Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
The Company remains well capitalized. The Tier 1 capital ratio was 10.66% at September 30, 2025 compared to 10.88% at December 31, 2024. The leverage ratio was 9.41% at September 30, 2025, compared to 9.56% at December 31, 2024 and the total risk-based capital ratio was 11.91% at September 30, 2025 compared to 12.13% at December 31, 2024.
The Bank also remained well capitalized as of September 30, 2025. The Bank’s Tier 1 capital ratio was 10.46% at September 30, 2025 compared to 10.72% at December 31, 2024. The Bank’s leverage ratio was 9.24% at September 30, 2025 compared to 9.42% at December 31, 2024. The Bank’s total risk-based capital ratio was 11.72% at September 30, 2025 compared to 11.98% at December 31, 2024. At September 30, 2025, the Bank continues to maintain its capital position with a leverage ratio of 9.24% compared to the regulatory guideline of 5.00% to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 10.46% compared to the regulatory guideline of 6.50% to be well-capitalized. The Company’s risk-based Tier 1 and Total Capital ratios place them above the federal bank regulatory agencies’ well-capitalized guidelines of 8.00% and 10.00%, respectively. We believe that we have the ability to raise additional capital, if necessary.
The Basel rules permit banking organizations with less than $15.0 billion in assets to retain, through a one-time election, existing treatment for accumulated other comprehensive loss, which currently does not affect regulatory capital. The Company elected to retain this treatment which reduces the volatility of regulatory capital levels.
The Basel III Capital Rules require the Company and the Bank to maintain minimum Common Equity Tier 1, Tier 1 and Total Capital ratios, along with a capital conservation buffer, effectively resulting in new minimum capital ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum, but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Company or the Bank.
Stock Repurchase Plan
On May 20, 2025, the Company announced that its Board had authorized, effective May 1, 2025, a common share repurchase program to purchase up to $20.0 million of the Company’s common stock in the aggregate through May 1, 2026 (the “2025 Program”), subject to receipt of non-objection from the Federal Reserve Bank of Richmond, which was received on May 19, 2025. The 2025 Program authorizes the purchase of the Company’s common stock in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 promulgated under the Exchange Act. The authorization permits management to repurchase shares of the Company’s common stock from time to time at management’s discretion. The actual means and timing of any shares purchased under the 2025 Program, and the number of shares actually purchased under the 2025 Program, will depend on a variety of factors, including the market price of the Company’s common stock, general market and economic conditions, management’s evaluation of the Company’s financial condition and liquidity position and applicable legal and regulatory requirements. The 2025 Program does not obligate the Company to purchase any particular number of shares and may be modified of terminated by the Board at any time. During the three and nine months ended September 30, 2025, the Company repurchased 262,269 and 809,601 shares of its common stock at a total cost of $4.9 million and $14.0 million, respectively, and at a weighted average cost per share of $18.70 and $17.35, respectively.
Contractual Obligations
As of September 30, 2025 , there have been no material changes to the information about the Company’s contractual obligations and cash commitments disclosed in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations," under the heading “Contractual Obligations” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ( the “2024 Annual Report”).
Off-Balance Sheet Arrangements
As of September 30, 2025, there have been no material changes to the off-balance sheet arrangements disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the heading "Off-Balance Sheet Arrangements" in the Company’s 2024 Annual Report.
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CARTER BANKSHARES, INC. AND SUBSIDIARIES
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