118 | $31590 |
| Losses (Gains) on Sales of Securities, net | 2 | 4 | (419) | (46) | (6869) |
| Losses (Gains) on Sales and Write-downs of Bank Premises, net | 269 | 4 | 117 | (73) | 231 |
| Losses on Sales and Write-downs of OREO, net | 164 | 169 | 199 | 432 | 3622 |
| Branch Consolidation Severance and Expenses |  |  | 13 |  | 579 |
| Non-recurring Fees<sup>5</sup> |  | (1) | (130) | (70) | (2028) |
| OREO Income | (15) | (13) | (8) | (50) | (90) |
| Gain on Sale of Branches |  |  |  |  | (506) |
| FHLB Prepayment Penalty |  |  | 39 | 18 | 43 |
| Contingent Liability | 35 |  |  | 185 |  |
| Gain on Loans Held-for-Sale | (295) |  |  | (295) |  |
| Gain on Tax Credit Exits | (1209) |  |  | (1209) |  |
| Professional Finder's Fee<sup>6</sup> |  |  | 150 |  | 724 |
| Tax Credit Amortization Reversal<sup>7</sup> |  | (1379) |  | (1379) |  |
| Total Tax Effect | 220 | 256 | 8 | 522 | 902 |
| &nbsp;&nbsp;**Core Net Income (Non-GAAP)** | $**14780** | $**13448** | $**5579** | $**48153** | $**28198** |
| Average Shares Outstanding - diluted | 23907447 | 24265075 | 26350877 | 24595789 | 26342729 |
| &nbsp;&nbsp;**Core Earnings Per Common Share (diluted) (Non-GAAP)** | $**0.62** | $**0.55** | $**0.21** | $**1.96** | $**1.07** |

---

------

**CARTER BANKSHARES, INC.**

**CONSOLIDATED SELECTED FINANCIAL DATA**

<sup>3</sup> **Net interest income has been computed on a fully taxable equivalent basis ("FTE") using 21% federal income tax rate for the 2022 and 2021 periods.**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Net Interest Income (FTE) (Non-GAAP)** | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| Interest and Dividend Income (GAAP) | $48216 | $42327 | $32933 | $160182 | $133897 |
| Tax Equivalent Adjustment | 273 | 279 | 314 | 1143 | 1492 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Interest and Dividend Income (FTE) (Non-GAAP)** | **48489** | **42606** | **33247** | **161325** | **135389** |
| Average Earning Assets | 4073623 | 4024880 | 3985152 | 4023634 | 3971640 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Yield on Interest-earning Assets (GAAP)** | **4.70%** | **4.17%** | **3.28%** | **3.98%** | **3.37%** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Yield on Interest-earning Assets (FTE) (Non-GAAP)** | **4.72%** | **4.20%** | **3.31%** | **4.01%** | **3.41%** |
| Net Interest Income | 41522 | 37725 | 28050 | 139928 | 111183 |
| Tax Equivalent Adjustment | 273 | 279 | 314 | 1143 | 1492 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net Interest Income (FTE) (Non-GAAP)** | $**41795** | $**38004** | $**28364** | $**141071** | $**112675** |
| Average Earning Assets | $4073623 | $4024880 | $3985152 | $4023634 | $3971640 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net Interest Margin (GAAP)** | **4.04%** | **3.72%** | **2.79%** | **3.48%** | **2.80%** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net Interest Margin (FTE) (Non-GAAP)** | **4.07%** | **3.75%** | **2.82%** | **3.51%** | **2.84%** |

---

**(Unaudited)**

**(Dollars in Thousands, except per share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <sup>4</sup> **Core Efficiency Ratio (Non-GAAP)** | **Quarter-to-Date** | **Quarter-to-Date** | **Quarter-to-Date** | **Year-to-Date** | **Year-to-Date** |
| | **December 31,<br>2022** | **September 30,<br>2022** | **December 31,<br>2021** | **December 31,<br>2022** | **December 31,<br>2021** |
| **Noninterest Expense** | $**27617** | $**23463** | $**26236** | $**97001** | $**102285** |
| Less: Losses on Sales and Write-downs of Bank Premises, net |  |  | (117) |  | (231) |
| Less: Losses on Sales and Write-downs of OREO, net | (164) | (169) | (199) | (432) | (3622) |
| Less: Branch Consolidation Severance and Expenses |  |  | (13) |  | (579) |
| Less: FHLB Prepayment Penalty |  |  | (39) | (18) | (43) |
| Less: Contingent Liability | (35) |  |  | (185) |  |
| Less: Professional Finder's Fee<sup>6</sup> |  |  | (150) |  | (724) |
| Add: Tax Credit Amortization Reversal<sup>7</sup> |  | 1379 |  | 1379 |  |
| &nbsp;&nbsp;**Core Noninterest Expense (non-GAAP)** | $**27418** | $**24673** | $**25718** | $**97745** | $**97086** |
| **Net Interest Income** | $**41522** | $**37725** | $**28050** | $**139928** | $**111183** |
| Plus: Taxable Equivalent Adjustment | 273 | 279 | 314 | 1143 | 1492 |
| &nbsp;&nbsp;**Net Interest Income (FTE) (non-GAAP)** | $**41795** | $**38004** | $**28364** | $**141071** | $**112675** |
| Less: Losses (Gains) on Sales of Securities, net | 2 | 4 | (419) | (46) | (6869) |
| Less: Losses (Gains) on Sales and Write-downs of Bank Premises, net | 269 | 4 |  | (73) |  |
| Less: Non-recurring Fees<sup>5</sup> |  | (1) | (130) | (70) | (2028) |
| Less: OREO Income | (15) | (13) | (8) | (50) | (90) |
| Less: Gain on Sale of Branches |  |  |  |  | (506) |
| Less: Gain of Loans Held-for-Sale | (295) |  |  | (295) |  |
| Less: Gain of Tax Credit Exit | (1209) |  |  | (1209) |  |
| Noninterest Income | 5544 | 5235 | 5776 | 21718 | 28881 |
| &nbsp;&nbsp;**Core Net Interest Income (FTE) (non-GAAP) plus noninterest income** | $**46091** | $**43233** | $**33583** | $**161046** | $**132063** |
| **Core Efficiency Ratio (Non-GAAP)** | **59.49%** | **57.07%** | **76.58%** | **60.69%** | **73.51%** |

---

<sup>5</sup> **The Non-recurring fees include PPP related fees.**

<sup>6</sup> **The professional finder's fee is related to fees associated with note sales in 2021.**

<sup>7</sup> **Tax credit amortization was reversed due to the extension of the in-service date from 2022 to 2023.**

<br>