Carter Bankshares, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) As of January 1, 2021, our CECL methodology introduced a modified discounted cash flow methodology based on expected cash flow changes in the future for the other segment. This methodology produced a significantly higher level of reserves from the incurred loss model. The model was developed with subjective assumptions that is driven by the following key factors: prepayment speeds, timing of prepayment, loss given defaults as well as other factors. This methodology resulted in an increase in other reserves totaling $51.3 million. The ACL increased $62.8 million to $116.9 million for the three months ended March 31, 2021 compared to $54.1 million at December 31, 2020 due to the Day 1 adoption of CECL of $61.6 million. The first quarter 2021 was primarily driven by adjustments to the CECL model were made to account for additional potential deterioration in credit quality with respect to loans on deferral. Management reviews and analyzes the monthly operating statements of commercial clients in the deferral program. Management observed continued deterioration on hospitality loans with aggregate principal balances of $50.9 million that are on deferral as of March 31, 2021. This adjustment resulted in expected credit losses of $11.7 million at March 31, 2021. The Day 1 model recognized the deterioration of loans with an aggregate principal balance of $42.8 million which resulted in current expected credit losses of $10.2 million as of January 1, 2021. Between the Day 1 model and the model ended March 31, 2021 a loan with a principal balance of $8.1 million was recognized resulting in additional expected credit losses of $1.5 million during the three months ended March 31, 2021. The ACL was $116.9 million, or 3.93%, of total portfolio loans at March 31, 2021, as compared to an allowance for loans losses of $54.1 million, or 1.83% of total portfolio loans at December 31, 2020. Net charge-offs were $0.7 million in the first three months of 2021 compared to $0.6 million in the same period of 2020. As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 0.10% and 0.09% for the three months ended March 31, 2021 and December 31, 2020, respectively. At March 31, 2021 and December 31, 2020, nonperforming loans were consistent at $32.0 million. Nonperforming loans as a percentage of total portfolio loans were 1.08%, 1.09% and 1.38% as of March 31, 2021, December 31, 2020 and March 31, 2020, respectively. Loans that amortize monthly, such as closed-end installment loans and amortizing loans secured by real estate are reported past due when the borrower is in arrears two or more monthly payments. Loans that amortize on a schedule other than monthly and interest only loans are reported past due when one scheduled payment is due and unpaid for 30 days or more. We monitor delinquency on a monthly basis for early identification of potential problem loans. TDRs are loans that we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise grant. The Company strives to identify borrowers in financial difficulty early and work with them to modify the terms before their loan reaches nonaccrual status. These modified terms generally include extension of maturity dates at a stated interest rate lower than the current market rate for a new loan with similar characteristics, reductions in contractual interest rates or principal deferment. While unusual, there may be instances of principal forgiveness. Modifications structured with deferments for significant periods are generally considered TDRs. However, related to the COVID-19 pandemic, the Bank has modified certain loans since March 2020 without considering them TDRs if consistent with the CARES Act and guidance issued by the federal bank regulatory agencies. An accruing loan that is modified and determined to be a TDR can remain in accrual status if, based on a current credit analysis, collection of principal and interest in accordance with the modified terms is reasonably assured, and the borrower has demonstrated sustained historical performance for a reasonable period before the modification. All TDRs are considered to be individually evaluated loans and will be reported as individually evaluated loans for the calendar year they are determined to be a TDR. The Company individually evaluates all individually evaluated loans, which includes TDRs, greater than or equal to $1.0 million for a specific reserve unless otherwise accounted for in the CECL model. Nonaccrual TDRs can be returned to accruing status if the ultimate collectability of all contractual amounts due, according to the restructured agreement, is not in doubt and there is a period of a minimum of six months of satisfactory payment performance by the borrower subsequent to the restructuring. As an example, consider a substandard commercial construction loan that is currently 90 days past due where the loan is restructured to extend the maturity date for a period longer than would be considered an insignificant period of time. The post-modification interest rate given to the borrower is considered to be lower than the current market rate for new debt with similar risk and all other terms remain the same according to the original loan agreement. This loan will be considered a TDR as the borrower is experiencing financial difficulty and a concession has been granted due to the long extension, resulting in payment delay as well as the rate being lower than current market rate for new debt with similar risk. The loan will be reported as a nonaccrual TDR and an individually evaluated loan. In addition, the loan could be charged down to the fair value of the 55 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) collateral if a confirmed loss exists. If the loan subsequently performs, by means of making on-time principal and interest payments according to the newly restructured terms for a period of six months, and it is expected that all remaining principal and interest will be collected according to the terms of the restructured agreement, the loan will be returned to accrual status and reported as an accruing TDR. For the loan’s remaining life, it will continue to be individually evaluated because the interest rate was not adjusted to be equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk. TDRs decreased $2.9 million to $131.3 million at March 31, 2021, compared to $134.2 million at December 31, 2020. The decrease is due to principal pay-downs in the amount of $2.9 million. Total TDRs of $24.6 million and $25.0 million were on nonaccrual at March 31, 2021 and December 31, 2020, respectively. There were minimal commitments to lend additional funds on relationships identified as TDRs in the amount of $2.9 million as of March 31, 2021. Our charge-off policy for commercial loans requires that loans and other obligations that are not collectible be promptly charged-off when the loss becomes quantifiable, regardless of the delinquency status of the loan. The Bank may elect to recognize a partial charge-off when management has determined that the value of collateral is less than the remaining investment in the loan. A loan or obligation does not need to be charged-off, regardless of delinquency status, if (i) management has determined there exists sufficient collateral to protect the remaining loan balance and (ii) there exists a strategy to liquidate the collateral. Management may also consider a number of other factors to determine when a charge-off is appropriate. These factors may include, but are not limited to: • The status of a bankruptcy proceeding • The value of collateral and probability of successful liquidation; and/or • The status of adverse proceedings or litigation that may result in collection Consumer unsecured loans and secured loans are evaluated for charge-off after the loan becomes 90 days past due. Unsecured loans are fully charged-off and secured loans are charged-off to the estimated fair value of the collateral less the cost to sell. Our policy is to place loans in all categories in nonaccrual status when collection of interest or principal is doubtful, or generally when interest or principal payments are 90 days or more past due. 56 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Nonperforming assets consist of nonaccrual loans, nonaccrual TDRs and OREO. The following table summarizes nonperforming assets for the dates presented: (Dollars in Thousands) March 31, 2021 December 31, 2020 $ Change Nonperforming Loans Commercial Real Estate $ 651 $ 224 $ 427 Commercial and Industrial 818 456 362 Construction 2,124 2,012 112 Residential Mortgages 3,629 4,135 (506) Other Consumer 109 191 (82) Other — — — Total Nonperforming Loans 7,331 7,018 313 Nonperforming Troubled Debt Restructurings Commercial Real Estate 21,306 21,667 (361) Commercial and Industrial — — — Construction 3,319 3,319 — Residential Mortgages — — — Other Consumer — — — Other — — — Total Nonperforming Troubled Debt Restructurings 24,625 24,986 (361) Total Nonperforming Loans and Troubled Debt Restructurings 31,956 32,004 (48) Other Real Estate Owned 14,031 15,722 (1,691) Total Nonperforming Assets $ 45,987 $ 47,726 $ (1,739) March 31, 2021 December 31, 2020 Nonaccrual Loans and Troubled Debt Restructurings to Total Portfolio Loans 1.08 % * 1.09 % Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned 1.54 % 1.61 % Nonperforming assets decreased $1.7 million to $46.0 million at March 31, 2021 compared to $47.7 million at December 31, 2020. The decrease was primarily related to a $1.7 million net decrease in OREO. The decrease in OREO was primarily due to sales of properties during 2021. Closed retail bank offices have a remaining book value of $1.9 million at March 31, 2021 and $2.5 million at December 31, 2020. The gross amount of interest that would have been recorded under original terms, had these loans not been placed on nonaccrual status was $1.1 million during the first three months of 2021. As of March 31, 2021, total nonaccrual loans include $3.0 thousand in loans held-for-sale in connection with sale of Bank branches. There were $7 thousand nonaccrual loans related to loans held-for-sale at December 31, 2020. The CARES Act permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. The provisions of the CARES Act dealing with temporary relief related to TDRs was extended pursuant to the CAA, which was signed into law on December 27, 2020. This amendment extended the “applicable” period to the earlier of January 1, 2022 or 60 days after the date on which the national emergency concerning the COVID-19 pandemic terminates. The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 and to assure banks that they will not be criticized by examiners for doing so. We are currently applying this guidance to qualifying loan modifications. At this time, it is uncertain what future impact loan and lease modifications related to COVID-19 will have on our financial condition, results of operations and allowance for credit losses. 57 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The following table summarizes loans past due 30-89 days for the periods presented: (Dollars in Thousands) March 31, 2021 December 31, 2020 Loans 30 to 89 Days Past Due Commercial Commercial Real Estate $ 620 $ 3,816 Commercial and Industrial 1,878 384 Total Commercial Loans 2,498 4,200 Consumer Residential Mortgages 260 1,347 Other Consumer 337 580 Total Consumer Loans 597 1,927 Construction — 284 Other 3,544 — Total Loans 30 to 89 Days Past Due $ 6,639 $ 6,411 Loans past due 30 to 89 days or more and still accruing, including held-for-sale loans, increased $0.2 million to $6.6 million at March 31, 2021 compared to $6.4 million at December 31, 2020. The variances in loan segments for past due 30 to 89 days is primarily related to the adoption of Topic 326. We made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. The new segmentation breaks out an Other category from the original loan categories, which applies only to the current year 2021 and was not adjusted to the comparable period, therefore showing fluctuations in all categories. The $3.5 million included in the other segment is to one relationship and was previously included in commercial and industrial loans at December 31, 2020. Deposits The following table presents the composition of deposits for the periods presented: (Dollars in Thousands) March 31, 2021 December 31, 2020 $ Change % Change Noninterest-bearing Demand $ 733,291 $ 699,229 $ 34,062 4.9 % Interest-bearing Demand 384,425 366,201 18,224 5.0 % Money Market 323,008 294,229 28,779 9.8 % Savings 646,722 625,482 21,240 3.4 % Certificate of Deposits 1,522,510 1,614,770 (92,260) (5.7) % Deposits Held-for-Assumption in Connection with Sale of Bank Branches 81,565 84,717 (3,152) (3.7) % Total Deposits $ 3,691,521 $ 3,684,628 $ 6,893 0.2 % Deposits are our primary source of funds. We believe that our deposit base is stable and that we have the ability to attract new depositors while diversifying the deposit composition. Total deposits at March 31, 2021 increased $6.9 million, or 0.2%, from December 31, 2020. Noninterest-bearing deposits increased by $34.1 million, or 4.9%, to $733.3 million as of March 31, 2021 as compared to $699.2 million at December 31, 2020. Money market accounts increased $28.8 million, or 9.8%, during the first three months of 2021 compared to December 31, 2020, due to our deposit acquisition strategy. Savings accounts increased $21.2 million, or 3.4%, at March 31, 2021 compared to December 31, 2020 due to promotions. Interest-bearing demand deposits increased $18.2 million, or 5.0% to $384.4 million at March 31, 2021 compared to December 31, 2020. Offsetting these increases was a decrease of $92.3 million, or 5.7%, in CDs at March 31, 2021 compared to December 31, 2020 due to intentional runoff of these higher cost CDs. Noninterest-bearing deposits comprised 19.9% and 19.0% of total deposits at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021, $81.6 million of deposits were held-for-assumption in connection with the sale of Bank branches that are expected to close in the second quarter of 2021. 58 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Federal Home Loan Bank Borrowings (“FHLB”) Borrowings are an additional source of liquidity for the Company. FHLB borrowings were $30.0 million and $35.0 million at March 31, 2021 and December 31, 2020, respectively. FHLB borrowings are fixed rate advances for various terms and are secured by a blanket lien on select residential mortgages, select multifamily loans, and select commercial real estate loans at March 31, 2021 and December 31, 2020. Total loans pledged as collateral were $781.3 million and $804.2 million at March 31, 2021 and December 31, 2020, respectively. There were no securities available-for-sale pledged as collateral at both March 31, 2021 and December 31, 2020. The Bank continues to methodically pledge additional eligible loans, with the ultimate expectation to have full pledging by year end 2021. The Company is eligible to borrow up to an additional $506.1 million based upon current qualifying collateral and has a maximum borrowing capacity of approximately $1.0 billion, or 25% of the Company’s assets, as of March 31, 2021. The Company had the capacity to borrow up to an additional $510.5 million from the FHLB at December 31, 2020. Information pertaining to long-term FHLB borrowings is summarized in the following table: (Dollars in Thousands) March 31, 2021 December 31, 2020 Balance at Period End $ 30,000 $ 35,000 Average Balance during the Period $ 33,889 $ 30,628 Average Interest Rate during the Period 1.15 % 1.18 % Maximum Month-end Balance during the Period $ 35,000 $ 35,000 Average Interest Rate at Period End 1.15 % 1.13 % The Company held FHLB Atlanta stock of $3.2 million and $5.1 million at March 31, 2021 and December 31, 2020, respectively. Dividends recorded on this restricted stock were $37 thousand and $64 thousand for the three months ended March 31, 2021 and March 31, 2020, respectively. The investment is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. We hold FHLB stock because we are a member of the FHLB of Atlanta. The FHLB requires members to purchase and hold a specified level of FHLB stock based upon the members’ asset values, level of borrowings and participation in other programs offered. Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB. Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise. Rather, members purchase stock to obtain access to the products and services offered by the FHLB. Unlike equity securities of traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value. Liquidity and Capital Resources Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost. This includes the ability to satisfy the financial needs of depositors who want to withdraw funds or of borrowers needing to access funds to meet their credit needs. In order to manage liquidity risk the Company’s Board has delegated authority to the ALCO for formulation, implementation and oversight of liquidity risk management for the Company. The ALCO’s goal is to maintain adequate levels of liquidity at a reasonable cost to meet funding needs in both a normal operating environment and for potential liquidity stress events. The ALCO monitors and manages liquidity through various ratios, reviewing cash flow projections, performing stress tests and by having a detailed contingency funding plan. The ALCO policy guidelines define graduated risk tolerance levels. If our liquidity position moves to a level that has been defined as high risk, specific actions are required, such as increased monitoring or the development of an action plan to reduce the risk position. Our primary funding and liquidity source is a stable customer deposit base. Management believes that we have the ability to retain existing deposits and attract new deposits, mitigating any funding dependency on other more volatile sources. Although deposits are the primary source of funds, the Company has identified various other funding sources that can be used as part of our normal funding program when either a structure or cost efficiency has been identified. Additional funding sources accessible to the Company include borrowing availability at the FHLB, equal to 25% of the Company’s assets approximating $1.0 billion, subject to the amount of eligible collateral pledged, federal funds lines with six other correspondent financial institutions in the amount of $145.0 million, and the brokered deposit market. In addition to the lines referenced above, the Company also has its available-for-sale investment securities portfolio as an additional source of liquidity. 59 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets. Highly liquid assets are those that can be converted to cash quickly, with little or no loss in value, to meet financial obligations. ALCO policy guidelines define a ratio of highly liquid assets to total assets by graduated risk tolerance levels of minimal, moderate and high. At March 31, 2021, the Bank had $844.7 million in highly liquid assets, which consisted of $65.6 million in interest-bearing deposits in other financial institutions, $110.6 million in FRB Excess Reserves, $626.3 million in unpledged securities, $32.7 million in mortgage loans held-for-sale and $9.4 million in loans held-for-sale in connection with sale of Bank branches. This resulted in highly liquid assets to total assets ratio of 20.4% at March 31, 2021. If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding. The following table provides detail of liquidity sources as of the periods presented: (Dollars in Thousands) March 31, 2021 December 31, 2020 Cash and Due From Banks $ 48,108 $ 38,535 Interest-bearing Deposits in Other Financial Institutions 60,415 39,954 Federal Reserve Bank Excess Reserves 110,631 163,453 Unpledged Investment Securities 626,285 632,724 Excess Pledged Securities 22,863 7,857 FHLB Borrowing Availability 506,105 510,533 Unsecured Lines of Credit 145,000 145,000 Total Liquidity Sources $ 1,519,407 $ 1,538,056 Regulatory Capital Requirements Total shareholders’ equity decreased by $52.3 million to $387.9 million at March 31, 2021 compared to $440.2 million at December 31, 2020. The decrease was primarily due to the $50.7 million cumulative-effect adjustment related to the adoption of Topic 326, a $11.1 million, net of tax, decrease in other comprehensive loss due to changes in the fair value of available-for-sale securities partially offset by net income of $9.4 million. The remaining difference is related to stock-based compensation during the three months ended March 31, 2021. The Company and the Bank are subject to various capital requirements administered by the federal banking regulators. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Quantitative measures established by regulations to ensure capital adequacy require us to maintain minimum amounts and ratios as shown in the following table. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2021 and December 31, 2020, the most recent regulatory notifications categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institutions category. At March 31, 2021, the Bank continues to maintain its capital position with a leverage ratio of 10.17% as compared to the regulatory guideline of 5.0% to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 12.88% compared to the regulatory guideline of 6.5% to be well-capitalized. the Bank’s risk-based Tier 1 and Total Capital ratios were 12.88% and 14.14%, respectively, which places the Bank above the federal bank regulatory agencies’ well-capitalized guidelines of 8.0% and 10.0%, respectively. We believe that we have the ability to raise additional capital, if necessary. 60 Table of Contents CARTER BANKSHARES, INC. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. Banks (“Basel III rules”) became effective on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. Under the Basel III rules, we must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in at the rate of 0.625% per year and was 2.5% on January 1, 2019. Management believes as of March 31, 2021 and December 31, 2020, the Company and the Bank met all capital adequacy requirements to which we are subject and satisfied the applicable capital conservation buffer requirements. The following table summarizes risk-based capital amounts and ratios for the Company and the Bank for the dates presented: (Dollars in Thousands) Adequately Capitalized Well Capitalized March 31, 2021 December 31, 2020 Amount Ratio Amount Ratio Carter Bankshares, Inc. Leverage Ratio 4.00 % NA 421,355 10.16 % $ 424,453 10.26 % Common Equity Tier 1 (to Risk-weighted Assets) 4.50 % NA 421,355 12.88 % 424,453 13.08 % Tier 1 Capital (to Risk-weighted Assets) 6.00 % NA 421,355 12.88 % 424,453 13.08 % Total Capital (to Risk-weighted Assets) 8.00 % NA 462,617 14.14 % 465,198 14.33 % Carter Bank & Trust Leverage Ratio 4.00 % 5.00 % 421,048 10.15 % 423,832 10.24 % Common Equity Tier 1 (to Risk-weighted Assets) 4.50 % 6.50 % 421,048 12.87 % 423,832 13.06 % Tier 1 Capital (to Risk-weighted Assets) 6.00 % 8.00 % 421,048 12.87 % 423,832 13.06 % Total Capital (to Risk-weighted Assets) 8.00 % 10.00 % 462,310 14.13 % 464,578 14.31 % The Company was incorporated on October 7, 2020, by and at the direction of the Board of Directors of the Bank, for the sole purpose of acquiring the Bank and serving as the Bank’s parent bank holding company pursuant to a corporate reorganization transaction (the “Reorganization”). The Reorganization was completed on November 20, 2020 pursuant to an Agreement and Plan of Reorganization among the Bank, the Company and CBT Merger Sub, Inc, and the Bank survived the Reorganization as a wholly-owned subsidiary of the Company. In the Reorganization, each of the outstanding shares of the Bank’s common stock was converted into and exchanged for one newly issued share of the Company’s common stock. In December 2018, the Office of the Comptroller of the Currency, (the “OCC”), the FRB, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. On March 27, 2020, the regulators issued interim final rule (“IFR”), “Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances” in response to the disrupted economic activity from the spread of COVID-19. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period. Contractual Obligations As of March 31, 2021, there have been no material changes outside the ordinary course of business to the contractual obligations disclosed in Part II, Item 7, “Management's Discussion and Analysis," under the heading “Contractual Obligations” in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Off-Balance Sheet Arrangements As of March 31, 2021, there have been no material changes to the off-balance sheet arrangements disclosed in Part II, Item 7, "Management's Discussion and Analysis," under the heading "Off-Balance-Sheet Arrangements" in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020. 61 Table of Contents CARTER BANKSHARES, INC.