What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-05 compared with 2025-03-07 · 444 added, 453 removed, 530 unchanged (63% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

commercial banking products and insurance.

The Company’s Business and Strategy

Carter Bankshares, Inc.

(the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.9 billion at December 31, 2025.

The Company is the parent company of its wholly owned subsidiary, Carter Bank & Trust (the “Bank”).

The Bank is a Federal Deposit Insurance Corporation (“FDIC”) insured, Virginia state-chartered bank, which operates 64 branches in Virginia and North Carolina.

The Company provides a full range of financial services with retail and, commercial banking products and insurance.

The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “CARE”.

The Company has entered into a definitive purchase and assumption agreement to acquire two branch facilities and the deposits associated therewith, located in Mooresville, North Carolina and Winston Salem, North Carolina, from First Reliance Bank.

The Company expects this transaction to close during the first half of 2025, subject to obtaining required regulatory approvals

The Company earns revenue primarily from interest on loans and securities and fees charged for financial services provided to our customers.

The Company incurs expenses for the cost of deposits, borrowings, provision for credit losses and other operating costs such as salaries and employee benefits, data processing, FDIC expense, occupancy and income tax provision.

Part of the Company’s current three-year strategic plan is to focus on refining and enhancing its brand image and position in the markets it serves.

With this new brand strategy, the Company has embarked on a multi-year implementation plan to create a brand tailored to the needs of its critical growth audiences, with a focus on innovating brand experiences to exceed expectations and to build a brand that stands apart.

This means a commitment to aligning processes, operations and systems around the Company’s brand while introducing new products and services, so that in time the Company can increase its brand awareness in the communities it serves.

To strengthen and further shape the brand and culture of the Company, a new set of guiding principles were introduced to associates in June 2023.

During 2025, the Company acquired two leased branch facilities, along with the associated deposits, located in Mooresville, North Carolina and Winston Salem, North Carolina, from First Reliance Bank (the “Branch Purchase”).

In connection with the Branch Purchase, the Bank acquired $55.9 million in deposits, along with cash, personal property, and other fixed assets associated with the branch locations, and welcomed ten associates to its team.

No loans were acquired as part of the Branch Purchase.

The Branch Purchase closed during the second quarter of 2025.

The Company earns revenue primarily from interest on loans and investment securities and from fees charged for financial services provided to customers.

Expenses consist principally of funding costs, the provision for credit losses, compensation and benefits, occupancy and equipment, technology and data processing, regulatory assessments, and other operating expenses.

Part of the Company’s current three-year strategic plan is to refine and enhance its brand image and position in the markets it serves.

With this brand strategy, the Company has embarked on a multi-year implementation plan to create a brand tailored to the needs of its critical growth audiences, focusing on innovating brand experiences to exceed expectations and build a brand that stands apart.

This means a commitment to aligning processes, operations, and systems around the Company’s brand while introducing new products and services, so that, over time, the Company can increase its brand awareness in the communities it serves.

To strengthen and further shape the brand and culture of the Company, a new set of guiding principles was introduced to associates in June 2023.

The guiding principles include a new purpose statement:

To create opportunities for more people and businesses to prosper ;

supported by our new set of core values:

To create opportunities for more people and businesses to prosper, supported by our new set of core values:

Build Relationships, Earn Trust, and Take Ownership.

We believe these new guiding principles will help create alignment to support future growth by empowering our associates and igniting a passion for the Company.

On October 30, 2024 the Company unveiled the new brand identity centered entirely around the people who matter most:

customers and associates of Carter Bank and Trust and the communities it serves to help deliver on its promise of helping people experience a life lived full.

The Company’s goal is to shift from restructuring the balance sheet to pursuing a prudent growth strategy when appropriate.

We believe this strategy will be primarily targeted at organic growth, but will also consider opportunistic acquisitions that fit this strategic vision.

On October 30, 2024, the Company unveiled its new brand identity and, in 2025, renovated 47 retail branch locations and seven corporate offices, and launched new websites for the Company and the Bank.

The brand identity is centered entirely around the people who matter most:

customers and associates of the Bank and the communities it serves to help deliver on its promise of helping people experience a life lived full.

The Company’s goal is to shift from balance-sheet restructuring to pursuing a prudent growth strategy when appropriate.

We believe this strategy will primarily focus on organic growth, but will also consider opportunistic acquisitions that align with this strategic vision.

We believe that the Bank’s strong capital and liquidity positions support this strategy.

In addition to loan and deposit growth, the Company will seek to increase fee income while closely monitoring operating expenses.

The Company is focused on executing this strategy to successfully support the new brand and grow its business in our current markets as well as any new markets it may enter.

The Company is focused on executing this strategy to successfully support the new brand and grow its business in its current markets as well as any new markets it may enter.

As part of executing this strategy, the Company continues to dedicate significant resources to the resolution of the Company’s nonaccrual loans, the significant majority of which are related to a single large credit relationship that the Company placed on nonaccrual status in the second quarter of 2023, in a manner that best protects the Company, the Bank, and shareholders.

The Company is closely monitoring all developments that may impact collateral values or potential recoveries on its nonperforming loans, including claims that may be asserted by other purported creditors.

As previously disclosed, during the second quarter of 2024, a federal court lawsuit filed against the Company and the Bank by West Virginia Governor James C.

As previously disclosed, during the second quarter of 2024, a federal court lawsuit filed against the Company and the Bank by then West Virginia Governor James C.

Justice II, his wife Cathy L.

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In connection with the dismissal of this litigation, the Justice Entities agreed upon a pathway of curtailment and payoff of the outstanding loans with the Bank.

The Justice Entities have reduced the aggregate nonperforming loan balance from $301.9 million as of March 30, 2024 to $252.0 million as of December 31, 2024.

The Justice Entities have reduced the aggregate nonperforming loan balance from $301.9 million as of June 30, 2023 to $214.0 million as of December 31, 2025.

During the third quarter of 2024, the Company obtained a voluntary stipulation of dismissal with prejudice of a lawsuit filed on February 10, 2024 against the Bank in the United States District Court for the Western District of Virginia (Danville Division) (the “GLAS Trust Lawsuit”) by GLAS Trust Company, LLC, in its capacity as Note Trustee (“GLAS Trust”).

In connection with the dismissal of the GLAS Trust Lawsuit, GLAS Trust and certain affiliates and parties on whose behalf it was acting executed a release that waives any and all causes of action of any kind that they might claim to have against the Bank.

The dismissal of the GLAS Trust Lawsuit ended all pending litigation brought against the Bank by GLAS Trust in connection with the Bank’s credit relationship with the Justice Entities.

Also in connection with the dismissal of the GLAS Trust Lawsuit, certain Justice Entities executed documents reaffirming the legality, validity and binding nature of all loan documents they have executed in favor of the Bank.

In connection with the dismissal of the GLAS Trust Lawsuit, GLAS Trust and certain affiliates and parties on whose behalf it was acting

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

executed a release that waives any and all causes of action of any kind that they might claim to have against the Bank.

The dismissal of the GLAS Trust Lawsuit ended all pending litigation brought against the Bank by GLAS Trust in connection with the Bank’s credit relationship with the Justice Entities.

Also, in connection with the dismissal of the GLAS Trust Lawsuit, certain Justice Entities executed documents reaffirming the legality, validity and binding nature of all loan documents they have executed in favor of the Bank.

The Company tendered a payment (the “Settlement Payment”) in consideration of the voluntary dismissal of the GLAS Trust Lawsuit.

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The Company’s financial results continue to be significantly impacted by the single large credit relationship that the Company placed on nonaccrual status during the second quarter of 2023, which has an aggregate principal balance of $214.0 million as of December 31, 2025.

Since placement of these loans, now reduced to judgements, on nonaccrual status during the second quarter of 2023, interest income has been negatively impacted by $35.1 million and $30.0 million during the years ended December 31, 2024 and 2023, respectively, or by $65.1 million in the aggregate.

Since placement of these loans, now reduced to judgments, on nonaccrual status during the second quarter of 2023, interest income has been negatively impacted by $26.1 million, $35.1 million and $30.0 million during the years ended December 31, 2025, 2024 and 2023, respectively, or by $91.2 million in the aggregate.

Results of Operations and Financial Condition

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2025 Highlights

• Net interest income decreased $7.9 million, or 6.4%, to $114.5 million for the year ended December 31, 2024 compared to the same period in 2023, reflecting the impact of higher funding costs during the year ended December 31, 2024, which more than offset loan growth and higher loan and securities yields;

• The (recovery) provision for credit losses decreased $10.5 million to a recovery of $5.0 million for the year ended December 31, 2024, compared to a provision for credit losses of $5.5 million for the same period in 2023 primarily driven by the updated analysis of the individually evaluated loans and Other segment reserves released of $6.6 million due to $49.9 million of curtailment payments during the year ended December 31, 2024, offset by loan growth during 2024;

• Net interest income increased $16.4 million, or 14.3%, to $130.8 million for the year ended December 31, 2025 compared to the same period in 2024;

• The (recovery) for credit losses was $(3.6) million for the year ended December 31, 2025, compared to a (recovery) for credit losses of $(5.0) million for the same period in 2024;

• Total noninterest income increased $1.0 million to $22.4 million for the year ended December 31, 2025 compared to the same period in 2024;

• Total noninterest expense increased $7.1 million to $117.1 million for the year ended December 31, 2025 compared to the same period in 2024;

• Provision for income taxes increased $1.0 million to $6.3 million for the year ended December 31, 2024 compared to the same period in 2023.

• Income tax provision increased $2.3 million to $8.6 million for the year ended December 31, 2025 compared to the same period in 2024.

Balance Sheet Highlights (period-end balances, December 31, 2025 compared to December 31, 2024 )

• The available-for-sale securities portfolio decreased $26.8 million and is currently 14.3% of total assets compared to 15.4% of total assets;

• Total portfolio loans increased $118.9 million, or 3.4%, due to loan growth, primarily in the commercial real estate (“CRE”) and construction segments during the year ended December 31, 2024, partially offset by $80.0 million in loan payoffs on two large CRE loans and the above mentioned curtailment payments;

• Total portfolio loans increased $254.7 million, or 7.0%, due to loan growth during the year ended December 31, 2025;

• The portfolio loans to deposit ratio was 92.1%, compared to 87.3%;

• At December 31, 2024, nonperforming loans declined by $50.2 million to $259.3 million compared to December 31, 2023.

Nonperforming loans as a percentage of total portfolio loans were 7.15% compared to 8.83%.

The decline was due to the year-to-date curtailment payments totaling $49.9 million made by the Bank’s largest nonperforming credit relationship that was placed on nonaccrual status during the second quarter of 2023.

These loans are contained in the

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Other segment with an aggregate principal balance of $252.0 million as of December 31, 2024 and comprise 97.2% of nonperforming loans at December 31, 2024;

• At December 31, 2025, NPLs declined by $15.4 million to $244.0 million compared to December 31, 2024.

NPLs as a percentage of total portfolio loans were 6.29% compared to 7.15%;

• The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 1.84% compared to 2.09%.

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• Total deposits increased $57.5 million, or 1.4%, to $4.2 billion at December 31, 2025, compared to December 31, 2024;

• FHLB borrowings decreased $323.4 million to $70.0 million at December 31, 2024 compared to $393.4 million at December 31, 2023 primarily due to deposit growth.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

• FHLB borrowings increased $108.5 million to $178.5 million at December 31, 2025 compared to $70.0 million at December 31, 2024.

The Company reported net income of $31.4 million , or $1.38 diluted earnings per share for the year ended December 31, 2025 compared to net income of $24.5 million , or $1.06 diluted earnings per share, for the year ended December 31, 2024 .

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Nonperforming Loans to Total Portfolio Loans 6.29 % 7.15 % 8.83 %

Allowance for Credit Losses to Nonperforming Loans 29.30 % 29.15 % 31.35 %

Net Interest Income

Our principal source of revenue is net interest income.

Net interest income represents the difference between the interest and fees earned on interest-earning assets and the interest paid on interest-bearing liabilities.

Net interest income is affected by changes in the average balance of interest-earning assets, interest-bearing liabilities, as well as changes in interest rates and spreads.

The level and mix of interest-earning assets and interest-bearing liabilities is managed by our Asset and Liability Committee (“ALCO”), in order to mitigate interest rate and liquidity risks of the balance sheet.

A variety of ALCO strategies were implemented, within prescribed ALCO risk parameters, to produce what the Company believes is an acceptable level of net interest income.

Net interest income and the net interest margin are presented on an FTE basis.

The FTE basis (non-GAAP) adjusts net interest income and net interest margin for the tax benefit of income on certain tax-exempt loans and securities using the applicable federal statutory tax rate for each period (which was 21% for the periods presented) and the dividend-received deduction for equity securities.

The Company believes this FTE basis presentation provides a relevant comparison between taxable and non-taxable sources of interest income.

Refer to the “Explanation of Use of Non-GAAP Financial Measures” above for additional discussion regarding the non-GAAP measures used in this Annual Report on Form 10-K.

Net interest income is the Company’s primary source of revenue and represents the difference between interest and fee income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities.

Net interest income is influenced by changes in the average balances of interest-earning assets and interest-bearing liabilities, as well as changes in interest rates, asset yields, funding costs, and interest rate spreads.

The composition and mix of interest-earning assets and interest-bearing liabilities are actively managed by the Company’s Asset and Liability Committee (“ALCO”) to mitigate interest rate risk and liquidity risk within the balance sheet.

ALCO utilizes a variety of strategies within established risk parameters to manage exposure to changing interest rate environments and to achieve what management believes to be an appropriate and sustainable level of net interest income.

Net interest income and net interest margin are presented on an FTE basis, which are non-GAAP financial measures.

The FTE presentation adjusts net interest income and net interest margin to reflect the tax-equivalent impact of income earned on certain tax-exempt loans and securities, using the applicable federal statutory income tax rate for each period presented, which was 21%, as well as the impact of the dividends-received deduction on equity securities.

Management believes that the FTE basis presentation provides a more meaningful comparison between taxable and tax-exempt sources of interest income and is consistent with industry practice.

Additional discussion regarding the Company’s uses of non-GAAP financial measures is included in the “Explanation of Use of Non-GAAP Financial Measures” section above.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table reconciles interest and dividend income (GAAP), yield on interest-earning assets (GAAP), net interest margin (GAAP) and net interest income (GAAP) per the Consolidated Statements of Income to interest and dividend income on an FTE basis (non-GAAP), yield on interest-earning assets on an FTE basis (non-GAAP), net interest margin on an FTE basis (non-GAAP) and net interest income on an FTE basis (non-GAAP), respectively, for the periods presented:

The following table reconciles interest and dividend income, yield on interest-earning assets, net interest income, and net interest margin as reported under GAAP to the corresponding amounts presented on an FTE basis for the periods presented:

(Dollars in Thousands) Years Ended December 31,

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Average Balance Sheet and Net Interest Income Analysis (FTE)

The following table provides information regarding the average balances, interest and rates earned on interest-earning assets and the average balances, interest and rates paid on interest-bearing liabilities for the years ended December 31:

The following table presents average balances, interest income and expense, and average yields and rates on interest-earning assets and interest-bearing liabilities for the years ended December 31:

(Dollars in Thousands) 2025 2024 2023

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Total Securities 810,645 26,624 3.28 % 840,196 29,850 3.55 % 928,243 31,607 3.41 %

Tax-Free Loans 1, 2

103,218 3,352 3.25 % 123,847 3,978 3.21 % 144,617 4,568 3.16 %

Taxable Loans 1

Commercial Real Estate 2,006,830 123,119 6.13 % 1,786,092 111,505 6.24 % 1,592,040 92,398 5.80 %

Commercial & Industrial 2

216,288 12,951 5.99 % 221,032 14,660 6.63 % 259,268 15,927 6.14 %

Residential Mortgages 819,697 34,988 4.27 % 809,085 34,196 4.23 % 714,733 27,365 3.83 %

Other Consumer 28,141 1,522 5.41 % 30,820 2,128 6.90 % 38,602 3,071 7.96 %

Construction 449,842 30,265 6.73 % 421,167 26,864 6.38 % 378,711 24,534 6.48 %

Other 239,273 — — % 292,264 — — % 341,485 — — %

Total Loans 1

Federal Home Loan Bank Stock 13,696 1,012 7.39 % 20,342 1,456 7.16 % 3,251 154 4.74 %

3,760,071 202,845 5.39 % 3,560,460 189,353 5.32 % 3,324,839 163,295 4.91 %

Other Restricted Stock, at Cost 9,432 616 6.53 % 13,696 1,012 7.39 % 20,342 1,456 7.16 %

Total Interest-Earning Assets 4,644,599 $ 232,893 5.01 % 4,458,602 $ 222,504 4.99 % 4,293,838 $ 197,424 4.60 %

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Total Interest-Bearing Deposits 3,581,977 96,184 2.69 % 3,277,398 95,431 2.91 % 2,904,956 52,628 1.81 %

FHLB Borrowings 222,719 11,379 5.11 % 402,675 20,822 5.17 % 29,849 1,163 3.90 %

Federal Home Loan Bank Borrowings 110,944 4,648 4.19 % 222,719 11,379 5.11 % 402,675 20,822 5.17 %

Federal Funds Purchased — — — % — — — % 7,023 368 5.24 %

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2.83 % 2.58 % 2.87 %

Net Interest Spread 2.27 % 1.93 % 2.37 %

1 Nonaccruing loans are included in the daily average loan amounts outstanding.

2 Tax-exempt income is on an FTE basis using the statutory federal corporate income tax rate of 21 percent.

Net interest income decreased $7.9 million, or 6.4% to $114.5 million for the year ended December 31, 2024 compared to the same period in 2023.

Net interest income, on an FTE basis (non-GAAP), decreased $8.1 million, or 6.6%, to $115.2 million for the year ended December 31, 2024 compared to $123.3 million for the same period in 2023.

Net interest margin decreased 28 basis points to 2.57% for the year ended December 31, 2024 compared to 2.85% for the same period in 2023.

Net interest margin, on an FTE basis (non-GAAP), decreased 29 basis points to 2.58% for the year ended December 31, 2024 compared to 2.87% for the same period in 2023.

The decreases were primarily a result of higher funding costs that increased 83 basis points, offset by an increase of 39 basis points on the yield on earning assets for the year ended December 31, 2024 compared to the same period in 2023.

During the year ended December 31, 2024, $1.2 billion of CDs matured and repriced from an average rate of 3.91% to an average rate of 4.02%.

Average interest-earning assets increased by $164.8 million with the yield on average interest-earning assets increasing

Net interest income increased to $130.8 million for the year ended December 31, 2025, compared to $114.5 million for the year ended December 31, 2024.

On an FTE basis (non-GAAP), net interest income increased to $131.5 million for the year ended December 31, 2025, compared to $115.2 million for the year ended December 31, 2024.

The increase was primarily driven by growth in average interest-earning assets, higher yields on loans, and a reduction in the overall cost of interest-bearing liabilities.

As a result, net interest margin increased 25 basis points to 2.82% for 2025 compared to 2.57% for 2024.

On an FTE basis (non-GAAP), net interest margin increased 25 basis points to 2.83% for 2025 compared to 2.58% for 2024.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

39 basis points.

The most significant increase in interest-earning assets was a 41 basis point increase in the yield on average loans from 4.91% for the year ended December 31, 2023 to 5.32% for the year ended December 31, 2024.

The decline in net interest income and net interest margin were significantly driven by the Bank’s largest nonperforming credit relationship that was placed on nonaccrual status during the second quarter of 2023, which negatively impacted interest income by $35.1 million for the year ended December 31, 2024 and by $30.0 million for the same period in 2023.

Interest income increased to $221.7 million for the year ended December 31, 2024 from $196.4 million compared to the same period in 2023.

Interest income, on an FTE basis (non-GAAP), increased $25.1 million, or 12.7%, to $222.5 million for the year ended December 31, 2024 compared to $197.4 million for the same period in 2023, resulting from average loan growth of $256.2 million in taxable loans.

Average interest-earning assets increased primarily due to growth in average loans of $235.6 million and an increase of $23.8 million in average interest-bearing deposits with banks during the year ended December 31, 2024, and was partially offset by a decrease of $88.0 million in average investment securities and a decrease of $6.6 million in FHLB stock.

The change in average investment securities is the result of active balance sheet management to deploy the proceeds from securities maturities and principal curtailments into higher yielding loans, rather than reinvesting those proceeds back into the securities portfolio.

The portfolio has been diversified as to bond types, maturities, and interest rate structures.

Average interest-earning assets increased to $4.6 billion in 2025 from $4.5 billion in 2024, reflecting growth in the loan portfolio, particularly in commercial real estate (“CRE”), residential mortgages, and construction loans.

Average investment securities declined compared to the prior year, reflecting active balance sheet management to deploy the proceeds from securities maturities and principal curtailments into higher yielding loans, rather than reinvesting those proceeds back into the securities portfolio.

Noninterest-earning assets increased slightly year over year, consistent with overall balance sheet growth.

The yield on total interest-earning assets (GAAP) increased slightly to 5.00% in 2025 compared to 4.97% in 2024.

The yield on total interest-earning assets (FTE)(non-GAAP) increased slightly to 5.01% in 2025 compared to 4.99% in 2024, reflecting improved loan yields driven by higher market interest rates and loan repricing activity.

The yields on total loans (FTE)(non-GAAP) increased to 5.39% in 2025 from 5.32% in 2024.

These increases were partially offset by lower yields on total investment securities, reflecting lower interest rates on the floating rate portion of the portfolio and changes in portfolio mix.

Overall, loan growth and improved loan yields more than offset the decline in securities yields.

As of December 31, 2025, the securities portfolio was comprised of 36.3% variable rate securities with approximately 94.9% that will reprice at least once over the next 12 months.

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If the Federal Reserve continues reducing short-term interest rates, the Bank may consider changes to this interest rate mix strategy going forward.

Interest expense for the year ended December 31, 2024 increased $33.2 million, or 44.7%, to $107.3 million compared to the same period in 2023.

The increase of $372.4 million in average interest-bearing deposits reflected solid growth in average CDs of $353.9 million, an increase of $100.7 million in average interest-bearing demand accounts and an increase of $63.0 million in average money market accounts, offset by a decrease of $145.2 million in average savings accounts as customer preferences shifted from lower cost non-maturing deposits to higher-yielding interest-bearing demand, money market and short-term CD products.

Average interest-bearing liabilities increased to $3.7 billion in 2025 from $3.5 billion in 2024, primarily due to growth in interest-bearing deposits.

Average interest-bearing deposits increased to $3.6 billion in 2025 compared to $3.3 billion in 2024, led by growth in CDs, money market accounts and interest-bearing demand deposits.

The cost of total interest-bearing deposits declined to 2.69% in 2025 from 2.91% in 2024, as we have lowered our deposit rate offerings on higher-yielding interest bearing demand, money market and short-term promotional CD products throughout 2025 in response to the Federal Open Market Committee’s (“FOMC”) short-term rate reduction efforts that began September 18, 2024 and continued through December 10, 2025.

Average borrowings declined significantly year-over-year, resulting in a reduction in borrowing costs and contributing to a lower overall cost of interest-bearing liabilities, which decreased to 2.74% in 2025 from 3.06% in 2024.

Our balance sheet is currently exhibiting characteristics of a slightly liability sensitive position due to the short-term nature of our deposit portfolio and FHLB borrowings.

Specifically, 71.7% of our CD portfolio and 77.6% of our outstanding FHLB borrowings will mature and reprice over the next 12 months.

This strategy gives us flexibility to manage the structure and pricing of our deposit and borrowing portfolios to reduce future funding costs should the Federal Open Market Committee (“FOMC”) continue cutting short-term rates in the future.

Discussion of net interest income compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7.

This strategy gives the Company flexibility to manage the structure and pricing of its deposit and borrowing portfolios to reduce future funding costs should the FOMC continue cutting short-term rates in the future.

Discussion of net interest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Net Interest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 , which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.

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Total Securities (1,027) (2,199) (3,226) (2,996) 1,239 (1,757)

Tax-free Loans 1, 2

(670) 44 (626) (666) 76 (590)

Taxable Loans 1

Commercial Real Estate 13,572 (1,958) 11,614 11,788 7,319 19,107

Commercial & Industrial 2

(309) (1,400) (1,709) (2,471) 1,204 (1,267)

Residential Mortgages 452 340 792 3,822 3,009 6,831

Other Consumer (174) (432) (606) (570) (373) (943)

Construction 1,885 1,516 3,401 2,713 (383) 2,330

Other — — — — — —

Total Loans 1

Federal Home Loan Bank Stock (490) 46 (444) 1,187 115 1,302

15,426 (1,934) 13,492 15,282 10,776 26,058

Other Restricted Stock, at Cost (288) (108) (396) (490) 46 (444)

Total Interest-Earning Assets $ 15,033 $ (4,644) $ 10,389 $ 13,029 $ 12,051 $ 25,080

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(Recovery) Provision for Credit Losses

The Company recognizes (recovery) provision for credit losses based on the difference between the existing balance of ACL reserves and the ACL reserve balance necessary to adequately absorb expected credit losses associated with the Company’s financial instruments.

Similarly, the Company recognizes (recovery) provision for unfunded commitments based on the difference between the existing balance of reserves for unfunded commitments and the reserve balance for unfunded commitments necessary to adequately absorb expected credit losses associated with those commitments.

(Recovery) provision for credit losses is determined based on management’s estimates of the appropriate level of ACL needed to absorb expected life-of-loan losses in the loan portfolio, after giving consideration to charge-offs and recoveries for the period.

The Company records a provision or recovery for credit losses to adjust the allowance for credit losses (“ACL”) to the level deemed appropriate to absorb expected credit losses in the loan portfolio.

Similarly, the Company records a provision or recovery for unfunded commitments to adjust the related reserve to the level considered appropriate to cover expected credit losses associated with those commitments.

The provision or recovery for credit losses reflects management’s estimate of the ACL required to absorb expected life-of-loan losses in the loan portfolio, after consideration of net charge-offs and recoveries during the period.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents information regarding the (recovery) provision for credit losses and net charge-offs:

The following table presents information regarding the recovery for credit losses and net charge-offs:

(Dollars in Thousands) Twelve months ended December 31,

2025 2024 $ Change

(Recovery) Provision for Credit Losses $ (5,039) $ 5,500 $ (10,539)

(Recovery) Provision for Unfunded Commitments (7) 901 (908)

Total (Recovery) Provision for Credit Losses on Loans (5,046) 6,401 (11,447)

Recovery for Credit Losses $ (3,637) $ (5,039) $ 1,402

Recovery for Unfunded Commitments (194) (7) (187)

Total Recovery for Credit Losses on Loans (3,831) (5,046) 1,215

Provision for Securities — — —

Total (Recovery) Provision for Credit Losses $ (5,046) $ 6,401 $ (11,447)

Total Recovery for Credit Losses $ (3,831) $ (5,046) $ 1,215

Net Loan Charge-offs $ 472 $ 16,413 $ (15,941)

Net Loan Charge-offs / Average Portfolio Loans 0.01 % 0.46 %

The (recovery) provision for credit losses decreased $10.5 million for the year ended December 31, 2024 compared to the same period in 2023.

The decrease was primarily driven by updated analysis of individually evaluated loans within the Other loan segment and $6.6 million of Other segment specific reserves released in connection with $49.9 million of curtailment payments during the year ended December 31, 2024, offset by loan growth during the year ended 2024.

The (recovery) provision for unfunded commitments for the year ended December 31, 2024 was a recovery of $7 thousand compared to a provision of $0.9 million for the same period in 2023, a decrease of $0.9 million primarily due to changes in construction commitments.

Net loan charge-offs were $16.4 million for the year ended December 31, 2024 compared to $2.3 million for the same period in 2023.

During the year ended December 31, 2024, net loan charge-offs were significantly impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio.

The (recovery) for credit losses was $(3.6) million for the year ended December 31, 2025, compared to a (recovery) of $(5.0) million for the same period in 2024.

The increases compared to the same period in 2024 was primarily driven by higher loan growth in 2025, the establishment of a new reserve of $1.0 million on a CRE loan during the fourth quarter of 2025 due to an updated appraisal, a reserve of $0.6 million on an existing CRE relationship with four loans that are under contract to sell and $12.0 million lower curtailment payments during the year ended December 31, 2025 compared to the same period in 2024.

The Other segment reserve rate declined to 8.43% at December 31, 2025 from 12.01% at December 31, 2024.

The (recovery) for unfunded commitments was $(194) thousand compared to a (recovery) of $(7) thousand for the same period in 2024.

The change from the prior year was primarily due to decreased unfunded commitments in construction loans.

Net charge-offs were $0.5 million for the year ended December 31, 2025 compared to $16.4 million for the year ended December 31, 2024.

As a percentage of average portfolio loans, net loan charge-offs were 0.01% and 0.46% for the years ended 2025 and 2024, respectively.

For information regarding the $15.0 million principal charge-off related to the Other segment of the loan portfolio, see the “Our Business and Strategy” section of this MD&A.

During the year ended December 31, 2024, net loan charge-offs were significantly impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio.

For information regarding the $15.0 million principal charge-off related to the Other segment of the loan portfolio, see the “The Company’s Business and Strategy” section of this MD&A.

See the “Allowance for Credit Losses” section of this MD&A for additional details regarding our charge-offs.

Discussion of (recovery) provision for credit losses for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “(Recovery) Provision for Credit Losses” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 , which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.

Noninterest Income

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Bank Owned Life Insurance Income 1,511 1,473 38 2.6 %

Commercial Loan Swap Fee Income — 139 (139) (100.0) %

Other 2,872 906 1,966 217.0 %

Total Noninterest Income $ 22,404 $ 21,368 $ 1,036 4.8 %

For the year ended December 31, 2024, total noninterest income was $21.4 million, an increase of $3.1 million, or 16.9%, from the same period in 2023.

The most significant increases were primarily related to higher insurance commissions of $1.7 million, a decrease in net losses on sales of securities of $1.6 million during the year ended December 31, 2023, and a $0.2 million increase in service charges, commissions and fees, offset by a $0.4 million decrease in other noninterest income.

The increase in insurance commissions primarily related to higher sales activity.

The gains on sales of securities of $1.5 million were driven by the sale of approximately $30.0 million of available-for-sale securities during the fourth quarter of 2023 to reposition the securities portfolio and reinvest the proceeds in higher earning assets.

The $0.4 million decrease in other noninterest income is related to lower fair value adjustment of our interest rate swap contracts with commercial customers.

Total noninterest income increased $1.0 million, or 4.8%, for the year ended December 31, 2025, compared to the same period in 2024.

The increase was primarily driven by other noninterest income of $2.0 million, which included a $1.9 million gain on a BOLI death benefit recognized in the first quarter of 2025.

This increase was partially offset by a $1.0 million decrease in

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Discussion of noninterest income compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7.

insurance commission income, reflecting lower activity levels compared to the prior year.

Discussion of noninterest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 , which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.

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Total Noninterest Expense $ 117,054 $ 110,002 $ 7,052 6.4 %

For the year ended December 31, 2024, total noninterest expense was $110.0 million, an increase of $4.5 million, or 4.3%, from the same period in 2023.

The most significant variance for the comparable period related to increases of $2.1 million in salaries and employee benefits, $1.6 million in occupancy expenses, $1.3 million increase in FDIC insurance expense, $1.0 million in data processing expenses, $0.8 million in advertising expenses and $0.5 million in debit card expenses, offset by decreases of $2.1 million in other noninterest expense, $0.5 million in professional and legal fees and $0.4 million in telephone expenses, which was due to a phone system replacement in 2023.

The increases in salaries and employee benefits resulted from higher salary expenses due to fewer open positions in retail, job grade assessment increases and normal merit increases.

The increase in occupancy expenses was due to new software license and depreciation expense.

The higher FDIC insurance expense was primarily due to the deterioration in asset quality as a direct result of the large nonperforming credit relationship that was placed into nonaccrual status in the second quarter of 2023, which is a component used to determine the assessment.

The increase in data processing expenses relates primarily to general inflationary cost increases for existing and new service agreements.

The increase in advertising expenses relates to costs incurred for the Company’s new brand refresh initiative described above.

The increase in debit card expense relates to discounts received in March of 2023.

The decline in other noninterest expense is related to a gain of $0.2 million on an other real estate owned (“OREO”) property sold in the fourth quarter of 2024, a $0.5 million gain on a closed office that was sold in the third quarter of 2024, a gain of $0.3 million on two other closed offices sold in the first quarter of 2024 that were previously written-down in the third quarter of 2023, write-downs of $0.6 million on three legacy OREO properties and $0.2 million on two additional closed offices in the third quarter of 2023, and a $0.4 million decrease in fair value due to our interest rate swap contracts with commercial customers.

The decrease in professional and legal fees relates to higher legal expenses incurred in 2023 when the Company’s largest credit relationship transferred to nonperforming status and resolution of the Justice Entity litigation in 2024.

Discussion of noninterest expense compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 3 , which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.

Noninterest expense totaled $117.1 million for the year ended December 31, 2025, representing an increase of $7.1 million, or 6.4% compared to 2024.

The increase was driven by higher expenses across several categories reflecting operational growth, strategic initiatives and inflationary pressures.

Total salaries and employee benefits expense was basically flat as compared to December 31, 2024 due to higher salary cost deferrals of $5.7 million as a result of updated loan origination cost studies performed in 2024 and implemented in the latter half of 2024 coupled with higher loan growth, which reduced the amount of salary expense recognized during 2025.

Excluding the $5.7 million of higher salary cost deferrals, salaries and employee benefits increased $5.5 million.

The increase is primarily attributable to normal merit increases, strategic new hires, higher incentives and increased medical costs during 2025.

Other noninterest expense increased $2.3 million, primarily due to $1.1 million of other real estate owned (“OREO”) related activity, $0.7 million of fees associated with 1035 exchanges, resulting from the early surrender of certain company owned life insurance policies (“BOLI”) during 2025, $0.4 million in acquisition costs and $0.2 million in amortization expense related to core deposit intangibles.

Occupancy expenses, net increased $2.0 million, driven by higher software maintenance costs, rebranding expenses, building and equipment maintenance and increased depreciation related to the Branch Purchase.

Professional and legal fees rose $1.2 million, primarily attributable to acquisition-related activity, consulting costs associated with troubled and NPLs and increased expenses related to the management of special assets.

Data processing expenses increased $0.8 million, primarily reflecting inflationary cost increases related to both existing and new service agreements.

Debit card expense increased $0.8 million, driven by higher miscellaneous fees and elevated costs associated with automated teller machine and debit card fraud activity.

Advertising expense increased $0.6 million, primarily due to higher spending related to rebranding initiatives and expanded new account promotions and advertising campaigns.

These increases were partially offset by a $0.4 million decrease in FDIC insurance expense, primarily related to a lower assessment base resulting from decreased loan balances associated with the Company’s large nonperforming lending relationship.

Discussion of noninterest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Condition and Results of Operations,” under the heading “Noninterest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 , which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.

Provision for Income Taxes

The provision for income taxes increased $2.3 million to $8.6 million for the year ended December 31, 2025 compared to $6.3 million for December 31, 2024.

The increase was primarily attributable to a $9.1 million increase in pre-tax income from the prior year, which was largely driven by a $16.4 million increase in net interest income, partially offset by a $7.1 million increase in noninterest expense.

The effective tax rate was 21.6% for the year ended December 31, 2025 compared to 20.6% for the year ended December 31, 2024.

For the period ended December 31, 2025, the annual effective tax rate was greater than the statutory rate of 21%, primarily due to the surrender of certain BOLI policies, which resulted in taxable gains of $2.4 million and $0.2 million in related Modified Endowment Contract (“MEC”) penalties, partially offset by the receipt of a $1.9 million tax-exempt BOLI death benefit.

Additional information related to the surrender of BOLI policies and the related MEC penalty is included in Note 18, Federal and State Income Taxes, in Item 8.

of this Annual Report on Form 10-K.

Discussion of provision for income taxes for the year ended December 31, 2024 compared to the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Provision for Income Taxes” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 , which was filed with the SEC on March 7, 2025, and is incorporated herein by reference.

Financial Condition

December 31, 2025

Total assets increased $146.7 million, to $4.7 billion at December 31, 2024 compared to $4.5 billion at December 31, 2023.

Total portfolio loans increased $118.9 million, or 3.4% to $3.6 billion at December 31, 2024 compared to December 31, 2023 primarily due to loan growth in the CRE and construction loan segments during the year ended December 31, 2024.

Loan growth was partially offset by $80.0 million in loan payoffs of two large CRE loans in the first quarter of 2024 and the curtailment payments on the large NPL credit relationship.

The variances in loan segments for portfolio loans related to increases of $199.2 million in CRE loans and a $26.6 million increase in construction loans, offset by decreases in all the other loan segments, such as a $49.9 million decrease in the Other loan segment due to curtailment payments made by the Bank’s largest nonperforming credit relationship, $41.0 million decrease in Commercial and Industrial (“C&I”) loans, a $10.5 million decrease in residential mortgages and a $5.4 million decrease in other consumer loans.

The securities portfolio decreased $60.6 million and is currently 15.4% of total assets at December 31, 2024 compared to 17.3% of total assets at December 31, 2023.

The decrease is due to ongoing maturities, principal curtailments, purchases and sales of available-for-sale securities and changes in market values driven by fluctuations in intermediate treasury yields.

During the year ended December 31, 2024 there were three new security purchases totaling $15.1 million and sales of three bonds with sale proceeds of $18.0 million.

As of December 31, 2024, the securities portfolio was comprised of 43.5% variable rate securities with approximately 84.6% that will reprice at least once over the next 12 months.

At December 31, 2024, total gross unrealized gains in the available-for-sale portfolio were $0.1 million, offset by $82.4 million of gross unrealized losses.

Total assets increased $192.7 million, to $4.9 billion at December 31, 2025 compared to $4.7 billion at December 31, 2024, reflecting balance sheet growth primarily driven by loan growth.

Total portfolio loans increased $254.7 million, or 7.0% to $3.9 billion at December 31, 2025 compared to December 31, 2024.

Loan growth was led by increases in the CRE, residential mortgage, construction and commercial and industrial loan (“C&I”) portfolios, partially offset by curtailment payments within the Other loan segment and a decline in the other consumer portfolio.

The available-for-sale securities portfolio decreased $26.8 million during 2025 and represented 14.3% of total assets at December 31, 2025, compared to 15.4% of total assets at December 31, 2024.

The decrease was primarily attributable to security sales, normal paydowns, amortization, and calls partially offset by new securities purchases and an improvement in unrealized losses during the year.

Refer to the “Securities” section below for further discussion of unrealized losses in the available-for-sale securities portfolio.

During 2024, the Company purchased $10.0 million of equity securities.

The equity securities consist of our investment in a market-rate, NASDAQ listed mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States.

The mutual fund mainly focuses on providing affordable housing to low and moderate income borrowers and renters, including those in Majority Minority Census Tracts.

The fund invests nationally, but individual bonds are designated to our bank that align with our current footprint.

The Company’s investment in the mutual fund is eligible for investment credit under the CRA.

FHLB stock, at cost decreased $15.1 million to $6.5 million at December 31, 2024 compared to December 31, 2023.

The decrease is due to a lower level of FHLB borrowings due to deposit growth that funded paydowns of FHLB borrowings.

Closed retail bank offices had a book value of $0.7 million at December 31, 2024 and $2.3 million at December 31, 2023, and are included in OREO on the Consolidated Balance Sheets.

The ACL was 2.09% of total portfolio loans at December 31, 2024 compared to 2.77% as of December 31, 2023.

The decrease is primarily related to an updated analysis of the individually evaluated loans, a $15.0 million charge-off related to the Other segment of the loan portfolio in the third quarter of 2024 and $6.6 million of Other segment specific reserves released in connection with $49.9 million of curtailment payments made by the Bank’s largest nonperforming credit relationship during the year ended December 31, 2024.

General reserves as a percentage of total portfolio loans were 1.24% at December 31, 2024 and 1.22% at December 31, 2023.

Management believes the ACL is adequate to absorb expected losses inherent in the loan portfolio.

See the sections of this MD&A titled “(Recovery) Provision for Credit Losses,” “Credit Quality” and “Allowance for Credit Losses” for information about the factors that impacted the ACL and the provision for credit losses.

Total deposits increased $431.5 million to $4.2 billion at December 31, 2024 compared to December 31, 2023.

The increase in deposits was primarily due to a $337.7 million increase in CDs and an increase of $245.5 million in interest-bearing demand accounts, offset by decreases of $99.4 million in savings accounts, $50.8 million in noninterest-bearing demand accounts and $1.5 million in money market accounts.

The Company had $196.1 million brokered CDs at December 31, 2024, compared to $70.0 million at December 31, 2023.

At December 31, 2024, noninterest-bearing deposits comprised 15.3% of total deposits compared to 18.4% at December 31, 2023.

CDs comprised 46.3% and 42.6% of total deposits at December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, based on assumptions that the Bank uses to prepare its regulatory call report, approximately 81.6% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits, and approximately 18.4% of our total

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

deposits were uninsured deposits over the standard FDIC insurance coverage limit.

The Company’s deposit base is diversified and granular and is comprised of approximately 78.5% of retail deposits.

FHLB borrowings decreased $323.4 million to $70.0 million at December 31, 2024 compared to $393.4 million at December 31, 2023 primarily due to deposit growth, offset by $126.1 million of new brokered CDs during 2024, and deposit growth.

The Company had no outstanding federal funds purchased at December 31, 2024 and December 31, 2023.

Total capital of $384.3 million at December 31, 2024, reflects an increase of $33.1 million compared to $351.2 million at December 31, 2023.

The increase in total capital from December 31, 2023 is primarily due to net income of $24.5 million for the year ended December 31, 2024, other comprehensive income of $6.9 million for the year ended December 31, 2024 due to positive changes in fair value of investment securities, and $1.7 million related to restricted stock activity all during the year ended December 31, 2024.

The Company remains well capitalized.

The Tier 1 capital ratio was 10.88% at December 31, 2024 compared to 11.08% at December 31, 2023.

The leverage ratio was 9.56% at December 31, 2024, compared to 9.48% at December 31, 2023 and the total risk-based capital ratio was 12.13% at December 31, 2024 compared to 12.34% at December 31, 2023.

The Bank also remained well capitalized as of December 31, 2024.

The Bank’s Tier 1 capital ratio was 10.72% at December 31, 2024 compared to 10.99% at December 31, 2023.

The Bank’s leverage ratio was 9.42% at December 31, 2024 compared to 9.41% at December 31, 2023.

The Bank’s total risk-based capital ratio was 11.98% at December 31, 2024 compared to 12.25% at December 31, 2023.

During the year ended December 31, 2025, the Company initiated $27.4 million in 1035 exchanges of BOLI to transfer proceeds to new insurance carriers and take advantage of enhanced credit ratings and improved yields resulting from favorable BOLI market conditions.

The exchange allowed the Company to retire lower-yielding BOLI assets and reinvest the proceeds into higher yielding BOLI related assets on the balance sheet.

Total deposits increased $57.5 million to $4.2 billion at December 31, 2025 compared to December 31, 2024, which included $55.9 million related to the Branch Purchase completed during the second quarter of 2025.

Deposit growth was driven by

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

increases in interest-bearing demand accounts and money market accounts, partially offset by decreases in noninterest-bearing demand accounts, savings accounts and CDs.

FHLB borrowings increased $108.5 million to $178.5 million at December 31, 2025 compared to $70.0 million at December 31, 2024, primarily to support loan growth.

The Company had no outstanding federal funds purchased at December 31, 2025 or 2024.

The following table presents the composition of available-for-sale securities for the periods presented:

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(Dollars in Thousands) 2025 2024

Balance Weighted-

Yield Balance Weighted-

Balance Weighted-Average

Government Agency Securities 19,375 4.11 % 26,950 4.82 %

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Total $ 691,612 3.20 % $ 718,400 3.40 %

The Company invests in various securities in order to maintain a source of liquidity, to satisfy various pledging requirements, to increase net interest income and as a tool of the ALCO to diversify and reposition the balance sheet for interest rate risk purposes.

Securities are subject to market risks that could negatively affect the level of liquidity available to us.

Security purchases are subject to our investment policy that is approved annually by our Board and administered through ALCO and our treasury function.

The securities portfolio decreased $60.6 million to $718.4 million at December 31, 2024 compared to $779.0 million at December 31, 2023.

Securities comprise 15.4% of total assets at December 31, 2024 compared to 17.3% at December 31, 2023.

During the year ended December 31, 2024, there were three new security purchases totaling $15.1 million and three bond sales with proceeds of $18.0 million.

Liquidity generated by the securities portfolio was primarily deployed into higher yielding loans.

As of December 31, 2024, the securities portfolio was comprised of 43.5% variable rate securities with approximately 84.6% that will reprice at least once over the next 12 months.

At December 31, 2024, total gross unrealized gains in the available-for-sale portfolio were $0.1 million offset by $82.4 million of gross unrealized losses.

At December 31, 2023, total gross unrealized gains in the available-for-sale portfolio were $0.7 million offset by $92.3 million of gross unrealized losses.

The unrealized losses on debt securities are believed to be temporary primarily because these unrealized losses are due to reductions in market value caused by upward movement in interest rates since the securities purchase (as applicable), and not related to the credit quality of these securities.

Our portfolio consists of 46.9% of securities issued by United States government

1 Weighted-average yields on tax-exempt obligations are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.

2 Weighted-average yields are calculated by dividing interest income (based on book yield) by the amortized cost basis of securities in each presented security category.

The Company invests in various securities to maintain liquidity satisfy various pledging requirements, enhance net interest income, and support balance sheet diversification and interest rate risk management through oversight by ALCO.

Securities are subject to market risk, which could adversely affect the level of liquidity available.

All security purchases are governed by the Company’s investment policy, which is approved annually by the Board of Directors and administered by ALCO and the treasury function.

The securities portfolio totaled $691.6 million at December 31, 2025, a net decrease of $26.8 million from December 31, 2024.

During the year ended December 31, 2025, the Company purchased $63.7 million of securities and recognized a $28.6 million improvement in unrealized losses driven primarily by favorable movements in intermediate term U.S.

Treasury yields.

These increases were more than offset by $19.0 million of securities sales and $100.1 million of principal reductions resulting from normal paydowns, maturities, calls and amortization, resulting in the net decline in the securities portfolio during the year.

Securities represented 14.3% of total assets at December 31, 2025 compared to 15.4% at December 31, 2024.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

sponsored entities and carry an implicit government guarantee.

States and political subdivisions comprise 30.8% of the portfolio and are largely general obligations or essential purpose revenue bonds, which have performed very well historically over all business cycles, and are rated AA and AAA.

We have the ability to hold these securities to maturity and expect full recovery of the amortized cost.

We may occasionally sell securities to take advantage of market opportunities or as part of a strategic initiative.

The Company’s investment securities with intermediate and long-term maturities were the largest driver of these gross unrealized losses, as the market values of these securities are significantly impacted by the Treasury yield curve for similar durations (i.e., 5- and 10-year Treasury securities).

This portion of the Treasury yield curve has moved lower over the past three months, driving unrealized losses on outstanding securities lower.

Changes in short-term interest rates can affect the yield on floating rate securities.

Yields on floating rate securities will fall as the Federal Reserve Board (“FRB”) lowers short-term rates.

Changes in intermediate and long-term interest rates, which are market driven, affect the market value of fixed rate securities with similar maturities.

The Company expects that market values on the Bank’s intermediate and long-term maturity holdings will continue to fluctuate in large part driven by treasury yield changes.

At December 31, 2024 the 5-year and 10-year U.S.

Treasury yields were 4.38% and 4.58%, respectively.

At December 31, 2023, those same bond yields were 3.84% and 3.88%, respectively.

Therefore, this increase of 54 bps and 70 bps, respectively in the intermediate part of the yield curve largely caused a reduction in bond prices for fixed rate bonds in that maturity range.

Note, the effects were generally greater for longer maturity bonds, such as municipal bonds.

On the other hand, floating rate bonds largely held consistent values, as those interest rates generally adjust in line with FRB interest rate hikes.

While interest rates were higher at year-end 2024, our unrealized losses were actually lower because of the significant amount of bond maturities and amortizations throughout the year, with a portion of the proceeds of those maturities invested in the loan portfolio or in higher-yielding securities.

Should the impairment of any of these securities become credit related, the impairment will be recognized by establishing an ACL through (recovery) provision for credit losses in the period the credit related impairment is identified, while any non-credit loss will be recognized in accumulated other comprehensive loss, net of applicable taxes.

At December 31, 2024 and December 31, 2023, the Company had no credit related impairment.

The Basel rules permit most banking organizations 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.

During 2024, the Company purchased $10.0 million of equity securities.

The mutual fund mainly focuses on providing affordable housing to low and moderate income borrowers and renters, including those in Majority Minority Census Tracts.

The fund invests nationally, but individual bonds are designated to our bank that align with our current footprint.

The Company’s investment in the mutual fund is eligible for investment credit under the CRA.

As of December 31, 2025, approximately 36.3% of the securities portfolio consisted of variable rate securities, with approximately 94.9% of the portfolio repricing at least once within the next 12 months.

Total gross unrealized gains in the available-for-sale portfolio were $0.4 million at December 31, 2025, offset by $54.2 million of gross unrealized losses, compared to gross unrealized gains of $0.1 million and gross unrealized losses of $82.4 million at December 31, 2024.

Management believes that unrealized losses on debt securities at December 31, 2025 are temporary and primarily attributable to changes in market interest rates since the time of purchase rather than deterioration in credit quality.

Approximately 45.1% of the securities portfolio is comprised of obligations issued by U.S.

government sponsored entities that carry implicit government guarantees.

States and political subdivision securities comprise 33.9% and are largely general obligations and essential purpose revenue bonds, which have historically performed well across economic cycles and are predominantly rated AA and AAA.

The Company has the ability and intent to hold these securities to maturity and expects to recover the full amortized cost of these investments.

The Company may occasionally sell securities to take advantage of market opportunities or as part of a strategic initiative.

Unrealized losses were concentrated primarily in securities with intermediate and long-term maturities, whose market values are most sensitive to movements in the U.S.

Treasury yield curve, particularly the five year and ten year maturities.

During the year ended December 31, 2025, intermediate term Treasury yields declined, contributing to a reduction in unrealized losses.

At December 31, 2025, the five and ten-year U.S.

Treasury yields were 3.73% and 4.18%, respectively, compared to 4.38% and 4.58%, respectively, at December 31, 2024.

The decline of approximately 65 basis points in the five year yield and 40 basis points in the ten year yield largely explains the improvement in unrealized losses during 2025, with longer duration securities, such as municipal bonds, experiencing the most pronounced valuation changes.

Changes in intermediate and long-term interest rates, which are market driven, will continue to affect the market value of fixed rate securities.

Accordingly, the Company expects ongoing fluctuations in the market values of its intermediate and long-term maturity securities as Treasury yields change.

Floating rate securities generally maintained stable market values, as their coupon rates adjust in line with changes in short-term interest rates set by the Federal Reserve.

If any impairment of securities were determined to be credit related, the Company would recognize an ACL through provision for credit losses in the period an impairment is identified, while any non-credit related impairment would be recorded in accumulated other comprehensive loss, net of applicable taxes.

At December 31, 2025 and December 31, 2024, the Company had no credit related impairments in its securities portfolio.

Under Basel III capital rules, most banking organizations are permitted to make a one-time election to retain the existing regulatory capital treatment for accumulated other comprehensive loss.

The Company elected to retain this treatment, under which accumulated comprehensive loss is excluded from regulatory capital.

As a result, changes in unrealized gains and losses on available-for-sale securities do not affect regulatory capital levels, therefore reducing capital volatility associated with interest rate movements.

During 2024, the Company purchased $10.0 million of equity securities consisting of an investment in a market-rate, NASDAQ listed mutual fund that invests primarily in high quality fixed income securities, principally government agency obligations.

The fund is designed to support community development initiatives throughout the United States, with a primary focus on expanding access to affordable housing for low and moderate income borrowers and renters, including those located in majority-minority census tracts.

Although the fund invests on a national basis, individual bond investments are designated to the Company and aligned with its geographic footprint.

The Company’s investment in this mutual fund qualifies for consideration under the Community Reinvestment Act (“CRA”) and supports the Company’s ongoing commitment to community development activities.

CARTER BANKSHARES, INC.

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2.09 % 2.99 % 2.86 % 3.69 %

1 Weighted -average yields are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.

1 Weighted-average yields on tax-exempt obligations are calculated on a taxable-equivalent basis using the federal statutory tax rate of 21 percent.

2 Securities not due at a single maturity date

At December 31, 2024 the Company had no held-to-maturity securities;

however, if at a future date we classify securities as held-to-maturity, our disclosures will show the weighted average yield for each range of maturities.

At December 31, 2024, the Company held 56.5% fixed rate and 43.5% floating rate securities.

The floating rate securities may have a stated maturity greater than ten years, but the interest rate generally adjusts monthly.

Therefore, the duration on these securities is short, generally less than one year, and will therefore not be as sensitive to interest rate changes.

Refer to Note 4, Investment Securities, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our securities.

Provision for Income Taxes

The provision for income taxes increased $1.0 million to $6.3 million for the year ended December 31, 2024 compared to $5.3 million for December 31, 2023.

Pre-tax income increased $2.1 million for the year ended 2024 compared to 2023, primarily due to recording a $6.5 million recovery to the (recovery) provision for credit losses in the fourth quarter of 2024.

The effective tax rate was 20.6% for the year ended December 31, 2024 compared to 18.6% for December 31, 2023.

The increase in the effective tax rate for the year ended December 31, 2024 compared to the same period in 2023 was primarily related to changes in pre-tax income, partially offset by higher levels of tax credits in 2023.

The Company ordinarily generates an annual effective tax rate that is less than the statutory rate of 21% due to benefits resulting from tax-exempt interest income, tax credit projects and bank owned life insurance (“BOLI”).

Discussion of provision for income taxes compared to the year ended December 31, 2023 compared to the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Provision for Income Taxes” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 3 , which was filed with the SEC on March 8, 2024, and is incorporated herein by reference.

3 Weighted-average yields are calculated by dividing interest income (based on book yield) by the amortized cost basis of securities in each presented maturity bucket and security category.

At December 31, 2025, the Company held no securities classified as held-to-maturity.

If the Company were to designate securities as held-to-maturity in future periods, disclosures would include the weighted average yield by contractual maturity range, as applicable.

At December 31, 2025, approximately 63.7% of the securities portfolio consisted of fixed rate securities and 36.3% consisted of floating rate securities.

Although certain floating rate securities have stated maturities exceeding ten years, their interest rates generally reprice on a monthly basis.

As a result, the effective duration of these securities is relatively short, generally less than one year, which reduces their sensitivity to changes in interest rates.

Refer to Note 5, Investment Securities, in the Notes to Consolidated Financial Statements included in Item 8.

of this Annual Report on Form 10-K for additional information regarding the Company’s securities portfolio.

CARTER BANKSHARES, INC.

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Loans Held-for-Sale 339 — — — 228

Loans Held-for-Sale in Connection with Sale of Bank Branches, at the lower of cost or fair value — — — — 9,835

Total Loans $ 3,879,899 $ 3,624,826 $ 3,505,910 $ 3,148,913 $ 2,812,357

Our loan portfolio represents our most significant source of interest income.

The risk that borrowers are unable to pay such obligations is inherent in the loan portfolio.

Other conditions such as downturns in the borrower's industry or the overall economic climate can significantly impact the borrower’s ability to pay.

For a discussion of the risk factors relevant to our business and operations, please refer to Part I, Item 1A, “Risk Factors,” contained in this Annual Report on Form 10-K for the year ended December 31, 2024.

Total portfolio loans increased $118.9 million, or 3.4%, to $3.6 billion at December 31, 2024 compared to December 31, 2023 with production primarily in our CRE and construction loan portfolios.

The CRE portfolio is monitored for potential concentrations of credit risk by market, property type and tenant concentrations.

Given the current interest rate environment, our mortgage portfolio paydowns outpaced growth in the year ended December 31, 2024.

At December 31, 2024, the loan portfolio was comprised of 25.4% floating rates which reprice monthly, 39.0%, variable rates that reprice at least once during the life of the loan and the remaining 35.6% are fixed rate loans.

The Company continues to carefully monitor the loan portfolio during 2024, including in light of market conditions that impact our borrowers and the interest rate environment.

Total CRE represented 51.6% of total portfolio loans at December 31, 2024 compared to 47.7% at December 31, 2023.

The collateral for the Company’s CRE loans are geographically concentrated predominantly in North Carolina, Virginia, South Carolina, West Virginia and Georgia and within the retail/restaurant, warehouse, hospitality, multifamily, and office metrics.

The loan portfolio is the Company’s primary source of interest income and is subject to inherent credit risk, including the risk that borrowers may be unable to meet their contractual obligations.

Adverse developments in a borrower’s industry or in overall economic conditions may negatively affect repayment capacity.

For a discussion of risk factors relevant to the Company’s business and operations, refer to Part I, Item 1A.

“Risk Factors,” in this Annual Report on Form 10-K for the year ended December 31, 2025.

Total portfolio loans increased $254.7 million, or 7.0%, to $3.9 billion at December 31, 2025, compared to December 31, 2024.

Growth was driven by increased production in the CRE, C&I, residential mortgage, and construction portfolios, partially offset by declines in the Other segment, reflecting $38.0 million of curtailment payments during 2025 and a decrease in the other consumer portfolio.

The Company actively monitors the loan portfolio in light of changing market conditions, borrower performance, and the interest rate environment.

At December 31, 2025, the loan portfolio consisted of 24.1% floating rates loans that reprice monthly, 37.5% variable rate loans that reprice at least once during the life of the loan, and 38.4% fixed rate loans.

CRE loans represented 54.5% of total portfolio loans at December 31, 2025, compared to 51.6% at December 31, 2024.

The CRE portfolio is monitored for potential concentrations of credit risk by market, property type and tenant exposure.

Collateral securing CRE loans is geographically concentrated primarily in North Carolina, Virginia and South Carolina and includes properties within the retail/restaurant, warehouse, hospitality, multifamily, office, and long-term care sectors.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents the Company's CRE loan portfolio breakout by collateral type, loan amounts for each collateral type included in special mention and substandard and the related percentages by segment to the collateral types as of the periods presented:

The following table presents the Company's CRE loan portfolio by collateral type, including outstanding balances, loans classified as special mention or substandard, and the related percentages by collateral category as of the dates presented:

December 31, 2025

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Total $ 1,875,033 $ 1,004 $ 50,334 $ 443,297 $ 175,982 $ 2,545,650 $ 190,045 100.0 %

CRE loans represent a portfolio concentration risk.

The majority of our CRE loans are made in the above noted geographies and granted to experienced developers and sponsors with loan guaranty structures that provide recourse to individuals with access to financial resources.

We believe our knowledge of CRE and our operating knowledge at the local and regional level of these markets allows us to effectively manage concentration risk.

Our operating knowledge at the local and regional level is derived from our front-line connection to the customer and our understanding of their business model.

We also have access to research tools that inform us about market statistics such as occupancy, lease growth rates and new construction starts.

This data is reviewed frequently by our credit officers and disseminated to our lenders.

The Bank’s underwriting process includes multiple shock scenarios primarily focused on cash flow and leverage in order to determine a supportable loan amount.

We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry while actively managing concentrations.

When concentrations exist in certain segments, we seek to mitigate this risk by reviewing the relevant economic indicators and internal risk rating trends of the loans in these segments.

The Company established transaction, relationship and specific loan segment limits in its loan policy.

Total commercial real estate balances should not exceed the combination of 300% of total risk-based capital and growth in excess of 50% over the previous thirty-six months and construction loan balances should not exceed 100% of total risk-based capital.

Investment real estate property types

CRE loans represent a concentration of credit risk within the loan portfolio.

The majority of the Company’s CRE loans are originated within its core geographic markets, extended to experienced developers and sponsors, and generally supported by guaranty structures that provide recourse to individuals with demonstrated financial capacity.

Management believes its local and regional market expertise enables effective management of CRE concentration risk.

This operating knowledge is derived from direct customer relationships, an understanding of borrower business models, and access to market research tools that provide data on occupancy levels, lease growth rates, and new construction activity.

These market indicators are reviewed regularly by credit officers and communicated to lending teams.

The Company’s underwriting process incorporates multiple stress scenarios, primarily focused on borrower cash flow and leverage, to determine supportable loan structures and appropriate commitment levels.

Aggregate commitments to the Company’s top 10 credit relationships totaled $659.7 million, representing 17.0% of gross loans at December 31, 2025, compared to $669.2 million, or 18.5% of gross loans, at December 31, 2024.

The Other segment accounted for 32.4% of the top 10 credit relationships at December 31, 2025.

During the second quarter of 2023, the Company

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

and purchased loan programs have individual dollar limits that should not be exceeded in the portfolio and are based on management’s risk tolerance relative to capital.

In addition, there are specific targets for various categories of real estate loans with respect to debt service coverage ratios, loan-to-value ratios, loan terms, and amortization periods.

We also have policy limits on loan-to-cost for construction projects.

Although leverage is important, the Company also focuses on cash flow generation and employs stress testing to calculate a supportable loan amount.

Aggregate commitments to our top 10 credit relationships were $698.3 million, or 19.27% of our CRE loan portfolio, at December 31, 2024, compared to $611.0 million, or 17.43% or our CRE portfolio, at December 31, 2023.

The Other segment represents 36.1% of the top 10 credit relationships and the Company transferred its largest credit relationship with a balance of $252.0 million as of December 31, 2024 to nonaccrual during the second quarter of 2023, as described in more detail below under “Credit Quality” in this MD&A.

The following table summarizes our top 10 relationships and a description of industries represented for the periods presented:

placed its largest credit relationship, with a current balance of $214.0 million at December 31, 2025, on nonaccrual status, as discussed further below in the “Credit Quality” section of this MD&A.

The following table summarizes the Company’s top 10 credit relationships and the industries represented as of the dates presented:

For the Periods Ending

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Retail & Office 54,838 52,913 1,925 1.41 % 10.67 %

Health Care Facility / Long-Term Care 52,855 53,683 (828) 1.46 % 10.55 %

Multifamily 51,990 27,090 24,900 1.43 % 10.38 %

Warehouse 49,661 51,185 (1,524) 1.37 % 9.92 %

Long-Term Care 46,199 21,803 24,396 1.28 % 9.23 %

Health Care Facility 44,779 — 44,779 1.24 % 8.94 %

Office & Retail 51,560 40,462 11,098 1.33 % 10.04 %

Warehouse 47,969 49,661 (1,692) 1.24 % 9.34 %

Retail 47,619 44,511 3,108 1.23 % 9.27 %

Land & Self-Storage 47,392 43,004 4,388 1.22 % 9.22 %

Warehouse 46,687 44,577 2,110 1.20 % 9.09 %

Long-Term Care 46,199 46,199 — 1.19 % 8.99 %

Multifamily 44,842 36,972 7,870 1.15 % 8.73 %

Top Ten (10) Relationships 659,736 669,152 (9,416) 17.00 % 128.42 %

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% of Total Gross Loans 17.00 % 18.46 % (1.46) %

Concentration (25% of RBC) $ 125,190 $ 121,231

Unfunded commitments on lines of credit were $620.8 million at December 31, 2024 as compared to $568.7 million at December 31, 2023.

The majority of unused commitments are for construction projects that will be drawn as the construction progresses toward completion.

Total utilization was 53.8% at December 31, 2024 and 53.8% at December 31, 2023.

Unfunded commitments on commercial operating lines of credit was 53.8% at December 31, 2024 and 53.7% at December 31, 2023.

Unsecured loans pose higher risk for the Company due to the lack of a well-defined secondary source of repayment.

Commercial unsecured loans are reserved for the best quality customers with well-established businesses that operate with low financial and operating leverage.

The repayment capacity of the borrower should exceed the policy and guidelines for secured loans.

The Company significantly increased the standards for consumer unsecured lending by adjusting upward the required qualifying Fair Isaac Corporation (“FICO”) scores and restricting loan amounts at lower FICO scores.

Deferred costs and fees included in the portfolio balances above were $8.8 million and $7.2 million at December 31, 2024 and December 31, 2023, respectively.

Discounts on purchased 1-4 family loans included in the portfolio balances above were $104.1 thousand and $133.4 thousand at December 31, 2024 and December 31, 2023, respectively.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Concentration (25% of Risk Based Capital ("RBC")) $ 128,431 $ 125,190

Unfunded commitments on lines of credit totaled $643.9 million at December 31, 2025, compared to $620.8 million at December 31, 2024.

The majority of unused commitments relate to construction lines of credit, which are expected to be funded as projects progress toward completion.

Total line of credit utilization was 53.2% at December 31, 2025, compared to 53.8% at December 31, 2024.

Utilization of commercial operating lines of credit was 52.8% at December 31, 2025, compared to 53.8% at December 31, 2024.

The following tables present the maturity schedule of portfolio loan types at December 31, 2025:

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Total Portfolio Loans $ 563,645 $ 1,371,715 $ 1,130,288 $ 813,912 $ 3,879,560

Refer to Note 5, Loans, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our loans.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Refer to Note 6, Loans and Loans Held-for-Sale, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to our loans.

Credit Quality

On a monthly basis, a Criticized Asset Committee meets to review certain watch, special mention and substandard risk rated loans within prescribed policy thresholds.

These loans typically represent the highest risk of loss to the Company.

Action plans are established and these loans are monitored through regular contact with the borrower and loan officer, review of current financial information and other documentation, review of all loan or potential loan restructures or modifications and the regular re-evaluation of assets held as collateral.

On a quarterly basis, the Credit Risk Committee of the Board meets to review our loan portfolio metrics, approve segment limits, approve the adequacy of ACL, and review the findings from Loan Review identified in the previous quarter.

Annually, this same committee approves credit related policy changes and policy enhancements as they become available.

Additional credit risk management practices include continuous reviews of trends in our lending footprint and our lending policies and procedures to support sound underwriting practices, concentrations, delinquencies and annual portfolio stress testing.

Our Loan Review department serves as a mechanism to independently monitor credit quality and assess the effectiveness of credit risk management practices to provide oversight of all lending activities.

The loan review function has the primary responsibility for assessing commercial credit administration and credit decision functions of consumer and mortgage underwriting, as well as determining the appropriateness of risk ratings for those loans reviewed and providing input to the loan risk rating process.

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 based on contractual terms.

Consumer unsecured loans and secured loans are evaluated for charge-off after the loan becomes 90 days past due.

Loans past due 90 days are automatically transferred to nonaccrual status.

Management reserves the right to exercise discretion at the individual loan level.

For example, we may elect to transfer a loan to nonaccrual regardless of the delinquency status if we believe the collection in full of both principal and interest to be unlikely.

We may also elect to retain a loan that is 90 or more days’ delinquent in accrual status if we believe the loan is well secured and in the process of collection.

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.

On a monthly basis, a Criticized Asset Committee meets to review certain watch, special mention and substandard risk rated loans that fall within prescribed policy thresholds.

These loans generally represent those with the highest potential risk of loss to the Company.

For loans identified through this process, management establishes action plans and conducts ongoing monitoring, which includes regular communication with the borrower and loan officer, review of current financial information and other supporting documentation, evaluation of existing or proposed loan structures or modifications, and periodic reassessment of collateral values.

On a quarterly basis, the Credit Risk Committee of the Board meets to review loan portfolio metrics, approve segment concentration limits, evaluate the adequacy of the ACL, and review the results of loan review activities identified during the prior quarter.

Annually, this committee also approves credit related policy changes and enhancements as they are implemented.

Additional credit risk management practices include continuous monitoring of trends within the Company’s lending footprint and ongoing evaluation of lending policies and procedures designed to support sound underwriting standards.

These practices include oversight of portfolio concentrations, delinquencies trends, and the results of annual portfolio level stress testing.

The loan review department provides independent oversight of credit quality and evaluates the effectiveness of credit risk management practices.

This function has primary responsibility for assessing commercial credit administration, consumer and mortgage underwriting and credit decision processes, and the appropriateness of assigned risk ratings for loans reviewed, as well as providing input into the overall loan risk rating process.

The Company’s policy is to place loans on nonaccrual status when collection of principal or interest is doubtful or, generally, when contractual principal or interest payments are 90 days or more past due.

Consumer unsecured loans and secured loans are evaluated for charge-off once they become 90 days past due, and loans that reach 90 days delinquent are automatically transferred to nonaccrual status.

Management, however, retains discretion at the individual loan level.

A loan may be placed on nonaccrual prior to becoming 90 days past due if full collection of principal and interest is deemed unlikely.

Conversely, a loan that is 90 days or more past due may be maintained in accrual status if it is well-secured and in process of collection.

Unsecured loans are generally charged-off in full, while secured loans are charged-off to the estimated fair value of the collateral, net of estimated cost to sell.

The repayment capacity of commercial borrowers is dependent on the performance of their underlying businesses and general economic conditions.

Given the higher potential for loss within the commercial loan portfolio, these loans are monitored through an internal risk rating system.

Risk ratings are assigned based on the borrower’s creditworthiness and are reviewed on an ongoing basis in accordance with internal policies.

Loans rated special mention or substandard exhibit potential or well-defined weaknesses that are not typically present in higher quality performing loans, and therefore require heightened management attention to mitigate the risk of loss.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The ability of borrowers to repay commercial loans is dependent upon the success of their business and general economic conditions.

Due to the greater potential for loss within our commercial portfolio, we monitor the commercial loan portfolio through an internal risk rating system.

Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies.

Loans rated special mention or substandard have potential or well-defined weaknesses not generally found in high quality, performing loans, and require attention from management to limit loss.

Nonperforming assets consist of nonaccrual loans and OREO.

The following table summarizes nonperforming assets for the dates presented:

Nonperforming assets consist of NPLs and OREO.

The following table summarizes nonperforming assets at the dates presented:

(Dollars in Thousands) December 31, 2025 December 31, 2024 Change

11 unchanged sentences

Nonperforming Assets to Total Portfolio Loans plus Other Real Estate Owned 6.29 % 7.17 %

Nonperforming assets decreased $52.0 million to $260.0 million at December 31, 2024 compared to December 31, 2023.

The decrease of $50.2 million in nonperforming loans was primarily related to $49.9 million of curtailment payments made by the Bank’s largest nonperforming credit relationship.

During the second quarter of 2023, the Company placed $301.9 million of commercial loans that reside in the Other segment of the Company’s loan portfolio, relating to the Bank’s largest credit relationship, on nonaccrual status due to loan maturities and failure to pay in full.

These loans remained on nonaccrual status at both December 31, 2024 and December 31, 2023.

These nonperforming loans are 97.2% of the Company's total nonperforming loans and 96.9% of the Company's total nonperforming assets at December 31, 2024.

As discussed in more detail above under “—Our Business and Strategy,” we have agreed upon a pathway of curtailment and payoff of the Bank’s credit relationship with the Justice Entities.

During the second, third and fourth quarters of 2024, $49.9 million of curtailment payments made by the Justice Entities to the Bank decreased the aggregate nonperforming loan balance outstanding to the Bank from $301.9 million as of December 31, 2023 to $252.0 million as of December 31, 2024.

The Company believes it is well secured based on the net carrying value of the credit relationship and it has appropriately reserved for expected credit losses with respect to all such loans based on information currently available.

However, the Company cannot give any assurance as to the timing or amount of future payments or collections on such loans or that the Company will ultimately collect all amounts contractually due.

Based on analyses of the credit relationship and various discounted cash flow valuation techniques utilized in the alternative modeling, which resulted in specific reserves with respect to these loans of $30.3 million at December 31, 2024, or 12.0%, of these loans aggregate principal amount as compared to $54.3 million or 18.0% of these loans aggregate principal amount at December 31, 2023.

This decline was driven by the aforementioned curtailments, updated analysis of the credit relationship during 2024 using the discounted cash flow model with updated assumptions and inputs regarding the credit relationship, legal risk and related risks.

As the borrowers on these loans operate in the hospitality, agriculture, and energy sectors, this credit relationship is secured by, among other collateral, commercial real estate properties in these sectors including but not limited to top-tier hospitality

At December 31, 2025, total nonperforming assets decreased $15.9 million to $244.1 million compared to December 31, 2024.

The decrease was primarily driven by a $15.4 million reduction in nonaccrual loans primarily within the Company’s Other segment, residential mortgages and C&I portfolios.

The reduction in the Other segment was largely attributable to $38.0 million of curtailment payments received during 2025 related to the Company’s largest nonperforming credit relationship.

This decrease was partially offset by the transfer of certain loans to nonaccrual status during the year, including a $9.5 million CRE relationship consisting of four loans placed on nonaccrual status during the first quarter of 2025, a $14.3 million CRE loan placed on nonaccrual status during the third quarter of 2025, and a $0.8 million residential mortgage loan placed on nonaccrual status during the third quarter of 2025.

The $14.3 million CRE loan is secured by an office building that experienced government agency tenants vacated during the fourth quarter of 2025.

Although the loan was originated at a relatively low loan-to-value ratio, an updated appraisal received in the fourth quarter of 2025 resulted in the establishment of a $1.0 million specific reserve.

Management believes the loan remains well-secured based on its net carrying value and continues to closely monitor this loan and other similar CRE credits for changes in valuation and other market impacts.

The $9.5 million CRE relationship placed on nonaccrual status during the first quarter of 2025 is secured by warehouse facilities located in North Carolina.

The properties are currently in receivership and are being marketed for sale, with these properties under contract as of December 31, 2025.

Based on updated appraisals during the fourth quarter of 2025, a specific reserve on one loan in this relationship was reduced to $0.6 million.

During the second quarter of 2023, the Company placed $301.9 million of commercial loans within the Other segment related to its largest lending relationship on nonaccrual status due to loan maturities and failure to pay in full.

These loans remained on nonaccrual status at December 31, 2025 and December 31, 2024 and represented 87.7% of total NPLs and total nonperforming assets at December 31, 2025.

Since June 30, 2023, cumulative curtailment payments of $87.9 million made by the Justice Entities to the Bank, have reduced the outstanding principal balance of this relationship from $301.9 million to $214.0 million at December 31, 2025.

The Company believes this credit is well secured based on its net carrying value and has appropriately reserved for expected credit losses with respect to all such loans based on information currently available.

However, the Company cannot give any assurance as to the timing or amount of future payments or collections on such loans, the timing of any credit administration or collection efforts, or that the Company will ultimately collect all amounts contractually due.

The Company is closely monitoring all developments that may impact collateral values or potential recoveries on its NPLs, including claims that may be asserted by other purported creditors.

Based on analyses of the credit relationship and various discounted cash flow (“DCF”) valuation techniques utilized in the alternative modeling, which resulted in specific reserves with respect to these loans of $18.0 million at December 31, 2025, or 8.4% of these loans aggregate principal amount as compared to $30.3 million or 12.0% of these loans aggregate principal amount at December 31, 2024.

This decline was driven by the aforementioned curtailments, updated analysis of the credit

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

When evaluating the net carrying value of this credit relationship at December 31, 2024, the Company utilized discounted cash flow valuation techniques to estimate the timing and magnitude of potential recoveries resulting from various collection processes.

The following is an analysis of nonperforming loans by loan portfolio segment for the dates presented, and each segment’s relative contribution to total nonperforming loans:

relationship during the second quarter of 2025 using the DCF model with updated assumptions and inputs regarding the credit relationship, legal risk and related risks.

When evaluating the net carrying value of this credit relationship at December 31, 2025, the Company utilized DCF valuation techniques to estimate the timing and magnitude of potential recoveries resulting from various collection processes.

Closed retail bank offices, recorded in OREO on the Consolidated Balance Sheets, had a book value of $0.1 million at December 31, 2025 compared to $0.7 million at December 31, 2024.

During the year ended December 31, 2025, the Bank transferred three closed retail branch properties to OREO.

This activity was partially offset by the sale of one branch during the second quarter of 2025 and the sale of the remaining two branches during the third quarter of 2025.

The following is an analysis of NPLs by loan portfolio segment for the dates presented, and each segment’s relative contribution to total NPLs:

December 31, 2025 December 31, 2024

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Balance End of Period $ 243,982 100.0 % $ 259,349 100.0 %

Closed retail bank offices had a book value of $0.7 million at December 31, 2024 and $2.3 million at December 31, 2023, and are recorded in OREO on the Consolidated Balance Sheets.

During the year ended December 31, 2024, the Bank sold three retail banking offices and moved $1.2 million of loans at fair value to OREO and moved one retail office of $0.2 million to OREO.

These properties are currently being marketed for sale.

Past Company legacy underwriting standards relied heavily on loan to value and did not necessarily consider the income characteristics of the borrower or the repayment capacity of collateral with respect to speculative land financing.

An overreliance on value as a primary repayment source can become compromised during real estate cycles.

As a result, management has worked through these legacy credits and has installed a number of underwriting guardrails that consider the global cash flows and repayment capability of borrowers and/or guarantors, the proportion of speculation, transaction limits and introduced sensitivity analysis in order to determine supportable loan amounts.

While these guardrails do not insulate the Company from credit cycles, management believes it should reduce the experience of defaults.

Closed-end installment loans, amortizing loans secured by real estate and any other loans with payments scheduled monthly are reported past due when the borrower is in arrears two or more monthly payments.

Other multi-payment obligations with payments scheduled other than monthly are reported past due when one scheduled payment is due and unpaid for 30 days or more.

We monitor delinquency on a monthly basis, including loans that are at risk for becoming delinquent and early stage delinquencies in order to identify emerging patterns and potential problem loans.

The Company’s legacy underwriting practices placed significant emphasis on loan to value metrics and, in certain cases, did not fully consider borrower income characteristics or the repayment capacity of collateral, particularly for speculative and land based financings.

Reliance on collateral value as a primary source of repayment can be adversely affected during real estate cycles.

In response, management has actively addressed these legacy credits and implemented enhanced underwriting guardrails that emphasize global borrower cash flows, repayment capability, limits on speculative exposure and transaction size, and the use of sensitivity analysis to determine supportable loan amounts.

While these guardrails do not eliminate exposure to credit cycles, management believes they reduce the risk of default.

Closed-end installment loans, amortizing loans secured by real estate, and other loans with monthly payment schedules are considered past due when payments are two or more months in arrears.

Multi-payment obligations with payment schedules other than monthly are reported as past due when a scheduled payment remains unpaid for 30 days or more.

Management monitors delinquency trends on a monthly basis, including early stage delinquencies and loans exhibiting heightened risk characteristics, to identify emerging credit deterioration.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table summarizes past due loans for the dates presented:

(Dollars in Thousands) December 31,

(Dollars in Thousands) December 31, 2025 December 31, 2024 Change

Loans 30 to 89 Days Past Due

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Total Loans 30 to 89 Days Past Due $ 3,236 $ 4,828 $ (1,592)

There were no loans during the year ended December 31, 2024 and December 31, 2023 that were past due more than 90 days and still accruing.

Loans past due 30 to 89 days or more and still accruing decreased $1.2 million to $4.8 million at December 31, 2024 compared to $6.0 million at December 31, 2023, primarily in the residential mortgage and construction

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

segments offset by an increase in CRE.

During 2024, the decrease related to two construction loans totaling $2.6 million, one of which is now current and one that has since paid off.

Also a construction loan totaling $2.1 million at December 31, 2023 that transferred to a residential mortgage loan in 2024 once construction was completed.

Offsetting these variances was one CRE relationship with an aggregate principal balance of $2.4 million that was downgraded to special mention during the fourth quarter of 2024.

There were no portfolio loans past due more than 90 days and still accruing at December 31, 2025 or December 31, 2024.

Loans past due 30 to 89 days and still accruing decreased by $1.6 million to $3.2 million at December 31, 2025, compared to $4.8 million at December 31, 2024.

The decrease was primarily driven by a $2.4 million CRE loan that moved to nonperforming status during the first quarter of 2025, partially offset by a $1.0 million residential mortgage loan that became past due in the third quarter of 2025 and was still 30 days past due at December 31, 2025.

The following tables represent credit exposures by internally assigned risk ratings as of December 31, 2025 and 2024:

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Total Portfolio Loans $ 1,869,831 $ 230,483 $ 777,471 $ 28,908 $ 462,930 $ 255,203 $ 3,624,826

At December 31, 2024 and December 31, 2023, the Company had no loans that were risk rated as doubtful.

Special mention and substandard loans at December 31, 2024 decreased $39.1 million compared to December 31, 2023, with a decrease of $42.4 million in substandard and an increase of $3.3 million in special mention.

The decrease of $42.4 million in substandard was primarily related to the aforementioned $49.9 million of curtailment payments made by the Bank’s largest nonperforming credit relationship in the second, third and fourth quarters of 2024 in the Other segment category.

Partially offsetting the curtailment payments were loan downgrades to substandard consisting of two CRE loans and two C&I loan relationships totaling $8.8 million, during the year ended December 31, 2024.

At December 31, 2024 and December 31, 2023 substandard loans were impacted by the above mentioned large nonaccrual credit relationship in the Other loan category, which was placed on nonaccrual status during the second quarter of 2023.

The increase of $3.3 million in special mention related to loan downgrades consisting of a $4.4 million construction loan and a $2.4 million CRE loan, partially offset by a $2.8 million C&I loan that was paid off during the year ended December 31, 2024.

Refer to Note 6, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our nonperforming loans and OREO.

At December 31, 2025 and December 31, 2024, the Company had no loans classified as doubtful.

The levels of special mention and substandard loans at December 31, 2025, compared to December 31, 2024, reflected an increase of $4.6 million in special mention and a decrease of $16.7 million in substandard loans.

Special mention loans increased primarily due to the addition of a $10.8 million CRE office building loan that was downgraded from pass to special mention during the fourth quarter of 2025.

This increase was partially offset by the payoff of a $4.4 million construction loan during the second quarter of 2025 and the downgrade of a previously mentioned $2.4 million CRE loan from special mention to substandard in the first quarter of 2025.

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Substandard loans decreased primarily due to $38.0 million of curtailment payments, related to the Bank’s largest nonperforming credit relationship, received during the year ended December 31, 2025, and due to the upgrade of a $2.0 million C&I loan to special mention in the first quarter of 2025 and subsequent payoff in the third quarter of 2025.

These reductions were partially offset by the downgrade of a $14.3 million CRE loan from pass to substandard in the third quarter of 2025.

Also impacting the decline was the downgrade of a single borrower relationship totaling $9.5 million consisting of three CRE loans totaling $7.1 million that were downgraded from pass to substandard, along with a $2.4 million CRE loan that was downgraded from special mention to substandard in the first quarter of 2025.

Refer to Note 7, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to our NPLs and OREO.

Allowance for Credit Losses

The following summarizes our allowance for credit loss experience at December 31 for each of the years presented:

The following is the allocation of the ACL balance by segment at December 31 for each of the years presented:

(Dollars in Thousands) 2025 2024 2023

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Allowance for Credit Losses to Total Portfolio Loans 1.84% 2.09% 2.77%

Net charge-offs were $16.4 million and $2.3 million for the years ended December 31, 2024 and December 31, 2023, respectively.

During 2024, net charge-offs were significantly impacted by a $15.0 million principal charge-off related to the Other segment of the loan portfolio, discussed in more detail above under “—Our Business and Strategy.” As a percentage of average portfolio loans, net charge-offs were 0.46% and 0.07% for the years ended December 31, 2024 and December 31, 2023, respectively.

The following table presents the net charge-offs by average portfolio loan segments for the years ended December 31:

(Dollars in Thousands) 2025 2024 2023

Commercial Real Estate — % — % — %

Commercial and Industrial — % — % (0.01) %

Residential Mortgages — % — % 0.01 %

Other Consumer 1.72 % 4.10 % 5.67 %

Construction — % 0.04 % 0.01 %

Other — % 5.13 % — %

Total 0.01 % 0.46 % 0.07 %

Net charge-offs were $0.5 million and $16.4 million for the years ended December 31, 2025 and December 31, 2024.

As a percentage of average portfolio loans, net charge-offs were 0.01% for the year ended December 31, 2025, compared to 0.46% for the year ended December 31, 2024.

During the year ended December 31, 2024, net loan charge-offs were significantly

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio, discussed in more detail above under “(Recovery) Provision for Credit Losses” and “The Company’s Business and Strategy.”

The following is the allocation of the ACL balance by segment as of December 31 for the years presented below:

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The ACL was $71.5 million, or 1.84%, of total portfolio loans at December 31, 2025 compared to $75.6 million, or 2.09%, of total portfolio loans at December 31, 2024.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table summarizes the credit quality ratios and their components as of December 31 for the years presented below:

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Net Charge-offs to Average Portfolio Loans 0.01 % 0.46 %

The (recovery) provision for credit losses, which includes a (recovery) provision for losses on loans and a (recovery) provision on unfunded commitments, is a charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date.

The (recovery) provision for credit losses decreased $10.5 million to a recovery of $5.0 million for the year ended December 31, 2024 when compared to the same period in 2023.

The decrease in the (recovery) provision for credit losses primarily related to updated analysis of the individually evaluated loans and $6.6 million of Other segment specific reserves released in connection with $49.9 million of curtailment payments made by the Bank’s largest nonperforming credit relationship, offset by loan growth in 2024.

The (recovery) provision for credit losses, which includes a (recovery) provision for losses on loans and a (recovery) provision on unfunded commitments, is a (recovery) or charge to earnings to maintain the ACL at a level consistent with management's assessment of expected losses in the loan portfolio at the balance sheet date.

The (recovery) for credit losses was a (recovery) of $(3.6) million for the year ended December 31, 2025 compared to a (recovery) for credit losses of $(5.0) million for the same period in 2024.

The increase compared to the same period in 2024 were primarily driven by higher loan growth in 2025, the establishment of a new reserve of $1.0 million on a CRE loan during the fourth quarter of 2025 due to an updated appraisal, a reserve of $0.6 million on an existing CRE relationship with four loans that are under contract to sell and $12.0 million lower curtailment payments during the year ended December 31, 2025 compared to the same period in 2024.

These increases were partially offset by a reduction in the Other segment reserve of $12.2 million, resulting from a lower reserve rate of 8.43% at December 31, 2025 compared to 12.01% at December 31, 2024 and from $38.0 million curtailment payments received during 2025.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The (recovery) provision for unfunded commitments decreased $0.2 million for the year ended December 31, 2025 compared to the same period in 2024.

The decrease was due to decreased commitments in construction loans in 2024.

The reserve for unfunded commitments is largely comprised of unfunded commitments related to real estate construction loans and pressure on the reserve rates.

The decline was due to decreased unfunded commitments in construction loans in 2025.

The reserve for unfunded commitments is largely comprised of unfunded commitments related to real estate construction loans.

There are three basic factors that influence the reserve rates associated with unfunded commitments for real estate construction loans.

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These reserve rates are influenced by the same factors cited in the ACL model such as economic forecasts, average portfolio life, etc.

Refer to Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to the ACL Policy and the discussion of these factors.

Refer to Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to the ACL Policy and the discussion of these factors.

Second, since the category of construction is generic, management applies a weighting of the reserve rates associated with certain CRE loans.

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Third, volume changes impact the total reserve calculation.

At December 31, 2024 nonperforming loans (“NPLs”) decreased $50.2 million at December 31, 2024 since December 31, 2023.

At December 31, 2025, NPLs decreased $15.4 million since December 31, 2024.

NPLs as a percentage of total portfolio loans were 6.29% and 7.15% as of December 31, 2025 and December 31, 2024, respectively.

Refer to Note 6, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our ACL.

Refer to Note 7, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to our ACL.

The daily average balance of deposits and rates paid on deposits are summarized in the following table for the years ended December 31:

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

(Dollars in Thousands) Average Balance Rate Average Balance Rate

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Total Average Deposits $ 4,208,731 2.29 % $ 3,921,629 2.43 %

For the year ended December 31, 2024, t otal average deposits increased $335.8 million, which included increases in average CDs of $353.9 million, or 24.8%, average interest-bearing deposits of $100.7 million, or 20.8% and average money market accounts of $63.0 million, or 14.1%, offset by decreases in average savings accounts of $145.2 million, or 26.6% and in average noninterest-bearing demand deposits of $36.6 million, or 5.4%.

The decreases in average savings and noninterest-bearing demand deposits was primarily due customers preferences shifting to higher-yielding deposit products as short-term interest rates increased.

Deposits are the Company’s primary source of funding, and management believes the deposit base remains stable with the ability to attract new customers while continuing to diversify deposit composition.

Total deposits increased at December 31, 2025, primarily due to $55.9 million of deposits assumed in connection with the Branch Purchase completed during the second quarter of 2025.

For the year ended December 31, 2025, t otal average deposits increased $287.1 million.

This increase was driven by growth in average interest-bearing demand deposits of $210.9 million, or 36.1%, average CDs of $120.2 million, or 6.7%, average money market accounts of $29.9 million, or 5.8%.

These increases were partially offset by decreases in average savings accounts of $56.4 million, or 14.1%, and average noninterest-bearing demand deposits of $17.5 million, or 2.7%.

The decline in savings accounts primarily reflected customer preferences shifting toward higher-yielding deposit products or the repositioning of funds into transactional deposit accounts.

At December 31, 2025 , noninterest-bearing deposits represented 14.7% of total deposits, compared to 15.3% at December 31, 2024 .

CDs comprised 45.2% of total deposits at December 31, 2025 , compared to 46.3% at December 31, 2024.

Based on the assumptions used in preparing regulatory call reports, approximately 81.3% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits at December 31, 2025, while approximately 18.7% were uninsured, compared to approximately 81.6% insured and 18.4% uninsured at December 31, 2024.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

The following table presents additional information about our year-end deposits:

(Dollars in Thousands) 2025 2024

Deposits from the Certificate of Deposit Account Registry Services ("CDARS") $ — $ —

Noninterest-Bearing Public Funds Deposits 33,220 55,385

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Three Months or Less $ 108,879 35.0 %

Over Three Months Through Twelve Months 127,032 42.6 %

Over Twelve Months Through Three Years 22,165 7.4 %

Over Three Years 1,431 0.5 %

Over Three Months Through Six Months 72,884 23.5 %

Over Six Months Through Twelve Months 65,384 21.0 %

Over Twelve Months 63,576 20.5 %

Total $ 310,723 100.0 %

Refer to Note 12, Deposits, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our deposits.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Refer to Note 14, Deposits, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to our deposits.

FHLB Borrowings and Federal Funds Purchased

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Federal Funds Purchased — % — % — %

Borrowings are an additional source of liquidity for the Company.

FHLB borrowings decreased $323.4 million to $70.0 million at December 31, 2024 and were $393.4 million at December 31, 2023 primarily due to deposit growth, coupled with $126.1 million of new brokered CDs during the year ended December 31, 2024.

The Company used liquidity provided by deposit growth to reduce outstanding short-term FHLB borrowings during the year ended December 31, 2024.

The Company had no overnight federal funds purchased at December 31, 2024 or at December 31, 2023.

The level and composition of borrowed funds fluctuates over time based on many factors including market conditions, loan growth, investment securities, deposit growth and capital considerations.

We manage our borrowed funds to provide a reliable source of liquidity.

The Company held FHLB of Atlanta stock of $6.5 million and $21.6 million at December 31, 2024 and December 31, 2023, respectively.

The decrease in FHLB stock was due to a lower required level of stock holdings due to a lower level of FHLB borrowings.

Dividends recorded on restricted stock were $1.0 million for the year ended December 31, 2024 compared to $1.5 million for the year ended December 31, 2023.

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.

Refer to Note 13, Federal Home Loan Bank Borrowings and Federal Funds Purchased, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our borrowings.

Borrowings represent an additional source of liquidity for the Company.

FHLB borrowings increased $108.5 million to $178.5 million at December 31, 2025, compared to $70.0 million at December 31, 2024, which were primarily utilized to fund loan growth.

The Company had no overnight federal funds purchased outstanding at December 31, 2025, or December 31, 2024.

The level and composition of borrowed funds fluctuates over time based on a variety of factors, including market conditions, loan and deposit growth, investment securities activity, and capital considerations.

Management actively monitors and manages borrowings to ensure they remain a reliable and cost effective source of liquidity.

As a member of the Federal Home Loan Bank of Atlanta, the Company is required to purchase and maintain a specified level of FHLB capital stock based on asset size, outstanding borrowings, and participation in other FHLB programs.

At December 31,

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

2025, the Company held $11.7 million of FHLB stock, compared to $6.5 million at December 31, 2024.

The increase in FHLB stock was attributable to the higher required level of stock holdings resulting from increased FHLB borrowings.

Dividends recognized on FHLB stock totaled $0.6 million for the year ended December 31, 2025, compared to $1.0 million for the year ended December 31, 2024.

The investment in FHLB stock is carried at cost and evaluated for impairment based on the ultimate recoverability of its par value.

FHLB stock is non-marketable and may be redeemed only at the discretion of the FHLB.

Members do not purchase stock for capital appreciation purposes, as FHLB can only be purchased, redeemed, or transferred at par value.

Rather, ownership of FHLB stock provides members with access to the funding, liquidity, and other financial services offered by the FHLB.

Refer to Note 15, Federal Home Loan Bank Borrowings and Federal Funds Purchased, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to our borrowings.

Capital Resources

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Carter Bank and Trust 11.49 % 11.98 %

Total capital of $384.3 million at December 31, 2024, reflects an increase of $33.1 million compared to December 31, 2023.

The increase in total capital from December 31, 2023 is primarily due to net income of $24.5 million, an increase of $6.9 million in other comprehensive income due to positive changes in fair value of investment securities, as well as an increase of $1.7 million related to restricted stock activity all during the year ended December 31, 2024.

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.

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 December 31, 2024 and December 31, 2023, 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 institution’s category.

At December 31, 2024, the Company continues to maintain its capital position with a leverage ratio of 9.56% as compared to the regulatory guideline of 5.00% to be well-capitalized and a risk-based Common Equity Tier 1 ratio of 10.88% compared to the regulatory guideline of 6.50% to be well-capitalized.

Our risk-based Tier 1 and Total Capital ratios were 10.88% and 12.13%, respectively, which places the Company 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,

Total capital increased to $419.7 million at December 31, 2025, up $35.4 million from December 31, 2024.

The increase was primarily driven by net income of $31.4 million and a $22.4 million increase in other comprehensive income related to favorable changes in the fair value of investment securities, partially offset by $20.2 million of common stock repurchases, including the related 1% excise tax, and $1.8 million of restricted stock activity.

The Company and the Bank remained well capitalized at December 31, 2025, exceeding all regulatory capital requirements.

The key capital ratios included a leverage ratio of 9.43%, a Common Equity Tier 1 ratio of 10.70%, a Tier 1 ratio of 10.70%, and a Total risk-based capital ratio of 11.95%, all well above regulatory well-capitalized thresholds.

Management believes the Company maintains a strong capital position and has the capacity to raise additional capital if needed.

Refer to Note 23, Capital Adequacy, in the Notes to Consolidated Financial Statements in Item 8.

of this Annual Report on Form 10-K for additional information related to the Company’s and the Bank’s capital.

Contractual Obligations

In the normal course of business, the Company enters into contractual obligations that represent future cash commitments under agreements with third parties.

These obligations exclude contingent contractual liabilities for which the timing or amount of future payments cannot be reasonably estimated.

The Company’s contractual obligations include arrangements that may require future cash payments, the expected timing of which is disclosed in the accompanying notes to consolidated financial statements in Item 8.

of this Annual Report on Form 10-K as of December 31, 2025 .

These obligations primarily include:

(i) operating and finance leases ( Note 9, Right-of-Use (“ROU”) Assets and Lease Liabilities);

(ii) time deposits with stated maturi ty dates (Note

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

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.

Refer to Note 21, Capital Adequacy, in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information related to our capital.

Contractual Obligations

In the normal course of business, we have entered into contractual obligations that represent future cash commitments and liabilities under agreements with third parties and exclude contingent contractual liabilities for which we cannot reasonably predict future payments.

The Company has various financial obligations, including contractual obligations and commitments that may require future cash payments.

Refer to the accompanying Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for the expected timing of such payments as of December 31, 2024 .

These include payments related to (i) operating and finance leases referenced in Note 8, Right-of-Use (“ROU”) Assets and Lease Liabilities, (ii) time deposits with stated maturi ty dates in Note 12 – De posits, (iii) Federal Home Loan Borrowings in Note 13, Federal Home Loan Bank Borrowings and Federal Funds Purchased , and (iv) commitments to extend credit, standby letters of credit and purchase obligations in Note 18, Commitments and Contingencies in Item 8 of this Annual Report on Form 10-K.

Purchase obligations primarily represent obligations under agreement with our third-party data processing provider.

14 – De posits);

(iii) Federal Home Loan Bank Borrowings and Federal Funds Purchased ( Note 15);

and (iv) commitments to extend credit, standby letters of credit, and purchase obligations (Note 20, Commitments and Contingencies).

Purchase obligations primarily consist of commitments under agreements with the Company’s third-party data processing provider.

Off-Balance Sheet Arrangements

In the normal course of business, the Company offers our customers lines of credit and letters of credit to meet their financing objectives.

The undrawn or unfunded portion of these facilities do not represent outstanding balances and therefore are not reflected in our financial statements as loans receivable.

The Company provides lines of credit to our clients to memorialize the commitment to finance the completion of construction projects and revolving lines of credit to operating companies to finance their working capital needs.

Lines of credit for construction projects represent $445.3 million, or 53.4% and $452.2 million, or 64.4% of the commitments to extend credit identified in the table below at December 31, 2024 and December 31, 2023, respectively.

The Company provides letters of credit, generally, for the benefit of our customers to provide assurance to various municipalities that construction projects will be completed according to approved plans and specifications.

These instruments involve elements of credit and interest rate risk and our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, could be equal to the contractual amount of the obligation less the value of any collateral.

The Company analyzes this risk and calculates a reserve for unfunded commitments.

The same credit policies are applied in granting these facilities as those used for underwriting loans.

Lines of credit to finance construction projects include a construction end date, at which time the loan is expected to convert to a mini-perm loan.

A department independent of our lending group monitors construction commitments of $1.0 million or greater and/or based on management’s discretion.

Lines of credit to operating companies to finance working capital include a maturity date and may include various financial covenants.

Letters of credit include an expiration date unless it is a standby letter of credit which automatically renews but generally provide for a termination clause on an annual basis given sufficient notice to the beneficiary.

The Company typically charges an annual fee for the issuance of letters of credit.

Because letters of credit are expected to expire without being drawn upon, these commitments do not necessarily represent future cash requirements of the Company.

In the normal course of business, the Company provides customers with lines of credit and letters of credit to meet financing needs.

The undrawn and unfunded portions of these facilities do not represent outstanding balances and, accordingly are not reflected as loans receivable in the consolidated financial statements.

Lines of credit are primarily used to support construction financing commitments and revolving working capital needs of operating companies.

At December 31, 2025 and December 31, 2024 construction-related lines of credit totaled $452.8 million, or 58.7% and $445.3 million, or 53.4%, respectively, of total commitments to extend credit.

Construction lines of credit generally include a defined construction end date, at which time the loan is expected to convert to a mini-perm loan.

A department independent of the lending function monitors construction commitments of $1.0 million or greater, based on management’s discretion.

Lines of credit to operating companies typically include stated maturity dates and may be subject to financial covenants.

The Company issues letters of credit primarily to assure municipalities that construction projects will be completed in accordance with approved plans and specifications.

Letters of credit generally include expiration dates, while standby letters of credit automatically renew but typically include annual termination provisions with proper notice.

The Company generally charges an annual fee for issuing letters of credit.

These off-balance sheet arrangements expose the Company to credit risk if counterparties fail to meet their contractual obligations, with potential losses generally limited to the contractual amount less any collateral.

The Company evaluates this risk using the same credit policies applied to loan underwriting and maintains a reserve for unfunded commitments.

Because letters of credit are expected to expire without being drawn, they do not necessarily represent future cash requirements.

Due to the short-term nature of these arrangements and the credit quality of counterparties, the Company has not estimated the fair value of these off-balance sheet commitments.

The following table sets forth the commitments and letters of credit as of December 31:

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Total $ 788,184 $ 850,251

Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

For more details, see Note 18, Commitments and Contingencies, in Item 8 of this Annual Report on Form 10-K.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

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 borrowers needing to access funds to meet their credit needs.

In order to manage liquidity risk the Company’s Board has delegated authority to 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 closely monitors and manages liquidity by reviewing cash flow projections, performing balance sheet stress tests and by maintaining a detailed contingency funding plan that includes specific liquidity measures that are reviewed by the ALCO monthly.

Our liquidity policy and contingency funding plan provide graduated risk tolerance levels for multiple liquidity measures and potential liquidity environments.

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.

The Company’s 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 potential 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 25.0% of the Company’s assets or approximating $1.2 billion, subject to the amount of eligible collateral pledged, of which the Company is eligible to borrow up to an additional $735.3 million.

The Company has unsecured facilities with three other correspondent financial institutions totaling $30.0 million, a fully secured facility with one other correspondent financial institution totaling $45.0 million, and access to the institutional CD market, and the brokered deposit market.

The Company did not have outstanding borrowings on these fed funds lines as of December 31, 2024.

In addition to the above funding resources, the Company also has $418.3 million of unpledged available-for-sale investment securities, at fair value, as an additional source of liquidity.

Please refer to the Liquidity Sources table below for available funding with the FHLB and our secured and unsecured lines of credit with correspondent banks.

As of December 31, 2024, approximately 81.6% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits, and approximately 18.4% of our total deposits were uninsured deposits over the standard FDIC insurance coverage limit.

The Company closely monitors changes in the industry and market conditions that may impact the Company’s liquidity and will use other borrowing means or other liquidity and funding strategies sources to fund its liquidity needs as needed.

The Company is also closely tracking the potential impacts on the Company’s liquidity of declines in the fair value of the Company’s securities portfolio due to developments in the banking industry that may change the availability of traditional sources of liquidity or market expectations with respect to available sources and amounts of additional liquidity.

An important component of our ability to effectively respond to potential liquidity stress events is maintaining a cushion of highly liquid assets or assets 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 December 31, 2024, the Bank had $509.9 million in highly liquid assets, which consisted of Federal Reserve Board Excess Reserves and interest-bearing deposits in other financial institutions of $91.6 million and $418.3 million in unpledged securities.

This resulted in highly liquid assets to total assets ratio of 10.9% at December 31, 2024.

Total available liquidity to uninsured deposits was 182.6% at December 31, 2024.

If an extended recession, or significant industry or market volatility, caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.

For more details, see Note 20, Commitments and Contingencies, in Item 8.

of this Annual Report on Form 10-K.

Liquidity refers to the Company’s ability to meet cash and collateral obligations in a timely manner and at a reasonable cost, including funding deposit withdrawals and borrower credit demands.

The Company’s Board of Directors has delegated oversight of liquidity risk management to ALCO, which is responsible for maintaining sufficient liquidity at a reasonable cost under both normal operating conditions and potential stress scenarios.

ALCO monitors and manages liquidity risk by reviewing cash flow projections, performing balance sheet stress testing, and maintaining a comprehensive contingency funding plan.

This plan includes defined liquidity metrics and graduated risk tolerance levels, which are reviewed monthly.

If liquidity levels reach thresholds defined as high risk, enhanced monitoring and the implementation of specific predefined action plans to reduce risk are required.

The Company’s primary source of liquidity is its stable customer deposit base.

Management believes it can retain existing deposits and attract new deposits, limiting reliance on more volatile funding sources.

In addition to deposits, the Company maintains access to multiple supplemental funding sources as part of its normal liquidity management strategy.

These include

CARTER BANKSHARES, INC.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

borrowing capacity with the FHLB of up to approximately 30% of the Company’s total assets, or $1.5 billion, subject to eligible collateral, of which $609.4 million remained available at December 31, 2025.

The Company also maintains unsecured borrowing facilities with three correspondent banks totaling $30.0 million and a fully secured facility with one other correspondent bank totaling $45.0 million.

There were no outstanding borrowings under these facilities at December 31, 2025.

The Company also had access to the institutional CD and brokered deposit markets.

Additional liquidity can be provided by $402.2 million of unpledged available-for-sale investment securities at fair value at December 31, 2025.

Refer to the Liquidity Sources table below for further detail regarding FHLB borrowing capacity and correspondent bank lines of credit.

As of December 31, 2025, approximately 81.3% of total deposits were insured under standard FDIC coverage limits, while 18.7% were uninsured.

Management actively monitors industry and market conditions that could affect liquidity and evaluates alternative funding strategies as needed.

In addition, the Company closely monitors the potential impacts of interest rate movements and market conditions on the fair value of its securities portfolio, particularly in light of evolving banking industry dynamics that may influence liquidity availability or market expectations.

Maintaining a cushion of highly liquid assets or assets that can be converted to cash quickly, with little or no loss in value, is a key component of the Company’s liquidity risk management framework.

ALCO policy establishes graduated risk tolerance levels for the ratio of highly liquid assets to total assets.

At December 31, 2025, the Bank had $470.7 million of highly liquid assets, consisting of $68.2 million in excess reserves at the Federal Reserve and interest-bearing deposits at other financial institutions, $0.3 million of loans held-for-sale, and $402.2 million of unpledged securities.

This resulted in highly liquid assets to total assets ratio of 9.7%.

Total available liquidity relative to uninsured deposits was 155.7% at December 31, 2025.

While management believes current liquidity sources are sufficient, an extended economic downturn or significant market disruption could increase reliance on more volatile or higher cost funding sources.

The following table provides detail of liquidity sources as of December 31:

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Highly Liquid Assets 1 to Total Assets

10.9 % 12.8 %

Highly Liquid Assets 1 to Uninsured Deposits

1 unchanged sentence

Total Available Liquidity to Uninsured Deposits 155.7 % 182.6 %

1 Highly liquid assets consist of $91.6 million in Federal Reserve Board excess reserves and interest-bearing deposits in other financial institutions and $418.3 million in unpledged securities.

Management is aware of the significant effect inflation has on interest rates and can have on financial performance.

The Company’s ability to cope with this is best determined by analyzing its capability to respond to changing interest rates and its ability to manage noninterest income and expense.

The mix of interest-rate sensitive assets and liabilities is monitored through ALCO in order to reduce the impact of inflation on net interest income.

The effects of inflation are controlled by reviewing the prices of our products and services, by introducing new products and services and by controlling overhead expenses.

Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature.

As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation.

1 Highly liquid assets consist of $68.2 million in Federal Reserve Board excess reserves and interest-bearing deposits in other financial institutions, loans held for sale of $0.3 million and $402.2 million in unpledged securities.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)

Management recognizes that inflation can have a significant impact on interest rates and overall financial performance.

The Company’s financial strength is measured by its ability to adapt to changes in interest rates and to effectively manage noninterest income and expense.

Through its ALCO, the Company actively monitors the mix of interest-rate sensitive assets and liabilities to mitigate the effects of inflation-driven rate changes on net interest income.

The Company manages inflationary pressures by adjusting product and service pricing, introducing new products and services and controlling overhead costs.

Unlike most industrial companies, financial institutions primarily hold monetary assets and liabilities;

therefore, interest rate movement, rather that general inflation levels, are the more significant driver of financial performance.

Stock Repurchase Plan

The Company repurchased 1,132,232 shares of its common stock at a total cost of $16.4 million, or an average price of $14.50 per share during the year ended December 31, 2023.

On March 29, 2023, the Company's Board of Directors authorized a new share repurchase program (the “2023 Program”) which took effect starting May 1, 2023, after the expiration of the previous repurchase program (the “2022 Program”), which was originally authorized through August 1, 2023, but was fully exhausted as of March 10, 2023.

The Board of Directors authorized the repurchase of 1,000,000 shares of common stock under the 2023 Program and on August 31, 2023 reached the maximum number of shares that could be purchased under the 2023 Program.

The Company’s Board of Directors has not authorized a new repurchase program as of December 31, 2024.

On May 20, 2025, the Company announced that its Board authorized a repurchase program to purchase up to $20.0 million of the Company’s common stock in the aggregate through May 14, 2026.

The program authorized 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 Securities Exchange Act of 1934, as amended.

During the year ended December 31, 2025, the Company repurchased 1,124,690 shares of its common stock at a total cost of $20.0 million at a weighted average cost per share of $17.78.

The 2025 Program was fully utilized on October 30, 2025.

On February 2, 2026, the Company announced that the Board authorized a repurchase program to purchase up to $10.0 million of the Company’s common stock in the aggregate over a period of twelve months beginning February 11, 2026, the date of receipt of non-objection from the Federal Reserve Bank of Richmond.

The 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 Securities Exchange Act of 1934, as amended.

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 program, and the number of shares actually purchased under the 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 repurchase program may be modified or terminated by the Board at any time.

The repurchase program does not obligate the Company to purchase any particular number of shares.

CARTER BANKSHARES, INC.

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What changed 10-K

Item 7. Management’s Discussion and Analysis