What changed in this filing

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Item 1. Financial Statements

2026-05-07 compared with 2025-11-03 · 822 added, 1026 removed, 1095 unchanged (63% of the section changed)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - (continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in Thousands) 2026 2025

1 unchanged sentence

Cash Interest Paid $ 23,927 $ 27,354

Cash Paid for Income Taxes 3,140 457

Transfer from Loans to Other Real Estate Owned — 1,181

Loans Financed to Purchase Other Real Estate Owned 525 —

Transfer from Fixed Assets to Other Real Estate Owned 1,829 —

Right-of-use Asset Recorded in Exchange for Lease Liabilities 1,041 2,511

Stock Repurchase Excise Tax Settled in Subsequent Period ( 122 ) —

Stock Repurchases Settled in Subsequent Period ( 371 ) —

Transfer from Portfolio Loans to Other Real Estate Owned, net 2,937 —

Transfer from Bank Premises and Equipment, net to Other Real Estate Owned, net 933 —

Portfolio Loans Transferred to Held-for-Sale 209,484 —

See accompanying notes to unaudited Consolidated Financial Statements.

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Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”), on March 5, 2026.

In management’s opinion, the accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position and the results of operations for each of the interim periods presented.

In management’s opinion, the accompanying interim financial information reflects all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s financial position and the results of operations for each of the interim periods presented.

Results of operations for interim periods are not necessarily indicative to the results of operations that may be expected for a full year or any future period.

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These estimates and assumptions affect the amounts reported in the Consolidated Financial Statements and the disclosures provided, and actual results could differ from those estimates.

Information available which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy, and changes in the financial condition of borrowers.

Information available which could affect these judgments include, but are not limited to, changes in interest rates, economic conditions, and the financial condition and performance of borrowers and counterparties.

Accounting Standard Adopted in 2026

On March 29, 2024 the Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update, (“ASU”) 2024-02, Codification Improvements— Amendments to Remove References to the Concepts Statements, which amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

The adoption of this ASU 2024-02 was effective January 1, 2025 and did not have a material impact to the Company’s Consolidated Financial Statements.

Accounting Standards Issued but Not Yet Adopted

ASU 2023-09 – Income Taxes — (Topic 740) Improvements to Income Tax Disclosures

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which enhances the required disclosures primarily related to the income tax rate reconciliation and income taxes paid.

The ASU requires an entity’s income tax rate reconciliation to provide additional information for reconciling items meeting a quantitative threshold, and to disclose certain selected categories within the income tax rate reconciliation.

The ASU also requires entities to disclose the amount of income taxes paid, disaggregated by federal, state and foreign taxes.

The ASU is effective in the annual period beginning on January 1, 2025, though early adoption is permitted.

The Company is currently evaluating the impact of this guidance on its Consolidated Financial Statements.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

ASU 2024-04 – Debt — Debt with Conversion and Other Options (Subtopic 470-20) Induced Conversions of Convertible Debt Instruments

Accounting Standards Update 2024-04 “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” (“ASU 2024-04”) clarifies wither the settlement of convertible debt, including debt containing cash conversion features at terms that are different from the terms included in the existing debt instrument, should be accounted for as an induced conversion or a debt extinguishment.

Updates permit an entity to apply the new guidance on either a prospective or a retrospective basis.

ASU 2024-04 is effective for public business entities January 1, 2026 and is not expected to have a significant impact on the Company’s financial statements.

Accounting Standards Update 2024-04 “Debt - Debt with Conversion and Other Options (Subtopic 470-20)” (“ASU 2024-04”) clarifies whether the settlement of convertible debt, including debt containing cash conversion features at terms that are different from the terms included in the existing debt instrument, should be accounted for as an induced conversion or a debt extinguishment.

Updates permitted an entity to apply the new guidance on either a prospective or a retrospective basis.

ASU 2024-04 was effective for public business entities beginning on January 1, 2026 and did not have a significant impact on the Company’s financial statements.

Accounting Standards Issued but Not Yet Adopted

ASU 2025-01 & 2024-03 – Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)

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This information is generally not presented in the financial statements today.

In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” The amendment in this Update amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

In January 2025, the FASB issued ASU 2025-01, “Income Statement — Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40).” ASU 2025-01 amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The adoption of this pronouncement is not expected to have a material impact on the Consolidated Financial Statements, but is expected to result in additional disclosures and potential changes to the line items on the Consolidated Statement of Income.

On May 23, 2025, Carter Bankshares, Inc.

the holding company for Carter Bank (“the Bank”) completed the acquisition of two leased branch facilities and the deposits associated therewith, located in Mooresville, North Carolina and Winston-Salem, North Carolina from First Reliance Bankshares, Inc., the holding company for First Reliance Bank (the “Branch Purchase”).

The Branch Purchase included approximately $ 57 thousand in premises and equipment, $ 517 thousand in cash and other assets, as well as approximately $ 55.9 million in deposits.

The Branch Purchase did not include any loans.

This expansion is part of our strategy to expand our footprint in growth markets throughout North Carolina.

The following table summarizes the estimated fair value of the assets acquired, liabilities assumed and consideration transferred in connection with the acquisition:

(Dollars in Thousands) September 30, 2025

Total Cash Received From Seller $ 53,077

Fair Value of Total Cash Received From Seller $ 53,077

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

Cash and Cash Equivalents $ 496

Premises and Equipment 57

Core Deposit Intangible 1,101

Accrued Interest Receivable and Other Assets 21

Total Assets Acquired 1,675

Deposits 55,945

Total Liabilities Assumed 55,945

Net Identifiable Assets / (Liabilities) ( 54,270 )

Goodwill Recognized 1,193

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Acquired Deposits

The fair values of core deposits, such as noninterest and interest-bearing transaction accounts, savings and money market accounts approximated their carrying value at the acquisition date.

For certificates of deposit, the fair values were estimated based on discounted cash flows, using interest rates that were being offered at the time of acquisition compared to the contractual interest rates.

Core Deposit Intangible

The Company believes that the customer relationships with the deposits acquired have an intangible value.

In connection with the acquisition, the Company recorded a core deposit intangible asset of $ 1.1 million, with a carrying value of $ 1.0 million as of September 30, 2025.

The core deposit intangible asset represents the value that the Bank’s core deposits had with their deposit customers.

The fair value was estimated based on a discounted cash flow methodology based on assumptions that considered the type of deposit, deposit retention and the cost of the deposit base.

The core deposit intangible is being amortized over ten years on an accelerated basis.

Goodwill is the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed and is the result of the expected operation synergies and other factors.

Goodwill of $ 1.2 million has been recorded.

The Bank will monitor valuation inputs for up to one year after the acquisition date according to GAAP.

Adjustments will be made to provisional amounts if new information becomes available about facts and circumstances that existed as of the acquisition date.

Merger Related Costs

During the nine months ended September 30, 2025, the Company incurred $ 419 thousand of merger-related costs in connection with the Branch Purchase, primarily for professional fees.

These expenses are recorded in professional and legal fees on the Consolidated Statements of Income.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

ASU 2025-08 – Financial Instruments — Credit Losses (Topic 326):

Purchased Loans

In December 2026, the FASB issued ASU 2025-08, “Financial Instruments—Credit Losses (Topic 326),” Purchased Loans which expands the population of acquired financial assets subject to the gross-up approach for accounting for credit losses.

The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.

Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance.

The Company does not expect these amendments to have a material effect on its financial statements.

The accounting for future business combinations, if any, would be impacted.

The Company completed an acquisition of two leased branch facilities and related deposits on May 23, 2025.

See Note 2 – Business Combinations in the Company’s 2025 Form 10-K for additional information.

There have been no material changes to the preliminary purchase accounting as of March 31, 2026.

NOTE 2 – EARNINGS PER COMMON SHARE

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The following table reconciles the numerators and denominators of basic and diluted earnings per common share calculations for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in Thousands, except share and per share data) 2026 2025

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Net Income Allocated to Common Shareholders - Basic & Diluted $ 84,688 $ 8,860

Weighted Average Shares Outstanding, including Shares Considered Participating Securities 22,574,579 23,072,376 22,916,907 23,043,705

Average Participating Securities 280,351 239,757 260,976 233,591

Weighted Average Shares Outstanding, including Shares Considered Participating Shares 22,122,783 23,114,817

Average Participating Shares 275,841 241,017

Weighted Average Common Shares Outstanding - Basic & Diluted 21,846,942 22,873,800

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The following tables present the amortized cost and fair value of available-for-sale securities at the dates presented:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Amortized

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Total $ 745,366 $ 445 $ ( 54,199 ) $ 691,612

The Company did no t have securities classified as held-to-maturity at September 30, 2025 or December 31, 2024.

The Company did no t have securities classified as held-to-maturity at March 31, 2026 or December 31, 2025.

The following table shows the composition of gross and net realized gains and losses for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in Thousands) 2026 2025

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Tax Impact $ 18 $ —

For the three and nine months ended September 30, 2025, the Company had no gross or net realized gains and losses.

Gains or losses are recognized in earnings on the trade date using the amortized cost of the specific security sold.

The net realized gains reflect reclassification adjustments in the calculation of Other Comprehensive Income.

The net realized gains are included in noninterest income as gains on sales of securities, net in the Consolidated Statements of Income.

The tax impact is included in income tax provision in the Consolidated Statements of Income.

Gains or losses on the sale of securities are recognized in earnings on the trade date based on the amortized cost of the specific security sold.

The related net gains or losses reflect reclassification adjustments included in the calculation of Other Comprehensive (Loss) Income.

Net realized gains are reported in noninterest income as gains on sales of securities, net, in the Consolidated Statements of Income, with the related tax impact included in income tax provision in the Consolidated Statements of Income.

CARTER BANKSHARES, INC.

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Securities not due at a single maturity date are shown separately.

September 30, 2025

March 31, 2026

(Dollars in Thousands) Amortized

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Total $ 716,862 $ 662,127

At September 30, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than those securities issued by or collateralized by the U.S.

Government and its Agencies, in an amount greater than 10% of shareholders’ equity.

The carrying value of securities pledged for various regulatory and legal requirements was $ 311.8 million at September 30, 2025 and $ 300.1 million at December 31, 2024.

Available-for-sale securities with unrealized losses at September 30, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

September 30, 2025

At March 31, 2026 and December 31, 2025, the Company held no securities of any single issuer, other than securities issued by or collateralized by the U.S.

Government and its Agencies, in amounts exceeding 10% of shareholders’ equity.

The carrying value of securities pledged to meet various regulatory and legal requirements was $ 254.4 million at March 31, 2026 and $ 289.4 million at December 31, 2025.

Available-for-sale securities with unrealized losses at March 31, 2026 and December 31, 2025, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, were as follows:

March 31, 2026

Less Than 12 Months 12 Months or More Total

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Total Debt Securities 32 $ 31,272 $ ( 731 ) 357 $ 583,812 $ ( 53,468 ) 389 $ 615,084 $ ( 54,199 )

The Company did no t record an allowance for credit losses, (“ACL”), on its investment securities during the three or nine months ended September 30, 2025 or the year ended December 31, 2024 as the Company did no t have any related impairment.

The Company regularly reviews debt securities for expected credit loss using both qualitative and quantitative criteria, as necessary, based on the composition of the portfolio at period end.

As of September 30, 2025, management does not intend to sell any security in an unrealized loss position and it is not more than likely that it will be required to sell any such security before the recovery of its amortized cost basis.

The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations, general financial market uncertainty and market volatility.

These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities.

The fair value is expected to recover as the securities approach their maturity date or repricing date.

It should be noted that we may occasionally sell securities to take advantage of market opportunities or as part of a strategic initiative.

The Company determined the unrealized losses detailed in the table above are not related to credit;

therefore, no ACL has been recognized on the Company’s investment securities.

Should the impairment of any of these securities become credit related, the impairment will be recognized by establishing an ACL through provision (recovery) 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.

During the three and nine months ended September 30, 2025 and September 30, 2024, the Company had no credit related net investment impairment losses.

The Company did no t record an allowance for credit losses (“ACL”), on its investment securities as of March 31, 2026 or December 31, 2025 as no credit related impairment was identified.

The Company regularly evaluates debt securities for expected credit losses using qualitative and quantitative factors, as appropriate, based on the composition of the portfolio at each reporting date.

As of March 31, 2026, management does not intend to sell any security in an unrealized loss position and it is not more than likely that the Company will be required to sell such securities before recovery of the amortized cost basis.

Unrealized losses on debt securities were primarily attributable to changes in interest rates, credit spread fluctuations, general financial market uncertainty, and market volatility, rather than deterioration in credit quality.

These conditions are not expected to affect the Company’s ability to collect contractual principal and interest, and the fair value of the securities is expected to recover as the securities approach maturity or repricing dates.

While the Company may periodically sell securities to take advantage of market opportunities or as part of strategic initiatives, management concluded that the unrealized losses presented in the table above were not credit related and, accordingly, no ACL was recorded on investment securities.

If any impairment were to become credit related, the Company would recognize an ACL through a recovery for credit losses in the period identified, with any non-credit related impairment recognized in accumulated other comprehensive loss, net of applicable taxes.

During the three months ended March 31, 2026 and March 31, 2025, the Company had no credit related net investment impairment losses.

Equity Securities

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

These securities are separately reported as “equity securities” on the Company’s Consolidated Balance Sheets.

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-income 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 Community Reinvestment Act.

During the three and nine months ended September 30, 2025, the Company recognized an unrealized fair value gain of $ 69 thousand and $ 228 thousand on these equity securities.

During the three and nine months ended September 30, 2024 the Company purchased $ 5.0 million of equity securities with a carrying value totaling $ 5.2 million and recognized an unrealized

During 2024, the Company purchased $ 10.0 million of equity securities, which are reported separately as “equity securities” on the Consolidated Balance Sheets.

These securities consist of an investment in a market-rate, NASDAQ listed mutual fund that invests primarily in high quality fixed income securities, principally government agency obligations, with proceeds intended to support community development initiatives throughout the United States.

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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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

fair value gain of $ 181.5 thousand and $ 207.1 thousand, respectively, on these equity securities.

This unrealized fair value gain is recorded in other noninterest income on the Consolidated Statements of Income.

During the three months ended March 31, 2026, the Company recognized an unrealized fair value loss of $ 45 thousand on these equity securities.

During the three months ended March 31, 2025 the Company recognized an unrealized fair value gain of $ 137 thousand on these equity securities.

Unrealized (losses) gains on equity securities are recorded in Other Noninterest Income in the Consolidated Statements of Income.

NOTE 4 – LOANS AND LOANS HELD-FOR-SALE

During the three months ended March 31, 2026, the Company completed the sale (the “Transaction”) of all loans, subsequently reduced to judgments, related to various entities in which James C.

Justice II has an interest (such loans, subsequently reduced to judgments, the “Judgments”).

The Transaction was completed as an absolute, “as-is, where-is” sale to an unaffiliated third party.

The Transaction resulted in changes to total portfolio loans and the allowance for credit losses, due to a release of specific reserves of $ 18.0 million related to the Judgments, as well as a $ 15.0 million net recovery associated with the Judgments, in each case related to the Transaction.

The composition of the loan portfolio by dollar amount is shown in the table below at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Commercial Real Estate $ 2,127,928 $ 2,114,314

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Total Loans $ 3,728,802 $ 3,879,899

Loan Restructurings

The following table shows the amortized cost basis as of September 30, 2025 and September 30, 2024 for the loans restructured during the three and nine months ended September 30, 2025 and September 30, 2024 to borrowers experiencing financial difficulty, disaggregated by portfolio segment.

The Company had no restructured loans to borrowers experiencing financial difficulty during the three months ended September 30, 2025:

Restructured Loans

Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025

(Dollars in Thousands) Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable

Accruing Restructured Loans

Commercial Real Estate — $ — — % — $ — — %

Commercial and Industrial — — — % — — — %

Residential Mortgages — — — % — — — %

Other Consumer — — — % — — — %

Construction — — — % 1 5,121 1.10 %

Other — — — % — — — %

Total Accruing Restructured Loans — $ — — % 1 $ 5,121 0.13 %

Nonaccrual Restructured Loans

Commercial Real Estate — $ — — % — $ — — %

Commercial and Industrial — — — % 2 966 0.44 %

Residential Mortgages — — — % — — — %

Other Consumer — — — % — — — %

Construction — — — % — — — %

Other — — — % 9 228,554 98.64 %

Total Nonaccrual Restructured Loans — $ — — % 11 $ 229,520 5.98 %

Total Restructured Loans — $ — — % 12 $ 234,641 6.12 %

The Company attempts to limit exposure to credit risk by diversifying the loan portfolio by segment, geography, collateral and industry, while actively monitoring and managing concentrations.

When concentrations exist in certain loan segments, management seeks to mitigate this risk through ongoing review of relevant economic indicators, portfolio performance metrics, and internal risk rating trends specific to those segments.

The Company has established transaction level, relationship level, and loan segment concentration limits within its loan policy.

Commercial real estate loans are subject to a limit of 300 % of total risk-based capital, with additional monitoring applied if growth exceeds 50 % over the prior 36 -month period.

Construction loan balances are limited to 100 % of total risk-based capital.

In addition, individual investment real estate property types and purchase loan programs are subject to specific dollar limits based on management’s risk tolerance relative to capital levels.

The loan policy also establishes targets for key underwriting criteria, including debt service coverage ratios, loan-to-value ratios, loan terms, amortization periods, and loan-to-cost limits for construction projects.

While leverage is an important consideration, management places significant emphasis on cash flow generation and uses borrower stress testing to determine supportable loan amounts.

Unsecured loans present a higher level of risk due to the absence of a defined secondary source of repayment.

Accordingly, commercial unsecured lending is generally limited to high quality borrowers with well-established businesses, strong cash flow, and low financial and operating leverage.

Repayment capacity for unsecured borrowers is expected to exceed policy guidelines applicable to secured loans.

In addition, the Company strengthened underwriting standards for consumer unsecured lending by increasing minimum qualifying Fair Isaac Corporation (“FICO”) score requirements and reducing approved loan amounts for borrowers with lower credit scores, which contributed to a significant reduction in loss rate.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Deferred loan costs, net of fees, included in loan portfolio balances totaled $ 16.4 million at March 31, 2026 and $ 14.5 million at December 31, 2025.

Discounts on purchased 1-4 family loans included in portfolio balances totaled $ 68.1 thousand and $ 73.2 thousand at March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026, the Company had $ 341 thousand in loans held-for-sale and $ 339 thousand as of December 31, 2025.

Loan Restructurings

A loan that is considered a restructured loan may be subject to the individually evaluated loan (“IEL”) analysis if the commitment is $ 1.0 million or greater and/or based on management’s discretion;

otherwise, the restructured loan remains in the appropriate segment in the ACL model.

For a discussion with respect to reserve calculations regarding IELs refer to the “Nonrecurring Basis” section in Note 6 - Fair Value Measurements, in the Notes to Consolidated Financial Statements in Item 1.

of this Quarterly Report on Form 10-Q.

The following table shows the amortized cost basis as of March 31, 2026 and March 31, 2025 for the loans restructured during the three months ended March 31, 2026 and March 31, 2025 to borrowers experiencing financial difficulty, disaggregated by portfolio segment:

Restructured Loans

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Three Months Ended March 31, 2026 Three Months Ended March 31, 2025

(Dollars in Thousands) Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable Number of Contracts Amortized Cost Basis % of Total Class of Financing Receivable

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The Bank closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table shows the performance of loans that were modified during the nine months ended September 30, 2025 and 2024:

As of September 30, 2025 As of September 30, 2024

The following table shows the performance of loans that were modified during the three months ended March 31, 2026 and March 31, 2025:

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

As of March 31, 2026 As of March 31, 2025

Payment Status (Amortized Cost Basis)

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Total Restructured Loans $ 18,561 $ — $ — $ 18,561 $ 159,705 $ — $ — $ 159,705

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents the amortized cost of modified loans to borrowers experiencing financial difficulty by portfolio segment and type of modification during the periods presented.

The Company had no restructured loans to borrowers experiencing financial difficulty during the three months ended September 30, 2025.

Nine Months Ended September 30, 2025

(Dollars in Thousands) Payment Delay Short-term Extension / Modified Rate Total % of Total Class of Financing Receivable

Commercial Real Estate $ — $ — $ — — %

Commercial and Industrial — 966 966 0.44 %

Residential Mortgages — — — — %

Other Consumer — — — — %

Construction 5,121 — 5,121 1.10 %

Other — 228,554 228,554 98.64 %

Total $ 5,121 $ 229,520 $ 234,641 6.12 %

Three Months Ended September 30, 2024

(Dollars in Thousands) Principal Deferral Accelerated Maturity Date/Modified Rate Total % of Total Class of Financing Receivable

Commercial Real Estate $ — $ — $ — — %

The following tables present the amortized cost of modified loans to borrowers experiencing financial difficulty by portfolio segment and type of modification during the periods presented.

Three Months Ended March 31, 2026

(Dollars in Thousands) Payment Delay Short-term Extension Total % of Total Class of Financing Receivable

Commercial and Industrial $ 336 $ 985 $ 1,321 0.54 %

Residential Mortgages — 2,106 2,106 0.27 %

Other Consumer — — — — %

Construction — 17,240 17,240 3.36 %

Other — — — — %

Total $ 336 $ 18,225 $ 18,561 0.50 %

Nine Months Ended September 30, 2024

(Dollars in Thousands) Principal Deferral Accelerated Maturity Date/Modified Rate Term Extension/Payment Delay Term Extension/Payment Delay/Interest Rate Reduction Total % of Total Class of Financing Receivable

Three Months Ended March 31, 2025

(Dollars in Thousands) Payment Delay Short-term Extension Total % of Total Class of Financing Receivable

Commercial Real Estate $ 4,516 $ — $ 4,516 0.24 %

Commercial and Industrial 13,604 — — — 13,604 5.63 %

Residential Mortgages — 2,106 — — 2,106 0.27 %

Other Consumer — — — — — — %

Construction — — — — — — %

Other — 155,189 155,189 62.51 %

Total $ 4,516 $ 155,189 $ 159,705 4.33 %

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table describes the effect of loan modifications made to borrowers experiencing financial difficulty during the periods presented:

Nine Months Ended September 30, 2025

Weighted-Average Payment Delay Weighted-Average Modified Rate Weighted-Average Short-term Extension Weighted-Average Interest Rate Reduction

Commercial and Industrial — 2.29 % 0.59 years — %

Residential Mortgages — — % — — %

Other Consumer — — % — — %

The following tables describe the effect of loan modifications made to borrowers experiencing financial difficulty during the periods presented:

Three Months Ended March 31, 2026

Weighted-Average Payment Delay Short-term Extension

Commercial and Industrial 0.25 years 0.41 years

Construction 0 0.33 years

Other — — % 0.86 years 0.04 %

Three Months Ended September 30, 2024

Weighted-Average Principal Deferral Weighted-Average Accelerated Maturity Date Weighted-Average Modified Rate

Commercial Real Estate — — — %

Commercial and Industrial 0.58 years — — %

Residential Mortgages — 19.26 years 4.63 %

Other Consumer — — — %

Construction — — — %

Other — — — %

Nine Months Ended September 30, 2024

Weighted-Average Principal Deferral Weighted-Average Accelerated Maturity Date Weighted-Average Modified Rate Weighted-Average Term Extension/Payment Delay Weighted-Average Interest Rate Reduction

Three Months Ended March 31, 2025

Weighted-Average Payment Delay Weighted-Average Term Extension/Payment Delay

Commercial Real Estate 0.32 years —

Commercial and Industrial 0.58 years — — % — — %

Residential Mortgages — 19.26 years 4.63 % — — %

Other — 0.92 years

Commitments to lend additional funds on one restructured loan as of September 30, 2025 totaled $ 4.1 million.

As of December 31, 2024, the Bank had no commitments to lend any additional funds on restructured loans.

As of September 30, 2025 and September 30, 2024 the Bank had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

For purposes of this disclosure, a default occurs when, within 12 months of the original modification, either a full or partial charge-off occurs or the loan becomes 90 days or more past due.

As of September 30, 2025 and December 31, 2024, the Company had $ 2.0 million and $ 0.4 million, respectively, of residential real estate in the process of foreclosure.

We had no residential real estate included in other real estate owned (“OREO”) at September 30, 2025 or at December 31, 2024, respectively.

NOTE 5 - ALLOWANCE FOR CREDIT LOSSES

The Company maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Company’s financial instruments over the life of those instruments as of the balance sheet date.

The Company develops and documents a systematic ACL methodology based on the following portfolio segments:

1) Commercial Real Estate (“CRE”), 2) Commercial and Industrial, (“C&I”), 3) Residential Mortgages, 4) Other Consumer, 5) Construction and 6) Other.

The Company’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles.

The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL.

CRE loans are secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments.

Operations of the individual projects as well as global cash

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

flows of the debtors are the primary sources of repayment for these loans.

The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type as well as the business.

C&I loans are made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing.

Cash flow from the operations of the borrower is the primary source of repayment for these loans.

The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the borrower.

Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.

These loans are also made to local and state municipalities for various purposes including refinancing existing obligations, infrastructure up-fit and expansion, or to purchase new equipment.

These loans may be secured by general obligations from the municipal authority or revenues generated by infrastructure and equipment financed by the Company.

The primary repayment sources for these loans include the tax base of the municipality, specific revenue streams related to the infrastructure financed, and other business operations of the municipal authority.

The health and stability of state and local economies directly impact each municipality’s tax basis and are important indicators of risk for this segment.

As of March 31, 2026 and December 31, 2025, the Bank had approximately $ 2.1 million and $ 4.5 million of commitments to lend additional funds on accruing loans that had been restructured.

As of March 31, 2026 and December 31, 2025, the Bank had no commitments to lend additional funds on nonperforming loans that had been restructured.

In addition, as of March 31, 2026 and December 31, 2025, the Bank had no loan commitments that defaulted during the period and had been modified prior to payment default while the borrower was experiencing financial difficulty at the time of modification.

For purposes of this disclosure, a default is defined as the occurrence, within 12 months of the original loan modification, of either a full or partial charge-off or the loan becoming 90 days or more past due.

As of March 31, 2026 and December 31, 2025, the Company had zero and $ 2.0 million, respectively, of residential real estate loans in process of foreclosure.

Residential real estate included in OREO totaled $ 2.9 million at March 31, 2026 and zero at December 31, 2025 .

NOTE 5 - ALLOWANCE FOR CREDIT LOSSES

The Company maintains an ACL at a level management believes is adequate to absorb expected credit losses associated with the Company’s financial instruments over their contractual lives as of the balance sheet date.

The ACL is estimated using a systematic methodology that incorporates historical loss experience, current conditions, and reasonable and supportable forecasts.

The Company’s loan portfolio is segmented by homogeneous loan types that are expected to respond similarly to changes in economic conditions.

The portfolio segments used in developing the ACL are as follows:

1) CRE, 2) Commercial and Industrial (“C&I”), 3) Residential Mortgages, 4) Other Consumer, 5) Construction and 6) Other.

Management evaluates credit risk and estimates expected credit losses for each portfolio segment based on the specific risk characteristics described below.

CRE loans are secured by income producing or owner-occupied commercial properties, including hotels, retail centers, office buildings, and multifamily properties.

The primary sources of repayment are cash flows generated by the underlying properties and, where applicable, global cash flows of the borrower.

Credit risk in this segment is influenced by property specific factors, borrower financial strength, tenant concentration, and local and regional economic conditions affecting property values and demand.

C&I loans are extended to operating companies for working capital, equipment financing, inventory, and accounts receivable financing.

Repayment is primarily dependent on the cash flows generated from the borrower’s ongoing operations.

Credit risk in this segment is influenced by borrower profitability, leverage, liquidity, and industry specific risks, as well as broader economic conditions.

Collateral supporting these loans may have limited liquidation value in a stressed environment.

This segment also includes loans to local and state municipalities for purposes such as refinancing existing obligations, infrastructure improvements, and equipment purchases.

These loans may be supported by general obligation pledges or specific revenue streams.

Repayment is generally dependent on the taxing authority, or revenues of the municipal borrower, and credit risk is influenced by the financial condition and economic stability of the underlying jurisdiction.

The ability of each municipality to increase taxes and fees to offset debt service requirements give this type of loan a very low risk profile in the continuum of the Company’s loan portfolio.

Residential Mortgages are loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchased money mortgages.

The primary source of repayment for these loans is the income of the borrower.

The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.

The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Other Consumer loans are made to individuals and may be either secured by assets other than 1-4 family residences or unsecured.

This segment includes auto loans and unsecured loans and lines.

The primary source of repayment for these loans is the income and assets of the borrower.

The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment.

Residential Mortgages are secured by first and second liens on 1-4 family residential properties, including home equity loans, home equity lines of credit and purchased money mortgages.

The primary source of repayment is the income and financial capacity of the borrower.

Credit risk in this segment is influenced by borrower employment levels, income stability, and housing market conditions, including changes in property values that may affect a borrower’s ability to refinance or sell the underlying collateral.

Other Consumer loans consist of loans to individuals that may be secured by collateral other than residential real estate or unsecured.

This segment includes automobile loans and unsecured consumer loans and lines of credit.

Repayment is primarily dependent on the income and financial condition of the borrower.

Credit risk is influenced by the condition of the local economy, including unemployment levels, borrower credit profiles, and where applicable, the value and liquidity of collateral.

The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Construction loans include both commercial and consumer.

Commercial loans are made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes.

While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Construction loans include both commercial and residential construction lending.

Commercial construction loans finance the development of income producing properties or the acquisition and development of land.

These loans are subject to risks related to project completion, cost overruns, contractor performance, and market demand upon stabilization.

The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Consumer loans are made for the construction of residential homes for which a binding sales contract exists and generally are for a period of time sufficient to complete construction.

Residential construction loans to individuals generally provide for the payment of interest only during the construction phase.

Credit risk for residential real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to complete the project to specifications and economic conditions that could impact demand for or supply of the property being constructed.

Other loans, which includes the Company’s largest lending relationship, has unique risk attributes considered inconsistent with our current underwriting standards.

The ACL reserve for the Other segment is based on models based on projected discounted cash flows and supportable loan amount and reserves will fluctuate based on expected cash flow changes and curtailments in the future.

These inconsistencies may include, but are not limited to i) transaction and/or relationship sizes that exceed limits established in 2018, ii) overreliance on secondary, tertiary or guarantor cash flow, iii) land acquisition loans without a defined source of amortization, iv) loan structures on operating lines of credit dependent on the value of real estate rather than trading assets, and v) indirect liabilities of certain guarantees resulting from the nonpayment of financial obligations.

Management continuously assesses underwriting standards, but significantly enhanced these standards in 2018.

Repayment may depend on the successful completion and leasing or sale of the project.

Residential construction loans are generally extended to finance the construction of owner occupied or presold residential properties and typically provide for interest only payments during the construction period.

Credit risk arises from construction delays, cost overruns, contractor performance, and economic conditions affecting housing demand.

The “ Other ” loan segment previously consisted primarily of the loans subsequently reduced to the Judgments, which were Company’s largest lending relationship and had unique risk characteristics that differed from the Company’s current [standard] underwriting criteria.

Expected credit losses for this segment were estimated using a discounted cash flows (or “DCF”) methodology, and the related ACL was subject to fluctuation based on changes in expected future cash flows.

These inconsistencies included, but were not limited to i) transaction and/or relationship sizes that exceeded limits established in 2018, ii) overreliance on secondary, tertiary or guarantor cash flow, iii) land acquisition loans without a defined source of amortization, iv) loan structures on operating lines of credit dependent on the value of real estate rather than trading assets, and v) indirect liabilities of certain guarantees resulting from the nonpayment of financial obligations.

During the three months ended March 31, 2026, the Company completed the Transaction in which the Company sold the Judgments to an unaffiliated third party.

However, the segment remains presented in prior periods for comparative purposes.

Prior to the Transaction, the Company previously established specific reserves of $ 18.0 million related to the Judgments, which were established based on the Company’s expected loss estimates and were subsequently released in connection with the Transaction.

Current Expected Credit Losses (“CECL”) Model

The CECL model is based on our best estimate of facts known with the most current information.

Certain portions of the CECL model are inherently subjective and include, but are not limited to estimates with respect to:

prepayment speeds, the timing of prepayments, potential losses given default, discount rates and the timing of future cash flows.

Management utilizes widely published economic forecasts as the basis for the regression analysis used to estimate the probability of default in the baseline model.

The peaks and troughs of these forecasts serve as guardrails for potential subjective adjustments.

In addition to

The Company’s CECL model is based on management’s best estimates using information available as of the reporting date.

Certain components of the CECL model are inherently subjective, including, but not limited to, assumptions related to prepayment speeds and timing, loss given default, discount rates, and the timing of future cash flows.

Management utilizes widely published economic forecasts as inputs to the regression analysis used to estimate probabilities of default in the baseline CECL model.

The projected peaks and troughs within these forecasts serve as guardrails when evaluating potential qualitative management adjustments.

While management considers outcomes across a range of scenarios, it also recognizes that published forecasts may not fully reflect the Company’s specific market footprint, risk profile or unique portfolio characteristics.

Significant changes in economic forecasts may introduce volatility into modeled results.

Accordingly, management evaluates not only the absolute level of the ACL, but also the reasonableness of the magnitude and pace of changes in the allowance.

To address this, management has developed a framework to assess the tolerance and reasonableness of CECL outputs by challenging certain model assumptions when appropriate.

These alternative outcomes, referred to as “challenger models,” are designed to provide additional perspective, support management judgment, and reduce undue volatility in reserve levels through a countercyclical approach.

Credit Quality Indicators:

The Company’s credit quality assessment is based on an internal loan grading system that evaluates the borrower’s capacity to repay contractual obligations in accordance with loan terms.

Risk ratings consider factors such as debt service coverage, collateral values, borrower financial condition, and other qualitative considerations.

Residential mortgage and consumer loans are generally assigned a pass rating unless a loan migrates to a past due or otherwise criticized status.

The Company maintains a formal loan review policy and annual loan review scope report that defines the level and focus of independent loan review activities for the year.

The annual loan review provides the Credit Risk Committee with an independent assessment of 1) overall credit quality of the loan portfolio, 2) compliance with lending policies, 3) adequacy of credit documentation, and 4) appropriateness of assigned risk ratings.

From 2020 through 2026, loan review activities followed a structured, multi-step approach that included:

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

considering the outcomes based on the range of forecasts, management recognizes that the assumptions used in economic forecasts may not perfectly align with our market area, risk profile or unique attributes of our portfolio along with other important considerations.

Severe changes in forecasts can also create significant variability and management must assess not only the absolute balance of reserves but also consider the appropriateness of the velocity of change.

Therefore, management developed a framework to assess the tolerance and reasonableness of the CECL modeling process by challenging certain elements of the forecasts, when appropriate.

These outcomes, known as “challenger models,” provide opportunities to examine and subjectively adjust the CECL model output and are designed to be counter cyclical, thereby reducing variability.

Credit Quality Indicators:

The Company’s portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all.

The Company’s internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors.

Mortgage and consumer loans are defaulted to a pass grade until a loan migrates to past due status.

The Company has a loan review policy and annual scope report that details the level of loan review for loans in a given year.

The annual loan review provides the Credit Risk Committee with an independent analysis of the following:

1) credit quality of the loan portfolio, 2) compliance with the loan policy, 3) adequacy of documentation in credit files and 4) validity of risk ratings.

Since 2020 and continuing through 2025, the Company used a four step approach for loan review in the following categories:

• Individual reviews of the top twenty large loan relationships (“LLRs”), which are defined as any individual commercial loan or aggregate commercial relationship totaling $ 2.0 million or more;

• A sampling of small LLRs, which are defined as individual commercial loans or relationships with aggregate exposure of $ 2.0 million or more but not included in the top twenty LLRs;

• A sampling review of commercial loans up to $ 10 million in commitment;

• Focus reviews of micro commercial loans defined as $ 2.0 million or less, to evaluate emerging risk rather than individual loan risk.

Focus reviews are performed annually on a rotational basis.

The Company’s internally assigned grades are as follows:

Pass – The Company uses six grades of pass, including its watch rating.

Generally, a pass rating indicates that the loan is currently performing and is of high quality.

Special Mention – Assets with potential weaknesses that warrant management’s close attention and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date.

Substandard – Assets that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any.

Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt.

Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Assets with all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loss – Assets considered of such little value that its continuance on the books is not warranted.

This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

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

• Individual reviews of the top 20 large loan relationships (“LLRs”), defined as any individual commercial loan or aggregate commercial relationship totaling $ 2.0 million or more;

• Sampling of other large loan relationships meeting the same exposure threshold but not in the top 20 LLRs;

• Sample review of Executive Loan Committee approved modifications, including both new and existing loans, to evaluate consistency with established policies and procedures;

• Sample review of non-organic commercial loans and loans approved outside of the Executive Loan Committee process;

• Annual rotational focus reviews of specific portfolio segments to identify emerging risk rather than assess individual loan performance.

The Company assigns internal risk grades to all loans as follows:

Pass – The Company utilizes multiple pass grades, including a watch designation.

Loans rated pass are generally performing in accordance with contractual terms and are considered to be of high credit quality.

Special Mention – Loans with potential weaknesses that warrant management’s close attention.

If left uncorrected, these potential weaknesses may result in deterioration of repayment prospects or the Company’s credit position.

Substandard – Loans that are inadequately protected by the borrower’s paying capacity or by the collateral pledged, if any.

These loans exhibit well-defined weaknesses that jeopardize repayment and present a distinct possibility of loss if deficiencies are not corrected.

Doubtful – Loans that possess all the weaknesses inherent in substandard loans, with the added characteristic that collection or liquidation in full is highly questionable and improbable based on currently known facts, conditions, and values.

Loss – Loans considered to be of such little value that continuation on the balance sheet is not warranted.

While partial recovery may occur in the future, the asset is deemed uncollectible and is charged off.

The repayment of commercial loans is dependent on the success of the borrower’s business and overall economic conditions.

Given the higher inherent risk within the commercial portfolio, these loans are monitored through ongoing risk grading and periodic review in accordance with internal policies.

Loans rated special mention or substandard require increased oversight and active management to mitigate potential credit losses.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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.

The loan portfolio has not yet been significantly impacted by tariffs or other actual or potential changes in trade policies, but potential supply chain disruption and commodity price volatility present addition risk to the loan portfolio.

The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of September 30:

The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of March 31:

(Dollars in Thousands) 2026 2025 2024 2023 2022 2021 and Prior Revolving Total Portfolio Loans

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YTD Gross Charge-offs $ 202 $ 181 $ 71 $ 342 $ 80 $ 11 $ — $ 887

The Bank’s largest credit relationship was nonperforming and rated as substandard at September 30, 2025 and December 31, 2024 with an aggregate principal balance of $ 228.6 million and $ 252.0 million at September 30, 2025 and December 31, 2024, respectively.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of September 30:

The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of March 31:

(Dollars in Thousands) 2026 2025 2024 2023 2022 2021 and Prior Revolving Total Portfolio Loans

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Total Portfolio Loans $ 772,625 $ 419,467 $ 526,921 $ 775,223 $ 393,773 $ 821,651 $ 169,900 $ 3,879,560

The Bank’s largest lending relationship, previously included in the “Other” segment, was sold in the Transaction effective on March 26, 2026, resulting in a significant reduction in both substandard and nonperforming loans at March 31, 2026, compared to an aggregate principal balance of $ 214.0 million classified as substandard and nonperforming at December 31, 2025.

CARTER BANKSHARES, INC.

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The following tables include an aging analysis of the recorded investment of past-due portfolio loans at the dates presented:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Current Loans Loans 30-59

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Total $ 3,632,342 $ 2,260 $ 976 $ 3,236 $ 243,982 $ 3,879,560

Loans past due 90 days or more and still accruing are automatically transferred to nonaccrual status and were zero at September 30, 2025 and December 31, 2024, respectively.

There were no nonaccrual or past due loans related to loans held-for-sale as of September 30, 2025 and December 31, 2024, respectively.

The following table presents loans on nonaccrual status by portfolio segment at the dates presented.

There were no loans at the dates presented that were past due more than 90 days and still accruing.

September 30, 2025 December 31, 2024

Loans past due 90 days or more and still accruing were zero at March 31, 2026 and December 31, 2025.

Loans past due 90 days automatically transfer to nonaccrual status.

There were no nonaccrual or past due loans related to loans held-for-sale as of March 31, 2026 and December 31, 2025, respectively.

The following table presents loans on nonaccrual status by portfolio segment of loan for the dates presented.

There were no loans for the dates presented that were past due more than 90 days and still accruing.

March 31, 2026 December 31, 2025

(Dollars in Thousands)

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Total Portfolio Loans $ — $ 23,971 $ 23,971 $ 2,018 $ 241,964 $ 243,982

A loan is considered nonperforming when we transfer the interest methodology from accrual to nonaccrual.

Nonaccrual status recognizes that the collection in full of both principal and interest is unlikely.

Without applying additional scrutiny at a granular level, management believes delinquency to be a leading indicator with respect to the likelihood of collection in full of both principal and interest.

Accordingly, management automatically transfers loans to nonaccrual status if they are 90 or more days’ delinquent.

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.

Nonaccrual loans and loans that have been characterized as restructured loans may be individually evaluated for credit losses in the Allowance for Credit Losses model if the loan commitment is

During the quarter ended March 31, 2026, nonaccrual loans in the Other segment decreased by $ 214.0 million following the resolution of the Company’s largest nonperforming lending relationship, and the related $ 18.0 million specific ACL was fully reversed in connection with the Transaction.

A loan is generally placed on nonaccrual status when management determines that the collection of principal and interest is unlikely.

Upon placement on nonaccrual status, the Company discontinues the accrual of interest income and reverses any unpaid accrued interest.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

$ 1.0 million or greater and/or based on management’s discretion, unless we elect to maintain the loan in the general pool.

During the three and nine months ended September 30, 2025 and September 30, 2024, respectively, no material amount of interest income was recognized on nonperforming loans subsequent to their classification as nonperforming loans.

The following tables present the amortized cost basis of individually evaluated loans at the dates presented.

Changes in the fair value of the types of collateral and discounted cash flow modeling for individually evaluated loans are reported in the provision (recovery) for credit losses on loans in the period of change.

September 30, 2025

Collateral Type Warehouse Equipment Single Family Office Building Discounted Cash Flow Total

Delinquency status is a key indicator used in evaluating collectability.

Accordingly, loans are generally transferred to nonaccrual status when they become 90 days or more past due.

Management, however, may exercise judgment at the individual loan level.

A loan may be placed on nonaccrual status prior to becoming 90 days past due if collectability of principal and interest is doubtful.

Conversely, a loan that is 90 days or more past due may remain on accrual status if management believes it is well secured and in the process of collection.

Nonaccrual loans, including loans that have been restructured, may be individually evaluated for expected credit losses when the outstanding loan balance is $ 1.0 million or greater or when management determines individual evaluation is appropriate.

Loans not individually evaluated are included in the applicable pooled segment of the ACL.

During the three months ended March 31, 2026 and March 31, 2025, respectively, no material interest income was recognized on nonperforming loans (“NPLs”) subsequent to their classification as nonaccrual.

The following tables present the amortized cost basis of IELs as of the periods presented.

Changes in the fair value of the types of collateral and DCF modeling for IELs are reported in the (recovery) provision for credit losses on loans in the period of change.

March 31, 2026

Collateral Type Single Family Warehouse Office Building Multifamily Total

(Dollars in Thousands) Fair Value - Collateral

Commercial Real Estate $ — $ 7,552 $ 14,055 $ — $ 21,607

Commercial and Industrial — 966 — — — 966

Residential Mortgage — — 2,018 — — 2,018

Other — — — — 228,554 228,554

Construction 661 — — 17,239 17,900

Total $ 661 $ 7,552 $ 14,055 $ 17,239 $ 39,507

December 31, 2025

Collateral Type Equipment Single Family Discounted Cash Flow Total

Collateral Type Equipment Single Family Warehouse Office Building Discounted Cash Flow Total

(Dollars in Thousands) Fair Value - Collateral

Commercial Real Estate $ — $ — $ 9,494 $ 14,321 $ — $ 23,815

Commercial and Industrial 915 — — — — 915

Residential Mortgage — 2,018 — — — 2,018

Construction — 661 — — — 661

Other — — — — 214,020 214,020

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The following tables present activity in the ACL for the periods presented:

Three Months Ended September 30, 2025

Three Months Ended March 31, 2026

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

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Balance, Beginning of Period $ 22,526 $ 2,790 $ 12,449 $ 638 $ 15,020 $ 18,068 $ 71,491

Provision (Recovery) for Credit Losses on Loans 1,524 ( 92 ) 1,373 177 2,198 ( 2,284 ) 2,896

(Recovery) Provision for Credit Losses on Loans ( 355 ) ( 252 ) ( 690 ) 23 425 ( 33,068 ) ( 33,917 )

Charge-offs — — — ( 138 ) — — ( 138 )

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Balance, End of Period $ 22,171 $ 2,538 $ 11,761 $ 588 $ 15,445 $ — $ 52,503

Nine Months Ended September 30, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

Allowance for Credit Losses on Loans:

Balance, Beginning of Year $ 20,146 $ 2,791 $ 10,389 $ 682 $ 11,297 $ 30,295 $ 75,600

Provision (Recovery) for Credit Losses on Loans 2,101 ( 159 ) 2,117 393 2,665 ( 8,576 ) ( 1,459 )

Charge-offs — ( 7 ) — ( 715 ) ( 1 ) — ( 723 )

Recoveries — 6 12 325 1 — 344

Net (Charge-offs) / Recoveries — ( 1 ) 12 ( 390 ) — — ( 379 )

Balance, End of Period $ 22,247 $ 2,631 $ 12,518 $ 685 $ 13,962 $ 21,719 $ 73,762

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

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Balance, Beginning of Period $ 20,146 $ 2,791 $ 10,389 $ 682 $ 11,297 $ 30,295 $ 75,600

Provision (Recovery) for Credit Losses on Loans 250 ( 238 ) ( 224 ) 288 526 ( 1,034 ) ( 432 )

Charge-offs — ( 21 ) ( 5 ) ( 421 ) ( 1 ) ( 15,000 ) ( 15,448 )

Recoveries — 1 5 97 — — 103

Net Recoveries / (Charge-offs) — ( 20 ) — ( 324 ) ( 1 ) ( 15,000 ) ( 15,345 )

Balance, End of Period $ 20,067 $ 2,936 $ 10,520 $ 724 $ 9,742 $ 36,920 $ 80,909

Nine Months Ended September 30, 2024

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

Allowance for Credit Losses on Loans:

Balance, Beginning of Year $ 19,873 $ 3,286 $ 10,879 $ 868 $ 7,792 $ 54,354 $ 97,052

Provision (Recovery) for Credit Losses on Loans 194 ( 313 ) ( 356 ) 877 2,107 ( 2,434 ) 75

(Recovery) Provision for Credit Losses on Loans ( 2 ) ( 112 ) 446 72 752 ( 3,181 ) ( 2,025 )

Charge-offs — ( 7 ) — ( 171 ) ( 1 ) — ( 179 )

Recoveries — 3 8 110 1 — 122

Net Charge-offs — ( 37 ) ( 3 ) ( 1,021 ) ( 157 ) ( 15,000 ) ( 16,218 )

Net (Charge-offs) / Recoveries — ( 4 ) 8 ( 61 ) — — ( 57 )

Balance, End of Period $ 20,144 $ 2,675 $ 10,843 $ 693 $ 12,049 $ 27,114 $ 73,518

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The Company uses fair value measurements when recording and disclosing certain financial assets and liabilities.

Securities available-for-sale, equity securities, loans and derivative financial instruments are recorded at fair value on a recurring basis.

Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as loans held-for-sale, individually evaluated loans, OREO, and certain other assets.

Securities available-for-sale, equity securities and derivative financial instruments are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record other assets at fair value on a nonrecurring basis, such as loans held-for-sale, IELs, OREO, and certain other assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

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it is not a forced transaction.

In determining fair value, we use various valuation approaches, including market, income and cost approaches.

In determining fair value, the Company uses various valuation approaches, including market, income and cost approaches.

The fair value standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data we have obtained from independent sources.

Unobservable inputs reflect our estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

Observable inputs are inputs that market participants would use in pricing an asset or liability, which are developed based on market data the Company has obtained from independent sources.

Unobservable inputs reflect the Company’s estimates of assumptions that market participants would use in pricing an asset or liability, which are developed based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

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Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

We recognize transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.

The Company recognizes transfers between any of the fair value hierarchy levels at the end of the reporting period in which the transfer occurred.

The following are descriptions of the valuation methodologies that the Company uses for financial instruments recorded at fair value on either a recurring or nonrecurring basis.

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The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges, if available.

This valuation method is classified as Level 1 in the fair value hierarchy.

For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities, or matrix pricing, which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

This valuation method is classified as Level 1 in the fair value

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

For securities where quoted prices are not available, fair values are calculated on market prices of similar securities, or matrix pricing, which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Matrix pricing relies on the securities’ relationship to similarly traded securities, benchmark curves, and the benchmarking of like securities.

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This valuation method is classified as Level 2 in the fair value hierarchy.

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators.

For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using DCF or other market indicators.

This valuation method is classified as Level 3 in the fair value hierarchy.

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This valuation method is classified as Level 1 in the fair value hierarchy.

As of September 30, 2025 and December 31, 2024, Level 1 fair values are available for each of the Company’s equity securities.

As of March 31, 2026 and December 31, 2025, Level 1 fair values are available for each of the Company’s equity securities.

Derivative Financial Instruments and Hedging Activities:

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Interest rate swap contracts involve the risk of dealing with borrower and counterparties and their ability to meet contractual terms.

We calculate the fair value for derivatives using accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.

The Company calculates the fair value for derivatives using accepted valuation techniques, including DCF analysis on the expected cash flows of each derivative.

Each valuation considers the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, such as interest rate curves and implied volatilities.

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Accordingly, interest rate swaps for commercial loans are classified as Level 2.

The Company previously used pay-fixed/receive-floating interest rate swaps (the “Pay-Fixed Swap Agreements”).

The Pay-Fixed Swap Agreements were designated as fair value hedges in order to hedge the risk of changes in the fair value of the fixed rate loans included in the amortizing single-family mortgages and CRE loans.

These fair value hedges were utilized to convert the hedged loans from a fixed rate to a synthetic floating Secured Overnight Financing Rate (“SOFR”).

As long as a hedging instrument was designated and the results of the effectiveness testing supported that the instrument qualified for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument were accounted for in net interest income.

The fair value of the hedge was recorded in either other assets or in other liabilities depending on the position of the hedge, and the offset was recorded in loans.

This was the case whether or not economic mismatches existed in the hedging relationship.

As a result, there was no periodic measurement or recognition of ineffectiveness.

Rather, the full impact of hedge gains and losses was recognized in the period in which the hedged transactions had an impact to earnings.

As of September 30, 2025, the Company had terminated all its Pay-Fixed Swap Agreements.

The Company also enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments).

Rate lock commitments on mortgage loans to be held-for-sale are considered to be derivatives.

The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

15 to 90 days.

The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 15 to 90 days.

The Company protects itself from changes in interest rates through the use of best-efforts forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on rate lock commitments due to changes in interest rates.

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Individually Evaluated Loans:

Individually evaluated loans with commitments of $ 1.0 million or greater and/or based on management’s discretion are evaluated for potential specific reserves and adjusted, if a shortfall exists, to fair value less costs to sell.

IELs with commitments of $ 1.0 million or greater and/or based on management’s discretion are evaluated for potential specific reserves and adjusted, if a shortfall exists, to fair value less costs to sell.

Fair value is measured based on the value of the underlying collateral securing the loan if repayment is expected solely from the sale or operation of the collateral or present value of estimated future cash flows discounted at the loan’s contractual interest rate if the loan is not determined to be collateral dependent.

All loans with a specific reserve are classified as Level 3 in the fair value hierarchy.

Fair value for individually evaluated loans is determined using several methods.

Fair value for IELs is determined using several methods.

Generally, the fair value of real estate is determined based on appraisals by qualified licensed appraisers.

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Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.

Subsequent to the initial impairment date, existing individually evaluated loans are reevaluated quarterly for additional impairment and adjustments to fair value less costs to sell are made, where appropriate.

For individually evaluated loans, the first stage of our impairment analysis involves inspection of the property in question to affirm the condition has not deteriorated since the previous impairment analysis date.

Management also engages in conversations with local real estate professionals and market participants to determine the likely marketing time and value range for the property.

Subsequent to the initial impairment date, existing IELs are reevaluated quarterly for additional impairment and adjustments to fair value less costs to sell are made, where appropriate.

For IELs, the first stage of our impairment analysis involves inspection of the property in question to affirm the condition has not deteriorated since the previous impairment analysis date.

Management also engages in conversations with local real estate professionals and market participants to determine the likely

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

marketing time and value range for the property.

The second stage involves an assessment of current trends in the regional market.

After thorough consideration of these factors, management will order a new appraisal.

For non-individually evaluated loans, the fair value is determined by updating the present value of estimated future cash flows using the loan’s existing rate to reflect the payment schedule for the remaining life of the loan.

OREO is evaluated at the time of acquisition and is recorded at fair value as determined by an appraisal or evaluation, less costs to sell.

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OREO and other repossessed assets marked to fair value are classified as Level 3.

At September 30, 2025 OREO assets were in compliance with the OREO policy as set forth above, and substantially all of the assets were listed for sale with credible third-party real estate brokers.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

At March 31, 2026 OREO assets were in compliance with the OREO policy as described above, except for $ 2.9 million related to two residential mortgage loans that are not currently marketed for sale as the Company is still in the process of determining a market value for listing the properties.

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis by fair value hierarchy level at the dates presented:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Carrying Value Quoted Prices In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

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Total $ 10,139 $ — $ 10,139 $ —

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

December 31, 2025

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Equity Securities 10,291 10,291 — —

Portfolio Loan Pool Subject to Fair Value Hedge 622 — 622 —

Derivatives 10,182 — 10,182 —

2 unchanged sentences

Total $ 10,089 $ — $ 10,089 $ —

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

We have invested in subordinated debt of other financial institutions.

We have two securities totaling $ 8.3 million that are considered to be Level 3 securities at September 30, 2025 and two totaling $ 7.8 million at December 31, 2024, attributable to the calculated change in fair value of $ 0.5 million.

The Level 3 fair value is benchmarked to other securities that have observable market values in Level 2 using comparable financial ratio analysis specific to the industry in which the underlying company operates.

The underwriting includes considerations of capital adequacy, asset quality trends, management’s ability to continue efficient and profitable operations, the institution’s core earnings ability, liquidity management platform and current on and off-balance sheet interest rate risk exposures.

The Company invests in subordinated debt securities issued by other financial institutions that are classified as Corporate Notes in the tables above.

At both March 31, 2026 and December 31, 2025, the Company held one such security with an aggregate fair value of $ 3.3 million that was classified within Level 3 of the fair value hierarchy due to the absence of observable market inputs and limited trading activity.

The fair value of these Level 3 securities is estimated by benchmarking to similar instruments with observable market data classified as Level 2.

Valuation techniques incorporate comparable financial ratio analysis and qualitative assessments specific to the industry in which the underlying issuers operate.

Key factors considered include capital adequacy, asset quality trends, management effectiveness, core earnings capacity, liquidity profile, and on and off-balance sheet interest rate exposures.

Financial assets measured at fair value on a nonrecurring basis at the dates presented are summarized below:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Level 1 Level 2 Level 3 Fair Value

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Individually Evaluated Loans $ — $ — $ 22,809 $ 22,809

The Company had two loan relationships totaling $ 8.8 million and and one relationship of $ 0.6 million measured at fair value on a nonrecurring basis as of September 30, 2025 and at December 31, 2024, respectively.

The increase in individually evaluated loans measured at fair value from December 31, 2024, was primarily related to one loan relationship.

The Company’s largest credit relationship is classified as an individually evaluated loan with a net carrying amount totaling $ 206.9 million at September 30, 2025 and $ 221.7 million at December 31, 2024.

The Company utilized various cash flow and discounting assumptions in the alternative modeling, instead of fair value, which resulted in a valuation allowance of $ 21.7 million at September 30, 2025 and $ 30.3 million at December 31, 2024.

When evaluating the net carrying value of this credit relationship at September 30, 2025, the Company utilized discounted cash flow valuation techniques to estimate the timing and magnitude of potential recoveries resulting from various collection processes.

OREO, which is measured at the lower of carrying or fair value less costs to sell, had a net carrying amount of $ 0.3 million as of September 30, 2025, compared with $ 0.7 million at December 31, 2024.

This decrease was primarily due to three closed branches being transferred to OREO and sold during the nine months ending September 30, 2025 in addition to the sale of another closed branch previously added to OREO.

The Company had zero and $ 0.5 million write-downs recorded on OREO for the three and nine months ended September 30, 2025 and had zero write-downs recorded on OREO for the three and nine months ended September 30, 2024.

These write-downs are recorded in other noninterest expense on the Consolidated Statements of Income.

The Company had two IELs totaling $ 20.6 million that were measured at fair value on a nonrecurring basis at March 31, 2026, compared to three totaling $ 22.8 million at December 31, 2025.

The Company’s largest credit relationship, previously classified as an IEL had a net carrying value of zero at March 31, 2026, compared to $ 196.0 million at December 31, 2025, as a result of the Transaction during the first quarter of 2026.

Prior to the Transaction, in estimating fair value, management utilized DCF techniques incorporating various assumptions related to the timing and amount of expected recoveries under multiple collection scenarios.

These valuation techniques resulted in a valuation allowance of zero at March 31, 2026, compared to $ 18.0 million at December 31, 2025, as the previously established specific reserves were released in connection with the Transaction during the first quarter of 2026.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

OREO, which is measured at the lower of carrying amount or fair value less costs to sell, had a net carrying amount of $ 3.4 million as of March 31, 2026, compared to $ 0.1 million at December 31, 2025.

The increase was primarily attributable to two nonperforming residential mortgage loans totaling $ 2.9 million that were transferred to OREO during the first quarter of 2026.

The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at the dates presented:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Fair Value Valuation Technique Unobservable Inputs Weighted Range Average

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Total Individually Evaluated Loans $ 20,586

OREO $ 2,937 NA NA NA NA

OREO 142 Internal Valuations Estimated Selling Costs 5.0 % 5.0 %

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Total OREO $ 3,443

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

December 31, 2025

(Dollars in Thousands) Fair Value Valuation Technique Unobservable Inputs Weighted Range Average

Individually Evaluated Loans $ 579 Discounted Appraisals Estimated Selling Costs 3.5 % 3.5 %

Individually Evaluated Loans $ 22,809 Appraisals Estimated Selling Costs 3.5 % —% 6.0 % 5.9 %

Total Individually Evaluated Loans $ 22,809

OREO $ 143 Internal Valuations Estimated Selling Costs 5.0 % 5.0 %

OREO 142 Discounted Internal Valuations Management’s Subject Discount 5.0 % 5.0 %

Total OREO $ 142

A baseline discount rate has been established for impairment measurement.

This baseline discount rate was back tested against historical OREO sales, and therefore, represents an average recovery rate based on the transaction sizes and asset types in the population examined.

Management considers the unique attributes and characteristics of each specific individually evaluated loan and may use judgment to adjust the baseline discount rate when appropriate.

The carrying values and estimated fair values of our financial instruments at September 30, 2025 and December 31, 2024 are presented in the following tables.

Fair values for September 30, 2025 and December 31, 2024 are estimated under the exit price notion in accordance with ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.”

GAAP requires disclosure of fair value information about financial instruments carried at book value on the Consolidated Balance Sheets.

In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.

Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Fair Value Measurements at September 30, 2025

A baseline discount rate has been established for use in impairment and fair value measurements.

This baseline rate was developed through back-testing against historical OREO sales and reflects an average recovery rate based on transaction size and asset type within the population analyzed.

Management considers the specific facts and circumstances of each IEL and may apply judgment to adjust the baseline discount rate when appropriate.

The carrying values and estimated fair values of the Company’s financial instruments at March 31, 2026 and December 31, 2025 are presented in the accompanying tables.

Fair values are estimated in accordance with the exit price notion under ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities .

In accordance with U.S.

GAAP, the Company is required to disclose the estimated fair value of financial instruments carried at amortized cost when quoted market prices are not readily available.

Estimated fair values are derived using present value techniques or other valuation methodologies and are significantly affected by the assumptions applied, including discount rates and expected future cash flows.

Because these estimates are based on models and assumptions rather than observable market transactions, they may not be realized upon immediate settlement.

Accordingly, the aggregate fair values presented do not necessarily represent the underlying value of the Company.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Fair Value Measurements at March 31, 2026

(Dollars in Thousands) Carrying Value Level 1 Level 2 Level 3 Total

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Portfolio Loans, net 3,675,958 — — 3,583,496 3,583,496

Federal Home Loan Bank Stock, at Cost 11,598 — — NA NA

Other Restricted Stock, at Cost 8,476 — — NA NA

Other Assets- Interest Rate Derivatives 10,232 — 10,232 — 10,232

3 unchanged sentences

Other Liabilities- Interest Rate Derivatives 10,139 — 10,139 — 10,139

FHLB Borrowings 175,500 — — 175,459 175,459

Accrued Interest Payable 6,295 — — 6,295 6,295

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Fair Value Measurements at December 31, 2025

4 unchanged sentences

Equity Securities 10,291 10,291 — — 10,291

Loans Held-for-Sale 339 — — 339 339

Portfolio Loans, net 3,808,069 — — 3,711,795 3,711,795

Federal Home Loan Bank Stock, at Cost 6,487 — — NA NA

Other Restricted Stock, at Cost 16,830 — — NA NA

Other Assets- Interest Rate Derivatives 10,182 — 10,182 — 10,182

6 unchanged sentences

NOTE 7 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In accordance with applicable accounting guidance for derivatives and hedging, all derivatives are recognized as either assets or liabilities on the Consolidated Balance Sheets at fair value.

Interest rate swaps are contracts in which a series of interest rate flows (fixed and variable) are exchanged over a prescribed period.

In accordance with applicable accounting guidance for derivatives and hedging, all derivatives are recognized as either assets or liabilities in the Consolidated Balance Sheets and are measured at fair value.

Interest Rate Swap Arrangements with Customers

Interest rate swaps are contracts under which a series of fixed and variable interest rate payments are exchanged over a specified period.

The notional amounts on which the interest payments are based are not exchanged.

These derivative positions relate to transactions in which the Company enters into an interest rate swap with a commercial customer while at the same time entering into an offsetting interest rate swap with another financial institution, or counterparty.

In connection with each transaction, the Company originates a floating rate loan to the customer at a notional amount.

In turn, the customer contracts with the counterparty to swap the stream of cash flows associated with the floating interest rate loan with the Company for a stream of fixed interest rate cash flows based on the same notional amount as the Company’s loan.

The transaction allows the customer to effectively convert a variable rate loan to a fixed rate loan with the Company receiving a variable rate.

These agreements could have floors or caps on the contracted interest rates.

The Company also has the ability to execute on balance sheet hedges.

On July 11, 2024, the Company entered into two related Pay-Fixed Swap Agreements for a combined notional amount of $ 300.0 million.

The Pay-Fixed Swap Agreements were designated as fair value hedges in order to hedge the risk of changes in the fair value of the fixed rate loans included in amortizing single-family mortgages and CRE loans.

These fair value hedges were utilized to convert the hedged loans from a fixed rate to a synthetic floating SOFR.

On December 19, 2024, the Company terminated the first Pay-Fixed Swap Agreement with an original notional value of $ 175.0 million that would have matured on July 11, 2029.

Negative interest income adjustments related to the termination of this hedge was $ 154 thousand .

On January 13, 2025, the Company terminated the remaining Pay-Fixed Swap Agreement with an original notional value of $ 125.0 million that would have matured on July 11, 2027.

The negative interest income adjustment for the termination of this hedge was $ 110 thousand.

While these two Pay-Fixed Swap Agreements were effective, the Company recognized interest income of $ 1.2 million related to these agreements.

As long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, 100% of the periodic changes in fair value of the hedging instrument are accounted for in net interest income.

The fair value of the hedge is recorded in either other assets or in other liabilities depending on the position of the hedge, and the offset is recorded in loans.

This is the case whether or not economic mismatches exist in the hedging relationship.

As a result, there is no periodic measurement or recognition of ineffectiveness.

Rather, the full impact of hedge gains and losses is recognized in the period in which the hedged transactions impact earnings.

Pursuant to agreements with various financial institutions, the Company may receive collateral or may be required to post collateral based upon mark-to-market positions.

Beyond unsecured threshold levels, collateral in the form of cash or securities may be made available to counterparties of interest rate swap transactions.

Based upon current positions and related future collateral requirements relating to them, management believes any effect on our cash flow or liquidity position to be immaterial.

The Company enters into interest rate swap transactions with commercial customers to facilitate customer risk management objectives.

In these transactions, the Company originates a floating rate loan to the customer at a notional amount and simultaneously enters into a corresponding offsetting interest rate swap with a third-party financial institution or counterparty.

Under this structure, the customer enters into an interest rate swap with the Company to exchange the variable rate cash flows associated with the loan for fixed rate cash flows based on the same notional amount as the Company’s loan.

These transactions allow customers to effectively convert variable rate loans to fixed rate loans, while the Company receives variable rate payments.

Certain agreements may include contractual interest rate floors or caps.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Derivatives contain an element of credit risk, the possibility that the Company will incur a loss because a counterparty, which may be a financial institution or a customer, fails to meet its contractual obligations.

All derivative contracts with financial institutions may be executed only with counterparties approved by the Asset and Liability Committee (“ALCO”) and all derivatives with customers are approved by a team of members from senior management who have been trained to understand the risk associated with interest rate swaps and have past industry experience.

Interest rate swaps are considered derivatives but are not accounted for using hedge accounting.

As such, changes in the estimated fair value of the derivatives are recorded in current earnings in the Consolidated Statements of Income.

Customer related interest rate swaps are considered derivatives, but are not designated as hedging instruments for accounting purposes.

Accordingly, changes in the estimated fair value of these derivatives are recognized in current earnings in the Consolidated Statements of Income.

Balance Sheet Hedging Activities

The Company also utilizes derivatives to hedge interest rate risk associated with on balance sheet assets.

On July 11, 2024, the Company entered into two related pay-fixed/receive floating interest rate swaps (the “Pay-Fixed/Receive Floating Interest Rate Swap Agreements”) with a combined notional amount of $ 300.0 million.

These swaps were designated as fair value hedges to mitigate changes in the fair value of the fixed rate loans, including amortizing single-family residential mortgage loans and CRE loans.

The hedges were intended to synthetically convert the hedged fixed rate loans to floating rate loans indexed to the Secured Overnight Financing Rate (“ SOFR”).

On December 19, 2024, the Company terminated the first Pay-Fixed/Receive Floating Swap Agreement with an original notional amount of $ 175.0 million, which was scheduled to mature on July 11, 2029.

The termination resulted in a negative interest income adjustment of $ 154 thousand.

On January 13, 2025, the Company terminated the remaining Pay-Fixed/Receive Floating Swap Agreement with an original notional amount of $ 125.0 million, which was scheduled to mature on July 11, 2027, resulting in a negative interest income adjustment of $ 110 thousand.

While these Pay-Fixed/Receive Floating Swap Agreements were outstanding, the Company recognized $ 1.2 million of interest income related to these hedging instruments.

Hedge Accounting Treatment

As long as a hedging instrument is properly designated and effectiveness testing supports qualification for hedge accounting treatment, changes in fair value of the hedging instrument attributable to the hedged risk are recognized in net interest income.

The fair value of the derivative is recorded in other assets or other liabilities, as applicable, with a corresponding adjustment recorded to the carrying amount of the hedged loans.

Under this accounting treatment, there is no separate measurement or recognition of hedge ineffectiveness, and the full impact of hedge gains and losses is recognized in earnings in the period in which the hedged item affects earnings.

Collateral and Credit Risk

Pursuant to agreements with various financial institutions, the Company may be required to post collateral or may receive collateral based on the mark-to-market position of its derivative contracts.

Beyond unsecured threshold levels, collateral may be provided in the form of cash or securities.

Based on current derivative positions and related collateral requirements, management believes any impact on the Company’s liquidity or cash flows is immaterial.

Derivative instruments expose the Company to credit risk, representing the risk that a counterparty may fail to perform under the terms of a contract.

All derivative transactions with financial institutions are executed only with counterparties approved by the Asset and Liability Committee (“ALCO”).

Derivative transactions with customers are subject to approval by members of senior management with appropriate training and experience in interest rate risk management.

The following tables indicate the amounts representing the fair value of derivative assets and derivative liabilities at the dates presented:

1 unchanged sentence

Asset Derivatives (Included in Other Assets)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(Dollars in Thousands) Number of

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Total Derivatives not Designated as Hedging Instruments 59 $ 350,836 $ 10,232 57 $ 353,512 $ 10,182

Total Derivatives 64 $ 360,842 $ 10,981 59 $ 369,716 $ 17,356

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Fair Values of Derivative Instruments

Liability Derivatives (Included in Other Liabilities)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(Dollars in Thousands) Number of

2 unchanged sentences

Transactions Notional

Derivatives Designated as Hedging Instruments

Interest Rate Swaps - Balance Sheet Hedge — $ — $ — 1 $ 125,000 $ 554

Total Derivatives Designated as Hedging Instruments — $ — $ — 1 $ 125,000 $ 554

Derivatives not Designated as Hedging Instruments

2 unchanged sentences

Total Derivatives not Designated as Hedging Instruments 59 $ 350,836 $ 10,139 57 $ 353,512 $ 10,089

Total Derivatives 64 $ 360,842 $ 10,888 60 $ 494,716 $ 17,710

The following table indicates the loss recognized within “other noninterest income or expense” for derivatives not designated as hedging instruments and the income (loss) within “interest income on taxable loans” for derivatives designated as hedging instruments in the Consolidated Statements of Income as of the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

The following table indicates the net loss recognized within “other noninterest income or expense” for derivatives not designated as hedging instruments and the loss recognized within “interest income on taxable loans” for derivatives designated as hedging instruments in the Consolidated Statements of Income for the periods presented:

Three Months Ended March 31,

(Dollars in Thousands) 2026 2025

1 unchanged sentence

Interest Rate Swaps - Balance Sheet Hedge $ — $ ( 140 )

Total Derivative Income (Loss) Designated as Hedging Instruments $ — $ 103 $ ( 140 ) $ 103

Total Derivative Loss Designated as Hedging Instruments $ — $ ( 140 )

Derivatives not Designated as Hedging Instruments

4 unchanged sentences

Net Derivative Loss $ — $ ( 184 )

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Presenting offsetting derivatives that are subject to legally enforceable netting arrangements with the same party is permitted.

For example, we may have a derivative asset and a derivative liability with the same counterparty to a swap transaction and are permitted to offset the asset position and the liability position resulting in a net presentation.

The following table indicates the gross amounts of derivative assets and derivative liabilities designated as hedging instruments and not designated as hedging instruments, the amounts offset and the carrying values included in the Consolidated Balance Sheets at the dates presented:

The Company is permitted to offset derivatives assets and derivative liabilities that are subject to legally enforceable master netting arrangements with the same counterparty.

Accordingly, derivative positions with the same counterparty may be presented on a net basis in the Consolidated Balance Sheets when the Company has both a derivative asset and a derivative liability related to swap transactions with that counterparty.

The following table indicates the gross amounts of derivative assets and derivative liabilities not designated as hedging instruments, the amounts offset and the carrying values included in the Consolidated Balance Sheets at the dates presented:

Asset Derivatives Liability Derivatives

(Included in Other Assets) (Included in Other Liabilities)

(Dollars in Thousands) September 30, 2025 December 31, 2024 September 30, 2025 December 31, 2024

Derivatives Designated as Hedging Instruments

Gross Amounts Recognized $ — $ — $ — $ 592

Gross Amounts Offset — — — 38

Net Amounts Presented in the Consolidated Balance Sheets $ — $ — $ — $ 554

(Dollars in Thousands) March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025

Derivatives not Designated as Hedging Instruments

2 unchanged sentences

Net Amounts Presented in the Consolidated Balance Sheets $ 10,232 $ 10,182 $ 10,139 $ 10,089

Net Amount $ 10,981 $ 17,356 $ 10,888 $ 17,710

NOTE 8 – DEPOSITS

The following table presents the composition of deposits at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Noninterest-Bearing Demand $ 637,933 $ 620,473

4 unchanged sentences

Total $ 4,235,250 $ 4,210,889

All depos i t accounts are i nsured by the Federal Deposit Insurance Corporation (“FDIC”) u p to the maximum amount allowed by l aw.

Certificates of deposits that exceed the FDIC Insurance limit of $250,000 at September 30, 2025 and December 31, 2024 were $ 308.3 million and $ 297.9 million, respectively.

At both September 30, 2025 and December 31, 2024, total brokered deposits (excluding the Certificate of Deposit Account Registry Services (“CDARS”) and ICS two-way) were $ 196.1 million, which are included within the “certificates of deposit” line item in the Consolidated Balance Sheets.

Certificates of Deposit maturing as of the date presented:

(Dollars in Thousands) September 30, 2025

3 Months or Less $ 630,814

Over 3 Months through 12 Months 675,452

Over 1 Year Through 3 Years 543,367

Over 3 Years 56,918

Total $ 1,906,551

Overdrafts reclassified to loans were $ 0.3 million at both September 30, 2025 and December 31, 2024.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

All deposit accounts are insured by the FDIC up to the maximum amount allowed by law.

The Dodd-Frank Act made permanent the $250,000 limit for federal deposit insurance and the coverage limit applies per depositor, per insured depository institution for each account ownership.

Certificates of deposit that exceed the FDIC Insurance limit of $250,000 at March 31, 2026 and December 31, 2025 were $ 303.7 million and $ 310.7 million, respectively.

At both March 31, 2026 and December 31, 2025, total brokered deposits (excluding the ICS two-way) were $ 191.2 million, which are included within the “certificates of deposit” line item in the Consolidated Balance Sheets.

Certificates of Deposit maturing as of the date presented:

(Dollars in Thousands) March 31, 2026

2027 $ 1,471,947

Thereafter 359

Total $ 1,884,628

Overdrafts reclassified to loans were $ 0.3 million at both March 31, 2026 and December 31, 2025.

NOTE 9 – FEDERAL HOME LOAN BANK BORROWINGS AND FEDERAL FUNDS PURCHASED

Borrowings serve as an additional source of liquidity for the Company.

The Company had $ 175.5 million of Federal Home Loan Bank (“FHLB”) borrowings at September 30, 2025 and $ 70.0 million at December 31, 2024.

The increase of $ 105.5 million is due to additional FHLB borrowings to fund loan growth.

FHLB borrowings are fixed and variable rate advances for various terms and are secured by a blanket lien on select residential mortgages, select multifamily loans, and select commercial real estate loans.

Variable rate FHLB borrowings were 51.6 % and 0.0 % of total borrowings at September 30, 2025 or December 31, 2024, respectively.

The FHLB charges prepayment fees for advances that are repaid before maturity, which is the net present value between current market rates and the fixed rate on each borrowing.

Total loans pledged as collateral were $ 1.3 billion at September 30, 2025 and $ 1.6 billion at December 31, 2024.

There were no securities available-for-sale pledged as collateral at September 30, 2025 or December 31, 2024.

At September 30, 2025, funding sources accessible to the Company include borrowing availability at the FHLB, equal to 25 % of the Company’s assets or approximately $ 1.2 billion, subject to the amount of eligible collateral pledged, of which the Company is eligible to borrow up to an additional $ 544.0 million.

The Company had the capacity to borrow up to an additional $ 735.3 million from the FHLB at December 31, 2024.

At September 30, 2025 and at December 31, 2024, the Company had $ 30.0 million unsecured facilities with three other correspondent financial institutions, as well as, a $ 45.0 million fully secured facility with one other correspondent financial institution.

The Company did not have outstanding borrowings on these facilities as of September 30, 2025 or December 31, 2024.

The Company also has access to the institutional certificate of deposit (“CD”) and brokered deposit markets.

At March 31, 2026, the Company had no outstanding Federal Home Loan Bank (“FHLB”) borrowings, compared to $ 178.5 million at December 31, 2025.

The $ 178.5 million decrease from December 31, 2025, reflects the repayment of borrowings utilizing proceeds from the Transaction.

FHLB borrowings consist of fixed and variable rate advances with contractual maturities and are secured by a blanket lien on select residential mortgage loans, select multifamily loans, and select commercial real estate loans.

At March 31, 2026, the Company had no variable rate FHLB borrowings compared to 52.0 % of total borrowings at December 31, 2025.

The FHLB assesses prepayment fees on fixed rate advances that are repaid prior to maturity.

These fees are generally calculated as the net present value of the difference between current market rates and the contractual fixed rate on the applicable borrowing.

During the quarter ended March 31, 2026, FHLB early prepayment credits totaled $ 0.1 million.

Loans pledged as collateral to the FHLB totaled $ 1.3 billion at both March 31, 2026 and December 31, 2025.

No available-for-sale securities were pledged as collateral at March 31, 2026 or December 31, 2025.

At March 31, 2026, funding sources accessible to the Company included borrowing availability from the FHLB equal to 30 % of total assets, or approximately $ 1.4 billion, subject to the amount of eligible collateral pledged.

Based on eligible collateral at March 31, 2026, the Company had the capacity to borrow up to an additional $ 816.6 million from the FHLB, compared to additional borrowing capacity of $ 609.4 million at December 31, 2025.

In addition to FHLB funding, at March 31, 2026 and December 31, 2025, the Company maintained unsecured borrowing facilities with three correspondent financial institutions totaling $ 30.0 million, as well as a fully secured borrowing facility with one correspondent financial institution totaling $ 25.0 million.

The secured line of credit decreased by $ 20.0 million during the quarter ended March 31, 2026, from $ 45.0 million, as a result of the sale of investment securities previously pledged as collateral to the secured facility that were not replaced with new pledged assets, which reduced the borrowing capacity.

No amounts were outstanding under these facilities as of March 31, 2026 or December 31, 2025.

The Company also had access to the institutional CD and the brokered deposit markets.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table represents the balance of FHLB borrowings, the weighted average interest rate and the borrowing availability at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

FHLB Borrowings $ — $ 178,500

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The following table represents the balance of federal funds purchased, the weighted average interest rate and the borrowing availability at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Federal Funds Purchased $ — $ —

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Federal Funds Purchased Availability $ 55,000 $ 75,000

Scheduled annual maturities and weighted average interest rates for FHLB borrowings for each of the five years subsequent to September 30, 2025 and thereafter are as follows:

(Dollars in Thousands) Balance Weighted Average Rate

1 year $ 135,500 4.21 %

2 years 20,000 3.83 %

3 years 20,000 3.82 %

4 years — — %

5 years — — %

Thereafter — — %

Total FHLB Borrowings $ 175,500 4.12 %

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Commitments to extend credit, which amounted to $ 782.6 million at September 30, 2025 and $ 833.6 million at December 31, 2024, represent agreements to lend to customers with fixed expiration dates or other termination clauses.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

provides lines of credit to our clients 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 represented $ 449.4 million, or 57.4 %, and $ 445.3 million, or 53.4 %, of the commitments to extend credit at September 30, 2025 and December 31, 2024, respectively.

Standby letters of credit are conditional commitments issued by the Company guaranteeing the performance of a customer to a third-party.

Commitments to extend credit represent agreements to lend to customers that generally have fixed expiration dates or other termination clauses.

At March 31, 2026 and December 31, 2025, commitments to extend credit totaled $ 730.6 million and $ 771.7 million, respectively.

These commitments primarily consist of lines of credit provided to customers to finance the completion of construction projects, as well as revolving lines of credit to operating companies to support working capital needs.

Construction related lines of credit represented $ 421.1 million, or 57.6 %, of total commitments to extend credit at March 31, 2026, compared to $ 452.8 million, or 58.7 %, at December 31, 2025.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third-party.

Those guarantees are primarily issued to support public and private borrowing arrangements.

The Company had outstanding letters of credit totaling $ 17.4 million at September 30, 2025 and $ 16.7 million at December 31, 2024.

(Dollars in Thousands) September 30, 2025 December 31, 2024

Outstanding standby letters of credit totaled $ 15.9 million at March 31, 2026 and $ 16.5 million at December 31, 2025.

(Dollars in Thousands) March 31, 2026 December 31, 2025

Commitments to Extend Credit $ 730,583 $ 771,677

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Total $ 746,456 $ 788,184

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.

The Company uses the same credit policies in making commitments and unconditional obligations as it does for on-balance sheet instruments.

Unless noted otherwise, collateral or other security is required to support financial instruments with credit risk.

The Company’s exposure to credit loss for commitments to extend credit and standby letters of credit in the event of nonperformance by the counterparty is represented by the contractual amounts of these instruments.

The Company applies the same credit policies and underwriting standards to these commitments as it does to on-balance sheet credit exposures.

Unless noted otherwise, commitments that expose the Company to credit risk are supported by collateral or other security.

Life-of-Loss Reserve on Unfunded Loan Commitments

We maintain a life-of-loss reserve on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements.

The life-of-loss reserve is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a draw-down on the commitment.

The life-of-loan reserve for unfunded loan commitments is included on our Consolidated Balance Sheets.

The Company maintains a life-of-loss reserve on unfunded commercial lending commitments and standby letters of credit to provide for the risk of loss inherent in these arrangements.

The reserve is calculated using a methodology similar to that used to determine the ACL on loans, adjusted to reflect the probability of drawdown on the unfunded commitment.

The reserve for unfunded loan commitments is included on the Consolidated Balance Sheets, with changes recognized through earnings in the recovery for unfunded loan commitments.

The reserve for unfunded loan commitments fluctuates primarily based on changes in construction related commitments between reporting periods.

A recovery of $( 0.2 ) million was recorded for the three months ended March 31, 2026, reflecting a decrease of $ 0.1 million compared to the same period in 2025.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

The following table presents activity in the life-of-loss reserve for unfunded loan commitments as of and for the dates presented:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in Thousands) 2026 2025

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Balance at beginning of period $ 2,992 $ 3,186

Provision (Recovery) for Unfunded Commitments 335 191 ( 114 ) ( 88 )

Recovery for Unfunded Loan Commitments ( 218 ) ( 114 )

Balance at end of period $ 2,774 $ 3,072

Amounts are added to or subtracted from the reserve for unfunded commitments through a credit or charge to current earnings in the provision (recovery) for unfunded commitments.

The reserve for unfunded commitments fluctuates primarily based upon levels of construction commitments in the comparative periods.

Legal Proceedings

In the normal course of business, the Company is subject to various legal and administrative proceedings and claims.

Legal and administrative proceedings are subject to inherent uncertainties and unfavorable rulings could occur, and although the timing and outcome of any legal or administrative proceeding cannot be predicted with certainty, the Company believes, based on current knowledge, that the resolution of any such matters will not have a material adverse effect on the Company.

Legal and administrative proceedings are subject to inherent uncertainties and unfavorable rulings could occur, and the timing and outcome of any legal or administrative proceeding cannot be predicted with certainty.

Other than as set forth below, as of March 31, 2026, the Company is not involved in any other material pending legal proceedings other than proceedings occurring in the ordinary course of business.

On April 12, 2026, the Company and the Bank, along with certain unaffiliated third parties, were named as defendants in a lawsuit filed in the Circuit Court of Greenbrier County, West Virginia by James C.

Justice, II, Cathy L.

Justice, James C.

Justice, III and various related entities that he and/or they own and control (such entities, the “Justice Entities” and collectively, the “Plaintiffs”).

The allegations contained in the lawsuit relate to a series of loans, which were later reduced to judgments (such loans subsequently reduced to judgments, the “Judgments”) made by the Bank to certain Justice Entities that are secured by collateral pledged by certain Justice Entities and are backed by personal guarantees from James C.

Justice, II and Cathy L.

Justice and, in certain cases, by personal guarantees from James C.

Justice, III.

The allegations contained in the lawsuit also relate to a transaction in which the Bank sold its interest in the Judgments and related collateral to one of the unaffiliated third-party defendants.

In the lawsuit the Plaintiffs allege that the Bank (i) breached an implied covenant of good faith and fair dealing, (ii) tortiously interfered with Plaintiffs’ business interests, (iii) harmed Plaintiffs through a series of allegedly misleading promises, representations and/or omissions on which Plaintiffs allegedly relied, (iv) tortiously interfered with the Plaintiffs’ business interests under agreements between Plaintiffs and the unaffiliated third-party defendants, and (v) together with the unaffiliated third-party defendants, participated in a scheme to restrain trade and competition in an alleged market in the which certain collateral securing the Judgments operates.

With respect to the Bank, the Plaintiffs have requested the court to rescind the Bank’s sale of the Judgments to the unaffiliated third-party purchaser and seek declaratory relief that the Plaintiffs are entitled to pay-off the Judgments at no more than the sale price.

The Plaintiffs further seek injunctions against the unaffiliated third-party defendants, direct damages of at least $ 500 million and additional consequential and punitive damages, and payment of costs, expenses and attorneys’ fees.

The Company and the Bank deny the allegations contained in the lawsuit and intend to vigorously defend the matter, the validity of the Bank’s sale of the Judgments to the unaffiliated third-party purchaser and the Bank’s conduct prior to selling the Judgments.

Based on information presently available to the Company and the Bank and based on consultation with legal counsel, the Company believes that the Company and the Bank have meritorious defenses to all allegations contained in the lawsuit.

At this early stage of the lawsuit, the Company is not yet able to make a determination as to the likelihood of an unfavorable outcome in this matter or to estimate the range of any possible loss.

CARTER BANKSHARES, INC.

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NOTE 11 – TAX EFFECTS ON OTHER COMPREHENSIVE INCOME

The following tables present the change in components of other comprehensive income for the periods presented, net of tax effects:

Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025

The following tables present the change in components of other comprehensive (loss) income for the periods presented, net of tax effects:

Three Months Ended March 31, 2026

(Dollars in Thousands) Pre-Tax

Amount Tax Expense Net of Tax

Amount Pre-Tax

Amount Tax Expense Net of Tax

Net Unrealized Gains Arising during the Period $ 7,968 $ ( 1,771 ) $ 6,197 $ 23,615 $ ( 5,147 ) $ 18,468

Other Comprehensive Income $ 7,968 $ ( 1,771 ) $ 6,197 $ 23,615 $ ( 5,147 ) $ 18,468

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Amount Tax Benefit Net of Tax

Net Unrealized Losses Arising during the Period $ ( 901 ) $ 153 $ ( 748 )

Reclassification Adjustment for Gains included in Net Income ( 80 ) 18 ( 62 )

Other Comprehensive Loss $ ( 981 ) $ 171 $ ( 810 )

Three Months Ended March 31, 2025

(Dollars in Thousands) Pre-Tax

Amount Tax Expense Net of Tax

Amount Pre-Tax

Amount Tax (Expense) Benefit Net of Tax

Net Unrealized Gains Arising during the Period $ 10,383 $ ( 2,235 ) $ 8,148

Reclassification Adjustment for Gains included in Net Income — — — ( 36 ) 8 ( 28 )

Other Comprehensive Income $ 10,383 $ ( 2,235 ) $ 8,148

NOTE 12 - PROVISION FOR INCO M E T AX ES

The following is a reconciliation of the differences between income tax provision and the amount computed by applying the statutory federal income tax rate to income before taxes for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,

The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before taxes.

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

Three Months Ended March 31,

(Dollars in Thousands) Amount Percent Amount Percent

Federal Statutory Rate $ 23,106 21.0 $ 2,339 21.0

State and Local Income Taxes, Net of Federal Income Tax Effect 1

1,486 1.4 261 2.3

(Dollars in Thousands) Amount Percent Amount Percent Amount Percent Amount Percent

Federal Income Tax at Statutory Rate $ 1,502 21.0 $ 1,476 21.0 $ 6,073 21.0 $ 4,239 21.0

State Income Tax, net of Federal Benefit 160 2.2 98 1.4 551 1.9 383 1.9

Tax-exempt Interest, net of Disallowance ( 109 ) ( 1.5 ) ( 125 ) ( 1.8 ) ( 340 ) ( 1.2 ) ( 393 ) ( 2.0 )

Federal Tax Credits, net of Basis Reduction ( 157 ) ( 2.2 ) ( 192 ) ( 2.7 ) ( 466 ) ( 1.6 ) ( 504 ) ( 2.5 )

Tax Credit Investment Amortization, net of Federal Benefit 129 1.8 22 0.3 385 1.3 280 1.4

Rehabilitation Tax Credits, Net of Basis Reduction — — ( 152 ) ( 1.4 )

Tax Credit Investment Amortization, Net of Federal Benefits 45 — 128 1.2

Change in Valuation Allowance 45 0.1 31 0.3

Nontaxable or Nondeductible Items

Tax-Exempt Interest, Net of Disallowance ( 103 ) ( 0.1 ) ( 117 ) ( 1.1 )

Income From Bank Owned Life Insurance ( 85 ) ( 0.1 ) ( 467 ) ( 4.2 )

Interim Period Effective Tax Rate Adjustment ( 114 ) ( 1.6 ) 33 0.5 40 0.2 ( 84 ) ( 0.4 )

Other 29 — ( 22 ) ( 0.1 )

Other Adjustments

Taxes and Penalty on Surrender of Bank Owned Life Insurance — — — —

Interim Period Effective Rate Adjustment ( 254 ) ( 0.2 ) 181 1.6

Other 5 — 1 —

Income Tax Provision and Effective Income Tax Rate $ 24,274 22.1 $ 2,183 19.6

The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before taxes.

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, tax-exempt income from bank owned life insurance (“BOLI”), and tax benefits resulting from certain partnership investments.

During the nine months ended September 30, 2025, tax-exempt bank owned life insurance income increased primarily due to a $ 1.9 million tax-free BOLI death benefit recorded in the first quarter of 2025.

In addition, the increase in Other primarily related to a $ 1.2 million taxable gain on a surrender of BOLI policies and a resulting $ 0.1 million Modified Endowment Contract (“MEC”) penalty.

The Company elected to adopt the proportional amortization method of accounting for all qualifying equity investments within the historic tax credits (“HTC”) program.

The Company makes equity investments as a limited partner in various partnerships that sponsor HTC as a strategic tax initiative designed to receive income tax credits and other income tax benefits, such as deductible flow-through losses.

As of September 30, 2025 and December 31, 2024, the Company recognized $ 0.6 million and

1 For the three months ended March 31, 2026 and 2025, North Carolina comprised the majority (greater than 50%) of the tax effect in this category.

For the three months ended March 31, 2026, the Company recorded an income tax provision of $ 24.3 million, reflecting an effective tax rate of 22.1 %, compared to $ 2.2 million and an effective tax rate of 19.6 % for the three months ended March 31, 2025.

For the period ended March 31, 2026, the annual effective tax rate was greater than the statutory rate of 21%, primarily due to a $ 98.9 million increase in pre-tax income, attributable to the Transaction, and the expiration of tax credits generated from historic tax credit investments.

Conversely, during the three months ended March 31, 2025, a tax-free BOLI death benefit of $ 1.9 million further reduced the annual effective tax rate reported in that period.

CARTER BANKSHARES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

$ 1.1 million, respectively, in HTC equity investments recorded as a component of other assets on the Consolidated Balance Sheets.

The Company elected to adopt the proportional amortization method of accounting for all qualifying equity investments within the historic tax credit (“HTC”) program.

As of March 31, 2026 and December 31, 2025, the Company recognized $ 0.3 million and $ 0.5 million, respectively, in HTC equity investments recorded as a component of other assets on the Consolidated Balance Sheets.

The Company records income tax credits and other income tax benefits received from its HTC investments as a component of the income tax provision on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows.

1 unchanged sentence

The Company records non-income-tax-related activity and other returns received from its HTC investments as a component of other noninterest income on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows.

As of September 30, 2025 and September 30, 2024, the Company has not recognized any non-income-tax-related activity from its HTC investments.

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act,” into law.

The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense.

The Company is currently evaluating the impact on future periods.

As of March 31, 2026 and March 31, 2025, the Company had not recognized any non-income-tax-related activity from its HTC investments.

NOTE 13 – STOCK REPURCHASE PLAN

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.

On February 2, 2026, the Company announced that its 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.

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The repurchase program does not obligate the Company to purchase any particular number of shares.

During the three and nine months ended September 30, 2025, the Company repurchased 262,269 and 809,601 shares of its common stock at a total cost of $ 4.9 million and $ 14.0 million, respectively, and at a weighted average cost per share of $ 18.70 and $ 17.35 , respectively.

The Company did not repurchase any shares under this repurchase plan during the three months ended March 31, 2026.

NOTE 14 - SEGMENT REPORTING

The Company is a holding company and the parent company to the Bank and conducts its business solely through the Bank.

As a state-chartered commercial bank, the Bank earns revenue primarily from interest on loans and securities and fees charged for financial services provided to customers.

The Company is a financial holding company and the parent company to the Bank and conducts its business solely through the Bank.

As a state-chartered commercial bank, and state member of the FRB, the Bank earns revenue primarily from interest on loans and securities and fees charged for financial services provided to customers.

The Company operates through a single operating and reporting segment, Community Banking that offers services which include accepting a full range of deposit products and originating commercial and consumer loans.

All financial information is reported on a consolidated basis and is evaluated regularly by the Chief Executive Officer, the Company’s Chief Operating Decision Maker (“CODM”) in allocating resources and assessing performance.

The CODM uses the consolidated net income to benchmark the Company against it competitors.

The CODM uses the consolidated net income to benchmark the Company against its competitors.

The benchmarking analysis in conjunction with monitoring of actual to budget results are used in assessment of performance and in establishing compensation.

Loans, investments and deposits provide the revenues, net in the community bank’s operation.

Interest expense, provision (recovery) for credit losses and salaries and benefits provide the significant expenses in the community bank’s operation.

Interest expense, recovery for credit losses and salaries and employee benefits provide the significant expenses in the community bank’s operation.

The results of operations for the Company’s single reporting segment are shown within the Consolidated Statements of Income and Consolidated Balance Sheets.

NOTE 15 - SUBSEQUENT EVENTS

On May 1, 2026, the Company announced that it has completed the sale of its membership interest in Bearing Insurance Group, LLC to an unaffiliated third party.

Based on currently available information, the Company expects to recognize a pre-tax gain of approximately $ 35.8 million in the second quarter of 2026.

CARTER BANKSHARES, INC.

1 unchanged sentence

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Carter Bankshares, Inc., its operations, and its present business environment, and its consolidated results of operations and financial condition and highlights material changes in its financial condition and results of operations as of and for the three and nine month periods ended September 30, 2025 and September 30, 2024.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist readers in understanding Carter Bankshares, Inc.’s operations, financial condition, and current business environment.

The MD&A is provided as a supplement to, and should be read in conjunction with, The Company’s Consolidated Financial Statements and the accompanying notes thereto contained in Item 1 of this Quarterly Report on Form 10-Q.

12 unchanged sentences

◦ Off-Balance Sheet Arrangements

This section reviews the Company’s financial condition and results of operations and highlights material changes in its financial condition and results of operations as of and for the three-month periods ended March 31, 2026 and March 31, 2025.

Certain prior period amounts have been reclassified to conform to the current period presentation.

In addition, certain tables may include additional periods to illustrate trends within the Company’s consolidated financial statements and related disclosures.

The results of operations presented in the consolidated financial statements are not necessarily indicative of future results.

Important Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains or incorporates certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements may include statements relating to our financial condition, market conditions, results of operations, plans, including our strategic plan, brand strategy, and guiding principles and the anticipated results of the foregoing, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality and nonaccrual and nonperforming loans.

Forward looking statements are typically identified by words or phrases such as “will likely result,” “expect,” “anticipate,” “estimate,” “forecast,” “project,” “intend,” “believe,” “assume,” “strategy,” “trend,” “plan,” “outlook,” “outcome,” “continue,” “remain,” “potential,” “opportunity,” “comfortable,” “current,” “position,” “maintain,” “sustain,” “seek,” “achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may.

These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and often are beyond the Company’s control.

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

Although the Company believes the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect.

Actual results may differ significantly from those expressed in or implied by these forward-looking statements.

The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements including, but not limited to the effects of:

• market interest rates and the impacts of market interest rates on economic conditions, customer behavior, and the Company’s net interest margin, net interest income and its deposit, loan and securities portfolios;

• inflation, market and monetary fluctuations;

• changes in trade, tariffs, monetary and fiscal policies and laws of the U.S.

government and the related impacts on economic conditions and financial markets, and changes in policies of the Federal Reserve, FDIC and U.S.

Department of the Treasury;

• market interest rates and the impacts of market interest rates on economic conditions, customer behavior, and the Company’s net interest margin, net interest income, funding costs and its deposit, loan and securities portfolios;

CARTER BANKSHARES, INC.

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

• inflation, market and monetary fluctuations;

• changes in trade policies, tariffs, monetary and fiscal policies and laws of the U.S.

government and the related impacts on economic conditions and financial markets, and changes in policies of the Federal Reserve, FDIC and U.S.

Department of the Treasury;

• changes in accounting policies, practices, or guidance, for example, our adoption of Current Expected Credit Losses (“CECL”) methodology, including potential volatility in the Company’s operating results due to application of the CECL methodology;

• cyber-security threats, attacks or events;

• rapid technological developments and changes;

• rapid technological developments and changes, including emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action or increase cybersecurity threats;

• our ability to resolve our nonperforming assets and our ability to secure collateral on loans that have entered nonaccrual status due to loan maturities and failure to pay in full;

• changes in the Company’s liquidity and capital positions;

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

• concentrations of loans secured by real estate, particularly commercial real estate (“CRE”) loans, and the potential impacts of changes in market conditions on the value of real estate collateral;

• increased delinquency and foreclosure rates on CRE loans;

• an insufficient allowance for credit losses;

• the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, war and other geopolitical conflicts or public health events, and of any governmental and societal responses thereto;

these potential adverse effects may include, without limitation, adverse effects on the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company’s liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;

• the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, war and other geopolitical conflicts or public health events (such as pandemics), and of any governmental and societal responses thereto;

these potential adverse effects may include, without limitation, adverse effects on macroeconomic conditions;

the ability of the Company's borrowers to satisfy their obligations to the Company, on the value of collateral securing loans, on the demand for the Company's loans or its other products and services, on incidents of cyberattack and fraud, on the Company’s liquidity or capital positions, on risks posed by reliance on third-party service providers, on other aspects of the Company's business operations and on financial markets and economic growth;

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

• regulatory supervision and oversight, including our relationship with regulators and any actions that may be initiated by our regulators;

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

• legislation affecting the financial services industry as a whole, and the Company and the Bank, in particular and changes impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies;

• the outcome of pending and future litigation and/or governmental proceedings;

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

• the soundness of other financial institutions and any indirect exposure related to large bank failures and their impact on the broader market through other customers, suppliers and partners or that the conditions which resulted in the liquidity concerns with those failed banks may also adversely impact, directly or indirectly, other financial institutions and market participants with which the Company has commercial or deposit relationships with;

• material increases in costs and expenses;

• reliance on significant customer relationships;

CARTER BANKSHARES, INC.

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

• general economic or business conditions, including unemployment levels, supply chain disruptions, slowdowns in economic growth and government shutdowns;

• significant weakening of the local economies in which we operate;

• material increases in costs and expenses;

• reliance on significant customer relationships;

• general economic or business conditions, including unemployment levels, supply chain disruptions, slowdowns in economic growth, government shutdowns and geopolitical instability and tensions;

• significant weakening of the local economies in which the Company operates;

• changes in customer behaviors, including consumer spending, borrowing and saving habits;

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Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made.

We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events are expressed in or implied by a forward-looking statement may, and often do, differ materially from actual results.

Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update, revise or clarify any forward-looking statement to reflect developments occurring after the statement is made, except as required by law.

The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events are expressed in or implied by a forward-looking statement may, and often do, differ materially from actual results.

Any forward-looking statement speaks only as to the date on which it is made, and the Company undertakes no obligation to update, revise or clarify any forward-looking statement to reflect developments occurring after the statement is made, except as required by law.

Explanation of Use of Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with generally accepted accounting principles in the United States (“GAAP”), our management uses, and this quarterly report contains or references, interest and dividend income, yield on interest earning assets, net interest income and net interest margin on a fully taxable equivalent, (“FTE”) basis, which are non-GAAP financial measures.

This quarterly report and the accompanying tables discuss financial measures that we believe are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results from period-to-period in a meaningful manner.

Management also believes these measures provide information useful to investors in understanding the Company’s underlying business, operational performance and performance trends as these measures facilitate comparisons with the performance of other companies in the financial services industry.

The Company believes the presentation of interest and dividend income, yield on interest earning assets, net interest income and net interest margin on an FTE basis ensures the comparability of interest and dividend income, yield on interest earning assets, net interest income and net interest margin arising from both taxable and tax-exempt sources and is consistent with industry practice.

Interest and dividend income (GAAP) per the Consolidated Statements of Income is reconciled to interest and dividend income adjusted on an FTE basis, yield on interest earning assets (GAAP) is reconciled to yield on interest earning assets adjusted on an FTE basis, net interest income (GAAP) is reconciled to net interest income adjusted on an FTE basis and net interest margin (GAAP) is reconciled to net interest margin adjusted on an FTE basis in the "Results of Operations and Financial Condition - Net Interest Income" section of this MD&A.

Although management believes that these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered as an alternative to GAAP or considered to be more relevant than financial results determined in accordance with GAAP, nor are they necessarily comparable with similar non-GAAP measures that may be presented by other companies.

Investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial

In addition to results presented in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”), management uses, and this quarterly report contains or references, certain non-GAAP financial measures, including interest and dividend income, yield on interest earning assets, net interest income, and net interest margin on a fully taxable equivalent (“FTE”) basis.

These non-GAAP measures should be read along with the accompanying tables that provide reconciliations of GAAP to non-GAAP financial measures.

Management believes these non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare the Company’s operating results across periods in a meaningful manner.

These measures also assist in assessing the Company’s underlying operating performance and performance trends and facilitate comparisons with other financial services companies.

CARTER BANKSHARES, INC.

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

condition of the Company.

Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

The Company believes that presenting interest and dividend income, yield on interest earning assets, net interest income, and net interest margin on an FTE basis improves comparability between income derived from taxable and tax-exempt sources and is consistent with industry practice.

Accordingly, GAAP measures presented in the Consolidated Statements of Income are reconciled to their corresponding FTE amounts, including:

• interest and dividend income,

• yield on interest earning assets,

• net interest income, and

• net interest margin.

These reconciliations are provided in the "Results of Operations and Financial Condition - Net Interest Income" section of this MD&A.

While management believes these non-GAAP measures provide meaningful supplemental information, they should not be considered as an alternative to GAAP results, as more relevant than financial results prepared in accordance with GAAP, or as necessarily comparable to similarly titled measures used by other companies.

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of the Company’s financial condition or results of operations as reported under GAAP.

Investors are encouraged to review the Company’s GAAP financial results and all other relevant information when evaluating its performance and financial condition.

Critical Accounting Estimates

The Company’s critical accounting estimates involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2025 have remained unchanged from the disclosures presented under the heading “Critical Accounting Estimates” in its Annual Report on Form 10-K for the year ended December 31, 2024 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are incorporated herein by reference.

The Company’s critical accounting estimates involving significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2026 have remained unchanged from the disclosures presented under the heading “Critical Accounting Estimates” in its Annual Report on Form 10-K for the year ended December 31, 2025 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and are incorporated herein by reference.

Overview and Strategy

Carter Bankshares, Inc.

(the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.8 billion at September 30, 2025.

(the “Company”) is a financial holding company, as of October 27, 2025, headquartered in Martinsville, Virginia with assets of $4.8 billion at March 31, 2026.

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 63 branches in Virginia and North Carolina.

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

The Bank became a member of the Federal Reserve System on November 13, 2025.

The Company provides a full range of commercial banking, consumer banking, mortgage and other services through the Bank.

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

At the close of business on May 23, 2025, the Company completed the acquisition of two leased branch facilities and the deposits associated therewith, located in Mooresville, North Carolina and Winston-Salem, North Carolina, from First Reliance Bank (the “Branch Purchase”).

In the Branch Purchase, the Bank acquired $55.9 million of deposits, as well as cash, personal property and other fixed assets related to the branch locations purchased, and welcomed 10 new associates to its team.

The Branch Purchase did not include any loans.

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 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 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:

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 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 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.

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 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.

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 and premises and equipment 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 or recovery for credit losses, compensation and benefits, occupancy and equipment, technology and data processing, regulatory assessments, and other operating expenses.

As part of its three-year strategic plan, the Company is working to elevate brand awareness by leveraging its core strengths:

exceptional service and lasting customer relationships.

We believe these core strengths set the Company apart in a competitive landscape.

The multi-year initiative aims for sustainable growth through innovation, operational excellence, and a continual focus on customer experience.

A key strategy is expanding consumer and business banking to meet customers’ evolving needs.

Recent milestones include comprehensive rebranding, new product and service launches, modernization of locations, and

CARTER BANKSHARES, INC.

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

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 $228.6 million as of September 30, 2025.

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 $6.5 million and $8.8 million during the three months ended September 30, 2025 and 2024, respectively, and by $20.0 million and $27.2 million during the nine months ended September 30, 2025 and 2024, respectively, or by $85.2 million in the aggregate.

upgrades to digital platforms, which we believe have led to deeper customer engagement and increased community impact.

The Company’s brand identity remains rooted in customers, associates, and communities, reflecting the Company’s dedication to delivering superior value and lasting success.

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

We anticipate this strategy will primarily focus on organic growth, but the Company will also consider opportunistic acquisitions that align with this strategy.

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

The Company will seek to grow loans and deposits and increase fee income.

At the same time, it will closely monitor operating expenses.

The Company is executing this strategy to support its brand and grow its business in its current markets.

It will also apply this approach when entering new markets .

On March 26, 2026, the Bank completed the sale (the “Transaction”) of all loans subsequently reduced to judgments related to various entities in which James C.

Justice, II has an interest (such loans, subsequently reduced to judgments, the “Judgments”).

The Transaction was completed as an absolute, “as-is, where-is” sale to an unaffiliated third party.

The Company received consideration of $289.5 million in cash in the Transaction.

Immediately prior to the Transaction, the Judgments had an outstanding aggregate principal amount of $209.5 million, all of the Judgments were nonperforming and on nonaccrual status, and the Company had recorded a specific reserve with respect to the Judgments of $18.0 million as of December 31, 2025.

Management’s continued focus on the resolution of this relationship has improved overall asset quality, reduced credit concentration risk and helped to optimize capital and liquidity.

Transaction Summary

• Received consideration of $289.5 million in cash in the Transaction during the first quarter of 2026;

• Recognized a net gain on the Transaction of $80.0 million, comprised of:

◦ $65.0 million gain on the Transaction;

◦ $15.0 million net recovery;

• Released $18.0 million of specific reserves related to the Judgments;

• The Transaction was accretive to diluted earnings per share by $3.50 for the first quarter of 2026;

• The Transaction increased book value per share by $3.49 for the first quarter of 2026.

Results of Operations and Financial Condition

Earnings Summary

Highlights for the Three Months Ended September 30, 2025

• Net interest income increased $4.9 million, or 17.1%, to $33.7 million for the three months ended September 30, 2025 compared to $28.8 million for the same period in 2024;

• The provision (recovery) for credit losses was an expense of $2.9 million for the three months ended September 30, 2025, compared to a recovery for credit losses of $(0.4) million during the same period in 2024;

• Total noninterest income decreased $0.1 million to $5.4 million for the three months ended September 30, 2025 compared to the same period in 2024;

• Total noninterest expense increased $1.3 million to $28.7 million for the three months ended September 30, 2025 compared to the same period in 2024;

• Provision for income taxes increased $0.3 million to $1.7 million for the three months ended September 30, 2025 compared to the same period in 2024.

Highlights for the Nine Months Ended September 30, 2025

◦ Net interest income increased $10.9 million, or 12.8%, to $96.2 million for the nine months ended September 30, 2025 compared to $85.3 million for the same period in 2024;

◦ The provision (recovery) for credit losses was a recovery of $(1.5) million for the nine months ended September 30, 2025, compared to a provision for credit losses of $0.1 million for the same period in 2024;

◦ Total noninterest income increased $1.2 million to $17.2 million for the nine months ended September 30, 2025 compared to the same period in 2024;

◦ Total noninterest expense increased $4.9 million to $86.1 million for the nine months ended September 30, 2025 compared to the same period in 2024;

◦ Provision for income taxes increased $2.1 million to $6.0 million for the nine months ended September 30, 2025 compared to the same period in 2024.

Balance Sheet Highlights (period-end balances, September 30, 2025 compared to December 31, 2024 )

• The available-for-sale securities portfolio increased $9.5 million and is currently 15.0% of total assets compared to 15.4% of total assets;

• Total portfolio loans increased $210.8 million, or 7.8%, on an annualized basis, due to loan growth during the nine months ended September 30, 2025;

• The portfolio loans to deposit ratio was 91.1%, compared to 87.3%;

• At September 30, 2025, nonperforming loans decreased by $0.7 million to $258.6 million compared to December 31, 2024.

Nonperforming loans as a percentage of total portfolio loans were 6.74% compared to 7.15%;

Highlights for the Three Months Ended March 31, 2026 compared to the Three Months Ended March 31, 2025.

• Net interest income totaled $35.9 million, an increase of $5.8 million, or 19.2% compared to the same period in 2025;

• Net interest margin, increased 39 basis points to 3.07%, compared to 2.68% for the same period in 2025;

• The recovery for credit losses was $33.9 million, compared to a recovery for credit losses of $2.0 million for the same period in 2025;

• Total noninterest income increased $64.1 million to $71.0 million compared to the same period in 2025 primarily due to the $65.0 million gain on the Transaction;

• Total noninterest expense increased $3.0 million to $31.0 million compared to the same period in 2025;

• Income tax provision increased $22.1 million to $24.3 million compared to $2.2 million for the same period in 2025.

CARTER BANKSHARES, INC.

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

• The Allowance for Credit Losses, (“ACL”) to total portfolio loans ratio was 1.92% compared to 2.09%.

The ACL on portfolio loans totaled $73.8 million at September 30, 2025, compared to $75.6 million at December 31, 2024;

• Total deposits increased $56.9 million, or 1.8%, on an annualized basis, to $4.2 billion at September 30, 2025, compared to December 31, 2024;

• FHLB borrowings increased $105.5 million to $175.5 million at September 30, 2025 compared to $70.0 million at December 31, 2024.

The Company reported net income of $5.4 million , or $0.24 diluted earnings per share, and $22.9 million , or $1.00 diluted earnings per share for the three and nine months ended September 30, 2025, respectively, compared to net income of $5.6 million , or $0.24 diluted earnings per share, and $16.2 million , or $0.70 diluted earnings per share, for the three and nine months ended September 30, 2024, respectively .

Three Months Ended September 30, Nine Months Ended September 30,

Balance Sheet Highlights (period-end balances, March 31, 2026 compared to December 31, 2025 )

• The available-for-sale securities portfolio decreased $29.5 million and is currently 13.8% of total assets compared to 14.3% of total assets;

• Total portfolio loans decreased $151.1 million due to the Transaction, partially offset by net loan growth during the quarter of $58.4 million;

• The portfolio loans to deposit ratio was 88.0%, compared to 92.1%;

• Nonperforming loans (“NPLs”) decreased significantly by $220.0 million to $24.0 million compared to $244.0 million due to the Transaction and NPLs to total portfolio loans were 0.64% compared to 6.29%;

• The allowance for credit losses to total portfolio loans was 1.41%, compared to 1.84%, primarily reflecting the reversal of specific reserves of $18.0 million related to the Judgments;

• Total deposits increased $24.4 million, or 2.3%, on an annualized basis, to $4.2 billion, compared to December 31, 2025;

• FHLB borrowings decreased $178.5 million, reflecting the repayment of borrowings utilizing proceeds from the Transaction.

The Company reported net income of $85.8 million , or $3.88 diluted earnings per share for the three months ended March 31, 2026, compared to net income of $9.0 million , or $0.39 diluted earnings per share for the three months ended March 31, 2025 .

Three Months Ended March 31,

PERFORMANCE RATIOS 2026 2025

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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 balances of interest-earning assets and 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 are 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 Quarterly Report on Form 10-Q.

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.

Interest and dividend income, yield on interest-earning assets, 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:

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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) Three Months Ended March 31,

Interest and Dividend Income (GAAP) $ 59,185 $ 56,007

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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 periods presented:

(Dollars in Thousands) Three Months Ended September 30, 2025 Three Months Ended September 30, 2024

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 periods presented:

(Dollars in Thousands) Three Months Ended March 31, 2026 Three Months Ended March 31, 2025

Balance Income/

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Total Securities 745,288 5,665 3.08 % 819,553 6,739 3.33 %

Tax-Free Loans 1, 2

84,366 695 3.27 % 99,810 815 3.25 %

Taxable Loans 1

Commercial Real Estate 2,132,911 31,687 6.03 % 1,891,376 29,180 6.26 %

Commercial & Industrial 2

224,422 3,946 7.13 % 212,851 3,220 6.14 %

Residential Mortgage 829,413 8,728 4.27 % 811,508 8,499 4.25 %

Other Consumer 26,526 279 4.27 % 28,329 419 6.00 %

Construction 466,197 8,096 7.04 % 432,761 7,268 6.81 %

Other 231,620 — — % 283,839 — — %

Total Loans 1

Federal Home Loan Bank Stock 8,956 144 6.38 % 11,304 210 7.39 %

Total Interest-Earning Assets 4,680,668 $ 59,333 5.03 % 4,447,455 $ 56,785 5.08 %

Noninterest Earning Assets 123,748 108,760

Total Assets $ 4,804,416 $ 4,556,215

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-Bearing Demand $ 809,318 $ 3,509 1.72 % $ 604,630 $ 2,838 1.87 %

Money Market 554,903 3,614 2.58 % 502,008 4,012 3.18 %

Savings 341,123 141 0.16 % 386,698 153 0.16 %

Certificates of Deposit 1,899,939 16,761 3.50 % 1,835,329 18,515 4.01 %

Total Interest-Bearing Deposits 3,605,283 24,025 2.64 % 3,328,665 25,518 3.05 %

FHLB Borrowings 119,870 1,284 4.25 % 171,424 2,143 4.97 %

Other Borrowings 11,145 142 5.05 % 10,070 136 5.37 %

Total Borrowings 131,015 1,426 4.32 % 181,494 2,279 5.00 %

Total Interest-Bearing Liabilities 3,736,298 25,451 2.70 % 3,510,159 27,797 3.15 %

Noninterest-Bearing Liabilities 658,178 672,208

Shareholders' Equity 409,940 373,848

Total Liabilities and Shareholders' Equity $ 4,804,416 $ 4,556,215

Net Interest Income 2

3,911,089 52,736 5.47 % 3,660,664 48,586 5.38 %

Net Interest Margin 2

2.87 % 2.59 %

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.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

(Dollars in Thousands) Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024

Balance Income/

Expense Rate Average

Balance Income/

Interest-Bearing Deposits with Banks $ 63,256 $ 2,111 4.46 % $ 33,049 $ 1,352 5.46 %

Tax-Free Investment Securities 2

11,622 253 2.91 % 11,779 255 2.89 %

Taxable Investment Securities 809,533 20,123 3.32 % 836,993 22,730 3.63 %

Total Securities 821,155 20,376 3.32 % 848,772 22,985 3.62 %

Tax-Free Loans 1, 2

89,036 2,188 3.29 % 105,569 2,566 3.25 %

Taxable Loans 1

3,642,182 148,365 5.45 % 3,434,407 138,025 5.37 %

Total Loans 3,731,218 150,553 5.39 % 3,539,976 140,591 5.31 %

Federal Home Loan Bank Stock 7,970 396 6.64 % 16,089 892 7.41 %

Other Restricted Stock, at Cost 15,969 245 6.22 % 6,499 112 6.99 %

Total Interest-Earning Assets 4,748,330 $ 59,339 5.07 % 4,554,103 $ 56,185 5.00 %

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3.08 % 2.70 %

Net Interest Spread 2.58 % 2.10 %

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 (GAAP) increased $4.9 million, or 17.1% and $10.9 million, or 12.8% for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Net interest income, on an FTE basis (non-GAAP), increased $4.9 million, or 16.9%, and $10.8 million, or 12.6% for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Net interest margin (GAAP) increased 28 basis points and 21 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Net interest margin, on an FTE basis (non-GAAP), also increased 28 basis points and 21 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

The increases were driven by a five basis point decrease in the yields on average earning assets during the three month period, a three basis point increase in yields on average earnings assets for the nine month period, and declines in funding costs of 45 and 28 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

For the three and nine months ended September 30, 2025, lower interest-bearing funding costs were positively impacted by the Federal Reserve’s reduction of short-term interest rates by 25 basis points during the third quarter of 2025, as well as by cumulative reductions of 100 basis points implemented between September 2024 to December 2024.

During the nine months ended September 30, 2025, $1.4 billion of CDs matured and repriced from an average rate of 4.22% to an average rate of 3.50%.

Interest and dividend income (GAAP) increased $2.6 million and $7.7 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Interest and dividend income, on an FTE basis (non-GAAP), increased $2.5 million and $7.6 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily resulting from average loan growth of $228.8 million and $191.2 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Average interest-earning assets increased primarily due to growth in average loans and increases of $20.6 million and $30.2 million in average interest-bearing

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

deposits with banks during the three and nine months ended September 30, 2025, respectively, partially offset by decreases of $13.9 million and $27.6 million in average investment securities and decreases of $2.3 million and $8.1 million in average FHLB stock for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

The change in average investment securities and average loans 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.

As of September 30, 2025, the securities portfolio was comprised of 39.7% variable rate securities with approximately 90.4% that will reprice at least once over the next 12 months.

We believe having a balanced mix of floating and fixed rate securities is an important strategy during any economic cycle.

The two structures behave differently when interest rates change, therefore providing a hedge.

In times of rising interest rates, fixed rate bond market prices generally fall, which can result in unrealized losses, while floating rate bonds generally increase in yield and hold constant market prices.

In times of falling interest rates, fixed rate bond market prices generally increase, which can result in unrealized gains, while floating rate bonds generally decrease in yield and hold constant on market price.

The bank considers short- and intermediate-term interest rates, and the likelihood of directional change, to fine tune its weighting between the two structures.

Interest expense decreased $2.3 million and $3.2 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024.

Average interest-bearing deposits increased $276.6 million and $370.7 million, of which $196.1 million was brokered deposits, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024.

Average borrowings decreased $50.5 million and $171.7 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024, primarily due to increased deposit balances.

Overall, the cost of interest-bearing liabilities decreased 45 and 28 basis points for the three and nine months ended September 30, 2025, respectively, compared to the same periods 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, 68.6% of our CD portfolio and 77.2% of our outstanding FHLB borrowings will mature and reprice over the next twelve 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.

Net interest income for the three months ended March 31, 2026 increased $5.8 million, or 19.2%, to $35.9 million compared to the same period in 2025.

On an FTE basis (non-GAAP), net interest income increased $5.8 million to $36.1 million compared to the same period in 2025.

The increase in net interest income was primarily driven by growth in average interest-earning assets, particularly loans, and a reduction in the cost of interest-bearing liabilities.

Average interest-earning assets increased $194.2 million, or 4.3% , to $4.7 billion for the three months ended March 31, 2026, compared to $4.6 billion for the same period in 2025.

This increase was primarily attributable to growth in the loan portfolio, including commercial real estate (“CRE”), construction loans, residential mortgage loans and commercial & industrial loans,

CARTER BANKSHARES, INC.

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

partially offset by a decline in other loans due to the Transaction, and the decrease in the average balances of investment securities.

The yield on average interest-earning assets (GAAP) increased six basis points to 5.05% for the three months ended March 31, 2026, compared to 4.99% for the same period in 2025.

The yield on total interest-earning assets (FTE)(non-GAAP) increased seven basis points to 5.07% for the three months ended March 31, 2026 compared to 5.00% during the same period in 2025.

The increase reflects higher loan yields driven by new originations at higher rates and the repricing of variable-rate loans.

These improvements were partially offset by declines in both average balance and yields on investment securities.

Total interest expense decreased $2.6 million, or 10.1%, to $23.3 million for the three months ended March 31, 2026, compared to $25.9 million for the same period in 2025.

The average cost of total interest-bearing liabilities declined 41 basis points to 2.49%, primarily due to continued reductions in funding costs, as well as stabilization in deposit pricing, partially reflecting the broader interest rate environment.

As a result of these factors, net interest margin increased to 3.07% for the three months ended March 31, 2026, compared to 2.68% for the same period in 2025.

On an FTE basis (non-GAAP), net interest margin increased 38 basis points to 3.08%.

The following table sets forth for the periods presented a summary of the changes in interest earned and interest paid resulting from changes in volume and changes in rates:

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

(Dollars in Thousands) Volume 3

Rate Increase/

(Decrease) Volume 3

Rate Increase/

Interest Earned on:

1 unchanged sentence

Tax-free Investment Securities 2

(1) 1 — (3) 1 (2)

Taxable Investment Securities (585) (488) (1,073)

Total Securities (586) (488) (1,074)

Tax-free Loans 1 2

(127) 7 (120) (406) 28 (378)

Taxable Loans 1

3,361 (156) 3,205 8,443 1,897 10,340

Commercial Real Estate 3,619 (1,112) 2,507

Commercial & Industrial 2

Residential Mortgages 189 40 229

Other Consumer (26) (114) (140)

Construction 575 253 828

Total Loans 1

Federal Home Loan Bank Stock (40) (26) (66) (411) (85) (496)

4,539 (389) 4,150

Other Restricted Stock, at Cost 146 (13) 133

Total Interest-Earning Assets $ 4,187 $ (1,033) $ 3,154

10 unchanged sentences

Total Interest-Bearing Liabilities $ 1,240 $ (3,858) $ (2,618)

Change in Net Interest Margin $ 1,974 $ 2,920 $ 4,894 $ 5,501 $ 5,325 $ 10,826

Change in Net Interest Margin (FTE) 1, 2

$ 2,947 $ 2,825 $ 5,772

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

1 unchanged sentence

3 Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

Provision (Recovery) for Credit Losses

The Company recognizes provision (recovery) 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 provision (recovery) 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.

Provision (recovery) 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.

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 provision (recovery) for credit losses and net charge-offs for the periods presented:

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change 2025 2024 $ Change

Provision (Recovery) for Credit Losses $ 2,896 $ (432) $ 3,328 $ (1,459) $ 75 $ (1,534)

Provision (Recovery) for Unfunded Commitments 335 191 144 (114) (88) (26)

Total Provision (Recovery) for Credit Losses on Loans 3,231 (241) 3,472 (1,573) (13) (1,560)

Recovery for Credit Losses

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 loan 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.

The following table presents information regarding the recovery for credit losses and net (recoveries) / charge-offs for the periods presented:

(Dollars in Thousands) Three Months Ended March 31,

2026 2025 $ Change

Recovery for Credit Losses $ (33,917) $ (2,025) $ (31,892)

Recovery for Unfunded Loan Commitments (218) (114) (104)

Total Recovery for Credit Losses on Loans (34,135) (2,139) (31,996)

Provision for Securities — — —

Total Provision (Recovery) for Credit Losses $ 3,231 $ (241) $ 3,472 $ (1,573) $ (13) $ (1,560)

Net Loan Charge-offs $ 157 $ 15,345 $ (15,188) $ 379 $ 16,218 $ (15,839)

Net Loan Charge-offs (annualized) / Average Portfolio Loans 0.02 % 1.71 % 0.01 % 0.61 %

The provision (recovery) for credit losses was an expense of $2.9 million and a recovery of $(1.5) million for the three and nine months ended September 30, 2025, respectively, compared to a recovery for credit losses of $(432) thousand and an expense of $75 thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily driven by $3.8 million in general reserves established for higher new loan volume during the third quarter of 2025, along with the establishment of a $1.2 million specific reserve on an existing CRE relationship that has been in nonaccrual status since the first quarter of 2025 as a result of an updated appraisal.

The increases were partially offset by a reduction in the Other segment reserve, resulting from a lower reserve rate from 13.13% at September 30, 2024 to 9.49% at September 30, 2025, offset by lower curtailment payments during the three and nine months ended September 30, 2025 compared to the same periods in 2024.

The provision (recovery) for unfunded commitments was an expense of $335 thousand and a recovery of $(114) thousand for the three and nine months ended September 30, 2025, respectively, compared to an expense of $191 thousand and a recovery of $(88) thousand for the same periods in 2024, respectively.

The changes compared to the same periods in 2024 were primarily due to increased unfunded commitments in construction loans.

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

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

First, the reserve rate is extrapolated from the reserve rates calculated for certain commercial real estate funded loans within the ACL model.

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 Item 8.

Financial Statements and Supplementary Data for our ACL Policy, contained in our Annual Report on Form 10-K for the year ended December 31, 2024 .

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

The proportion of these segments affect the weighting.

Third, volume changes impact the total reserve calculation.

Total Recovery for Credit Losses $ (34,135) $ (2,139) $ (31,996)

Net Loan (Recoveries) / Charge-offs $ (14,929) $ 57 $ (14,986)

Net Loan (Recoveries) / Charge-offs (annualized) / Average Portfolio Loans (1.55) % 0.01 %

During the three months ended March 31, 2026, the Company recorded a recovery for credit losses of $33.9 million, compared to a recovery of $2.0 million for the same period in 2025.

The recovery for credit losses in the first quarter of 2026 primarily reflects the release of previously established specific reserves of $18.0 million, as well as a $15.0 million net recovery associated with the Judgments, in each case related to the Transaction.

In addition to the impact of the Transaction, specific reserves declined $0.9 million during the quarter related to other individually evaluated loans.

This decline was primarily attributable to the sale of one property securing a CRE loan relationship, improved performance and payments on another CRE loan, which reduced the required reserve, and a commercial and industrial (“C&I”) loan relationship returning to accrual status due to sustained payment performance, resulting in the removal of its specific reserves.

The Company also recorded a recovery for unfunded loan commitments of $0.2 million compared to $0.1 million for the same period in 2025.

The increase from the prior year was primarily due to a reduction in unfunded loan commitments, which is reflective of the increase in construction loans in the loan composition.

As a result of these factors, the Company recorded a net benefit to the recovery for credit losses, contributing to a decline in the allowance for credit losses to total portfolio loans declined to 1.41% during the quarter.

The net benefit to the recovery for credit losses was a significant driver of earnings for the first quarter of 2026.

Net recoveries totaled $14.9 million for the three months ended March 31, 2026, compared to net charge-offs of $0.1 million for the same period in 2025.

Net recoveries (annualized) to average portfolio loans, were 1.55% for the three months ended March 31, 2026 compared to net charge-offs of 0.01% for the same period in 2025.

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

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

Noninterest Income

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Gains on Sales of Securities, net $ — $ — $ — — % $ — $ 36 $ (36) (100.0) %

(Dollars in Thousands) Three Months Ended March 31,

2026 2025 $ Change % Change

Gain on the Transaction $ 65,000 $ — $ 65,000 NM

Gains on Sales of Securities, net 80 — 80 NM

Service Charges, Commissions and Fees 2,128 1,874 254 13.6 %

4 unchanged sentences

Total Noninterest Income $ 70,974 $ 6,901 $ 64,073 928.5 %

Total noninterest income decreased slightly by $0.1 million for the three months ended September 30, 2025, but increased by $1.2 million, or 7.4%, for the nine months ended September 30, 2025, compared to the same periods in 2024.

Insurance commission income declined for both the three and nine month periods due to lower activity compared to the same periods in

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

The most significant increase compared to the nine months ended September 30, 2024 was the $1.8 million increase in other noninterest income, primarily driven by a $1.9 million gain on a BOLI death benefit recorded in the first quarter of 2025.

NM- Not Meaningful

Noninterest income for the three months ended March 31, 2026 totaled $71.0 million, an increase of $64.1 million compared to the same period in 2025.

The increase was primarily driven by the $65.0 million gain on the Transaction, which is considered non-core in nature and not indicative of the Company’s ongoing operating performance.

Compared to the quarter ended March 31, 2025, insurance commissions increased $0.6 million, while other noninterest income decreased by $2.0 million, primarily reflecting favorable period-end adjustments within insurance commissions and the impact of a $1.9 million gain on a BOLI death benefit recognized in the first quarter of 2025, respectively.

Noninterest Expense

(Dollars in Thousands) Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 $ Change % Change 2025 2024 $ Change % Change

(Dollars in Thousands) Three Months Ended March 31,

2026 2025 $ Change % Change

Salaries and Employee Benefits $ 14,915 $ 13,657 $ 1,258 9.2 %

9 unchanged sentences

Total Noninterest Expense $ 31,012 $ 28,042 $ 2,970 10.6 %

For the three and nine months ended September 30, 2025, total noninterest expense increased $1.3 million and $4.9 million compared to the same periods in 2024.

The increase for the three months ended September 30, 2025 was primarily driven by higher professional and legal fees of $0.7 million, occupancy expenses, net, of $0.6 million, and other noninterest expenses of $0.5 million, partially offset by a $0.6 million decrease in salaries and employee benefits compared to the same period in 2024.

The increase in professional and legal fees was driven by costs associated with the Branch Purchase.

Additionally, occupancy expenses, net, increased due to higher software and maintenance costs, as well as increased depreciation expense related to the Branch Purchase.

The increase in other noninterest expense primarily related to activity on four other real estate owned (“OREO”) branch properties of $0.4 million.

While base salaries increased during the three months ended September 30, 2025, total salary expenses decreased due to higher salary cost deferrals associated with higher loan growth, which reduced the amount of salary expense recognized in the third quarter.

The increase in noninterest expense during the nine months ended September 30, 2025, compared to the same period in 2024 was primarily driven by the following increases:

other noninterest expenses of $2.1 million, occupancy expenses, net, of $1.8 million, advertising expenses of $0.8 million, professional and legal fees of $0.8 million, data processing expenses of $0.7 million, and debit card expenses of $0.5 million, partially offset by lower salaries and employee benefits of $1.3 million and FDIC insurance expenses of $0.5 million.

The increases in other noninterest expense was due primarily due to activity on four OREO branch properties, as previously discussed, and $0.5 million in 1035 exchange fees, as a result of the early surrender and transfer to new carriers of the Company’s BOLI policies, both of which were recorded in the second quarter of 2025.

As discussed above, the increase in occupancy expense, net, for the nine months ended September 30, 2025 was primarily due to additional software and maintenance expenses and higher depreciation expense.

The increase in advertising expenses primarily related to contributions made during the first quarter of 2025, as well as additional expenses incurred during the first nine months of 2025 related to the launching of the new brand refresh that commenced in the fourth quarter of 2024.

Similar to the variance above, the increase in professional and legal fees was driven by costs associated with the Branch Purchase, as well as various consulting expenses primarily due to project management.

The increase in data processing expenses related primarily to general inflationary cost increases for existing and new service agreements in the beginning of the year.

Debit card expenses increased during the period primarily due to higher credit card billing fees and elevated debit card fraud losses.

As discussed previously, while base salaries increased during the nine months ended September 30, 2025, total salary expenses decreased due to higher salary cost deferrals of $5.0 million associated with higher loan growth, which reduced the amount of salary expense recognized in the nine months ended September 30, 2025.

The decrease in FDIC insurance expense was primarily due to the curtailment payments which have reduced the outstanding balance of the aforementioned large nonperforming credit relationship from $301.9 million at September 30, 2024 to $228.6 million at September 30, 2025, which is a component used to determine the assessment.

Noninterest expense for the three months ended March 31, 2026 totaled $31.0 million, an increase of $3.0 million compared to the same period in 2025.

The increase was primarily driven by higher salaries and employee benefits of $1.3 million, as well as increases in other noninterest expense of $0.5 million, data processing expense of $0.4 million, occupancy expense of $0.4 million, and professional and legal fees of $0.3 million.

The increase in salaries and employee benefits was primarily attributable to higher incentive compensation, increased medical costs and annual merit increases, partially offset by higher deferred costs on loan originations.

Other noninterest expense increased primarily due to a $0.6 million write-down on one closed office that was transferred to OREO during the first quarter of 2026.

Data processing expense increased due to inflationary cost pressures and higher costs associated with new and existing service agreements implemented in early 2026.

The increase in occupancy expense was primarily attributable to maintenance contracts entered into during the first quarter of 2026 and related infrastructure investments.

Professional and legal fees increased primarily due to costs associated with the Transaction and higher expenses related to the management of special assets.

CARTER BANKSHARES, INC.

2 unchanged sentences

Provision for Income Taxes

The provision for income taxes increased $0.3 million and $2.1 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Pre-tax income increased $0.1 million and $8.7 million for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

The effective tax rate was 24.3% and 20.9% for the three and nine months ended September 30, 2025 compared to 19.9% and 19.5% for the same periods in 2024.

The increase in the effective tax rate for the three and nine months ended September 30, 2025 compared to the same period in 2024 was primarily related to a $1.2 million taxable gain on a surrender of BOLI policies and a related $0.1 million Modified Endowment Contract (“MEC”) penalty.

Refer to Note 12, Provision for Income Taxes, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the surrender of BOLI policies and related MEC penalty.

The increase in the effective tax rate for the nine months ended September 30, 2025 compared to the same period in 2024 also included an increase in pre-tax income, which was largely driven by a $10.9 million increase net interest income and a $1.9 million tax-exempt gain for a BOLI death benefit, partially offset by a $4.9 million increase in noninterest expense.

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 BOLI.

The income tax provision for the three months ended March 31, 2026 was $24.3 million, an increase of $22.1 million compared to $2.2 million for the same period in 2025.

The increase was primarily driven by higher pre-tax income, which increased $98.9 million period over period primarily due to the Transaction.

The effective tax rate was 22.1% for the three months ended March 31, 2026 compared to 19.6% for the same period in 2025.

The current period effective tax rate exceeded the statutory federal rate of 21% primarily due to the impact of higher pre-tax income attributable to the Transaction and the expiration of tax credits associated with historic tax credit investments.

In contrast, the prior year period included a $1.9 million tax-free BOLI death benefit, which reduced the annual effective tax rate in that period.

Refer to Note 12, Provision for Income Taxes, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Financial Condition

September 30, 2025

Total assets increased $180.9 million, to $4.8 billion at September 30, 2025 compared to December 31, 2024.

Total portfolio loans increased $210.8 million, or 7.8%, on an annualized basis, at September 30, 2025 compared to December 31, 2024, due to growth in the commercial real estate (“CRE”), residential mortgage, construction and other consumer portfolios, partially offset by the aforementioned curtailment payments in the Other segment and a decrease in the commercial and industrial loan (“C&I”) portfolio.

The available-for-sale securities portfolio increased $9.5 million and is currently 15.0% of total assets at September 30, 2025 compared to 15.4% of total assets at December 31, 2024.

The increase is due to new security purchases and the positive change in unrealized losses, partially offset by normal paydowns, amortizations and calls during the first nine months of 2025.

During the nine months ended September 30, 2025, the Company initiated a 1035 exchange of $20.7 million in BOLI in order to transfer the proceeds to new insurance carriers and take advantage of enhanced credit ratings and better yields due to improving BOLI markets.

The exchange was an opportunity to retire below market yielding BOLI assets and reinvest the proceeds from the exchange into higher yielding BOLI related assets on the balance sheet.

Total deposits increased $56.9 million to $4.2 billion at September 30, 2025 compared to December 31, 2024.

Total deposits included $55.9 million related to the Branch Purchase that the Company completed during the second quarter of 2025.

Deposits increased due to growth 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 $105.5 million at September 30, 2025 compared to December 31, 2024 due to loan growth.

The Company had no outstanding federal funds purchased at September 30, 2025 and December 31, 2024.

March 31, 2026

Total assets decreased $52.7 million, to $4.8 billion at March 31, 2026, compared to December 31, 2025.

The decrease was primarily driven by a $151.1 million decline in portfolio loans, largely reflecting the Transaction, partially offset by net loan growth during the first quarter of $58.4 million.

This decrease was partially offset by an increase in cash and due from banks of $123.2 million, as balances held at the Federal Reserve Bank increased due to the excess proceeds from the Transaction in the first quarter of 2026.

The allowance for credit losses decreased $19.0 million during the quarter, primarily reflecting the release of the $18.0 million of specific reserves related to the Judgments.

Available-for-sale investment securities decreased $29.5 million, primarily due to normal paydowns, calls and sales, as well as changes in unrealized losses, partially offset by purchases.

These securities represented 13.8% of total assets at March 31, 2026, compared to 14.3% at December 31, 2025.

Federal Home Loan Bank (“FHLB”) stock, included in Other Restricted Stock, at cost on the Consolidated Balance Sheets, declined $8.4 million in line with lower borrowing levels.

On the funding side, FHLB borrowings decreased $178.5 million during the first quarter, reflecting the repayment of borrowings utilizing proceeds from the Transaction.

Total deposits increased $24.4 million to $4.2 billion at March 31, 2026 compared to December 31, 2025, reflecting an increase of $63.2 million in interest-bearing demand deposits and $17.5 million in noninterest-bearing demand deposits, partially offset by decreases of $39.6 million in money market accounts and $17.5 million in certificates of deposit (“CDs”).

Other liabilities increased $16.5 million, primarily due to an increase in taxes payable associated with the Transaction.

At March 31, 2026, approximately 82.8% of total deposits were insured under FDIC insurance coverage limits, while approximately 17.2% of total deposits were uninsured.

At December 31, 2025, approximately 81.3% of total deposits were insured under FDIC insurance coverage limits, while approximately 18.7% of total deposits were uninsured.

CARTER BANKSHARES, INC.

2 unchanged sentences

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

(Dollars in Thousands) September 30, 2025 December 31, 2024 $ Change

(Dollars in Thousands) March 31, 2026 December 31, 2025 $ Change

Government Agency Securities $ 17,747 $ 19,375 $ (1,628)

7 unchanged sentences

Total $ 662,127 $ 691,612 $ (29,485)

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 increased $9.5 million at September 30, 2025 compared to December 31, 2024, primarily due to purchases and changes in market values driven by fluctuations in intermediate treasury yields.

During the nine months ended September 30, 2025, there were new security purchases totaling $58.6 million and a positive change in unrealized losses of $23.6 million, partially offset by normal paydowns, amortization and calls of $72.7 million during the first nine months of 2025.

Securities comprised 15.0% of total assets at September 30, 2025 compared to 15.4% at December 31, 2024.

As of September 30, 2025, the securities portfolio was comprised of 39.7% variable rate securities with approximately 90.4% that will reprice at least once over the next 12 months.

At September 30, 2025, total gross unrealized gains in the available-for-sale portfolio were $0.4 million, offset by $59.1 million of gross unrealized losses.

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.

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 45.9% of securities issued by United States government sponsored entities and carry an implicit government guarantee.

States and political subdivisions comprise 32.0% 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 nine 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 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 September 30, 2025 the 5-year and 10-year U.S.

Treasury yields were 3.74% and 4.16%, respectively.

At December 31, 2024, those same bond yields were 4.38% and 4.58%, respectively.

Therefore, these decreases of 64 basis points and 42 basis points, respectively in the intermediate part of the yield curve largely caused the reduction in unrealized losses for the first nine

The Company invests in various securities to maintain liquidity to 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 $662.1 million at March 31, 2026, a net decrease of $29.5 million from December 31, 2025.

During the quarter ended March 31, 2026, the Company purchased $3.5 million of securities and recognized a $1.0 million improvement in unrealized losses driven primarily by fluctuations in intermediate term U.S.

Treasury yields.

This net increase was more than offset by $32.0 million of principal reductions resulting from normal paydowns, sales, calls and amortization, resulting in the net decline in the securities portfolio during the three months ended March 31, 2026.

Securities represented 13.8% of total assets at March 31, 2026 compared to 14.3% at December 31, 2025.

As of March 31, 2026, approximately 34.2% of the securities portfolio consisted of variable rate securities, with approximately 100.0% of the portfolio repricing at least once within the next 12 months.

Total gross unrealized gains in the available-for-sale portfolio were $0.2 million at March 31, 2026, offset by $55.0 million of gross unrealized losses, compared to gross unrealized gains of $0.4 million and gross unrealized losses of $54.2 million at December 31, 2025.

Management believes that unrealized losses on debt securities at March 31, 2026 are temporary and primarily attributable to changes in market interest rates since the time of purchase rather than deterioration in credit quality.

Approximately 43.5% 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 35.2% 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 three months ended March 31, 2026, intermediate term Treasury yields increased, contributing to an increase in unrealized losses.

At March 31, 2026, the five and ten-year U.S.

Treasury yields were 3.92% and 4.30%, respectively, compared to 3.73% and 4.18%, respectively, at December 31, 2025.

The increase of approximately 19 basis points in the five year yield and 12 basis points in the ten year yield largely explains the slight increase in unrealized losses during the three months ended March 31, 2026, 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

CARTER BANKSHARES, INC.

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

months of 2025.

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

Conversely, floating rate bonds largely held consistent values, as those interest rates adjust in line with Federal Reserve interest rate changes.

At September 30, 2025 and December 31, 2024, 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.

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 recovery or 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 March 31, 2026 and December 31, 2025, 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.

Loan Composition

The following table summarizes our loan portfolio at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Commercial Real Estate $ 2,127,928 $ 2,114,314

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Total Loans $ 3,728,802 $ 3,879,899

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 our Annual Report on Form 10-K for the year ended December 31, 2024 .

Total portfolio loans increased $210.8 million, or 7.8% on an annualized basis, at September 30, 2025 compared to December 31, 2024 with production due to growth in the CRE, residential mortgage, construction and other consumer portfolios, partially offset by declines in the Other segment due to $23.4 million curtailment payments made during the nine months ended September 30, 2025 and a decline in the C&I portfolio.

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

At September 30, 2025, the loan portfolio was comprised of 24.2% floating rates which reprice monthly, 38.1% variable rates that reprice at least once during the life of the loan and the remaining 37.7% are fixed rate loans.

The Company continues to carefully monitor the loan portfolio during 2025, including in light of market conditions that impact our borrowers and the interest rate environment.

Total CRE represented 53.8% of total portfolio loans at September 30, 2025 compared to 51.6% at December 31, 2024.

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 industries.

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,” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 .

Total portfolio loans decreased $151.1 million to $3.7 billion at March 31, 2026, compared to December 31, 2025 largely reflecting the Transaction, partially offset by net loan growth during the three months ended March 31, 2026 of $58.4 million.

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

At March 31, 2026, the loan portfolio consisted of 20.7% floating rates loans that reprice monthly, 38.2% variable rate loans that reprice at least once during the life of the loan, and 41.1% fixed rate loans.

CRE loans represented 57.1% of total portfolio loans at March 31, 2026, compared to 54.5% at December 31, 2025.

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 at the dates presented:

September 30, 2025

The following tables present 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:

March 31, 2026

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgage Construction Other Total CRE Collateral Type in Special Mention and Substandard Risk Rating % of Each Segment to Total CRE Collateral Type

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Total $ 2,113,854 $ 187 $ 62,072 $ 441,799 $ 150,183 $ 2,768,095 $ 187,308 100.0 %

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 generally 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 levels of these markets allows us to effectively manage concentration risk.

Our operating knowledge at the local and regional levels 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

The decrease in the CRE loan portfolio at March 31, 2026 is primarily related to the Other segment reducing to zero due to the Transaction, partially offset by an increase in CRE construction loans.

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.

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 $684.0 million, or 17.8% of gross loans, at September 30, 2025, compared to $685.9 million, or 18.9% of gross loans, at December 31, 2024.

The Other segment represents 33.4% of the top 10 credit relationships and the Company transferred its largest credit relationship with a current balance of $228.6 million as of September 30, 2025 to nonaccrual during the second quarter of 2023, as described in more detail below under “Credit Quality” in this MD&A.

Aggregate commitments to the Company’s top 10 credit relationships totaled $478.7 million, representing 12.8% of gross loans at March 31, 2026, compared to $477.6 million, or 12.3% of gross loans, at December 31, 2025.

The following table reflects the impacts of the Transaction, which resulted in elimination of the Company’s largest nonperforming loan relationship and a meaningful decline in borrower concentration.

Prior to the Transaction, the top 10 relationships to total gross loans at December 31, 2025 was 17.00%.

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

For the Periods Ending

Dollars in Thousands September 30, 2025 December 31, 2024 Change September 30, 2025 % of Gross Loans September 30, 2025 % of RBC

Hospitality, Agriculture & Energy $ 228,554 $ 251,982 $ (23,428) 5.96 % 44.77 %

Dollars in Thousands March 31, 2026 December 31, 2025 Change March 31, 2026 % of Gross Loans March 31, 2026 % of RBC

Multifamily $ 58,541 $ 58,610 $ (69) 1.57 % 9.82 %

Office & Retail 55,206 40,462 14,744 1.44 % 10.81 %

Retail & Office 54,487 54,838 (351) 1.46 % 9.14 %

Multifamily 54,817 51,990 2,827 1.43 % 10.74 %

Retail & Warehouse 47,965 38,656 9,309 1.29 % 8.04 %

Warehouse 47,534 47,969 (435) 1.27 % 7.97 %

Retail 47,856 44,511 3,345 1.25 % 9.37 %

Long-Term Care 46,199 46,199 — 1.20 % 9.05 %

Health Care Facility 44,779 44,779 — 1.17 % 8.77 %

Warehouse 46,721 46,687 34 1.25 % 7.84 %

Long-Term Care 46,199 46,199 — 1.24 % 7.75 %

Health Care 44,779 44,779 — 1.20 % 7.51 %

Land & Self-Storage 44,744 47,392 (2,648) 1.20 % 7.50 %

Multifamily 44,669 44,842 (173) 1.20 % 7.49 %

Retail 43,068 47,619 (4,551) 1.16 % 7.22 %

Top Ten (10) Relationships $ 478,707 $ 477,591 $ 1,116 12.84 % 80.28 %

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Concentration (25% of Risk Based Capital ("RBC")) $ 149,083 $ 128,431

Unfunded commitments on lines of credit were $655.9 million at September 30, 2025 as compared to $620.8 million at December 31, 2024.

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

Total utilization was 53.2% at September 30, 2025 and 53.8% at December 31, 2024.

Unfunded commitments on commercial operating lines of credit was 53.1% at September 30, 2025 and 53.8% at December 31, 2024.

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, which resulted in a significant decline in the loss rate.

Deferred costs, net of fees included in the portfolio balances above were $13.4 million and $8.8 million at September 30, 2025 and December 31, 2024, respectively.

Refer to Note 4, Loans and Loans Held-for-Sale, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to our loans.

Unfunded loan commitments on lines of credit were $636.9 million at March 31, 2026 as compared to $643.9 million at December 31, 2025.

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 54.2% at March 31, 2026, compared to 53.2% at December 31, 2025.

Utilization of commercial operating lines of credit was 54.2% at March 31, 2026, compared to 52.8% at December 31, 2025.

Refer to Note 4, Loans and Loans Held-for-Sale, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company’s 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.

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.

CARTER BANKSHARES, INC.

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

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 the 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-offs 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.

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 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.

Nonperforming assets consist of NPLs and other real estate owned (“OREO”).

The following table summarizes nonperforming assets at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024 Change

(Dollars in Thousands) March 31, 2026 December 31, 2025 Change

Nonaccrual Loans

8 unchanged sentences

Total Nonperforming Assets $ 27,414 $ 244,124 $ (216,710)

Nonperforming assets decreased $1.0 million to $259.0 million at September 30, 2025 compared to December 31, 2024.

The $0.7 million reduction in nonperforming loans was primarily due to $23.4 million in curtailment payments made by the Bank’s largest nonperforming credit relationship.

This decrease was partially offset by the transfer of $24.1 million on two CRE relationships, consisting of five loans, to nonperforming loan (“NPL”) status.

One loan totaling $14.6 million was transferred during the third quarter of 2025, and the remaining four loans totaling $9.5 million were transferred during the first quarter of 2025.

During the three months ended September 30, 2025 a $14.6 million CRE loan in the office sector located in northern Virginia was placed on nonaccrual status and classified as substandard.

This CRE loan is secured by an office building whose government agency tenants are vacating during the fourth quarter of 2025.

Although this CRE loan was originated at a

At March 31, 2026, total nonperforming assets decreased $216.7 million to $27.4 million compared to December 31, 2025, primarily reflecting the Transaction, as the Judgments were previously included in the “Other” segment.

Nonperforming loans declined $220.0 million to $24.0 million, driven largely by the Transaction.

Residential mortgage nonperforming loans decreased $2.9 million, due to two loans that transferred to OREO during the first quarter of 2026.

Commercial real estate nonperforming loans decreased $2.2 million related to the sale of a property in receivership, while commercial and industrial nonperforming loans declined $0.9 million due to a relationship returning to accruing status.

These decreases were partially offset by an increase in OREO to $3.4 million at March 31, 2026, compared to $0.1 million at December 31, 2025 due to the above-mentioned transfer of two residential mortgage loans in the first quarter of 2026.

CARTER BANKSHARES, INC.

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

relatively low loan-to-value ratio, the Bank is closely reviewing this CRE loan, and other similar loans in its CRE portfolio, for changes in valuation and other market impacts.

Also placed in nonaccrual status during the three months ended September 30, 2025 was a $0.8 million residential mortgage loan.

During the first quarter of 2025, the Company placed a $9.5 million CRE relationship consisting of four loans on nonaccrual status.

These loans are secured by warehouse facilities located in North Carolina.

The properties are currently in receivership and are being marketed for sale.

Two are currently under contract, and the sales are expected to close in the fourth quarter of 2025.

During the third quarter of 2025, a specific reserve of $1.2 million was established based on updated appraisals on one loan in the 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 with a current outstanding principal balance of $228.6 million at September 30, 2025, remained on nonaccrual status at September 30, 2025 and December 31, 2024.

These nonperforming loans are 88.4% of the Company's total nonperforming loans and 88.3% of the Company's total nonperforming assets at September 30, 2025.

During 2024 and the nine months ended September 30, 2025, $73.4 million of curtailment payments made by the various entities in which James C.

Justice, II has an interest to the Bank decreased the aggregate nonperforming loan balance outstanding to the Bank from $301.9 million as of June 30, 2023 to $228.6 million as of September 30, 2025.

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, 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 nonperforming loans, including claims that may be asserted by other purported creditors.

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 $21.7 million at September 30, 2025, or 9.5% 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 relationship during the second quarter of 2025 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 properties.

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(Dollars in Thousands) Amount % of NPLs Amount % of NPLs

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Balance End of Period $ 23,971 100.0 % $ 243,982 100.0 %

Closed retail bank offices had a book value of $0.3 million at September 30, 2025 and $0.7 million at December 31, 2024, and are recorded in OREO on the Consolidated Balance Sheets.

During the nine months ended September 30, 2025, the Bank transferred three closed branches to OREO, which was partially offset by the sale of one of these closed branches in the second quarter of 2025 and the sale of the additional two closed branches in the third quarter of 2025.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

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, and 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.

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.

Allowance for Credit Losses

The following is the allocation of the ACL balance by segment at the dates presented:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

(Dollars in Thousands) Amount % of Loans in each Category to Total Portfolio Loans Amount % of Loans in each Category to Total Portfolio Loans

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Balance End of Period $ 52,503 100.0 % $ 71,491 100.0 %

The ACL was $73.8 million, or 1.92%, of total portfolio loans at September 30, 2025 compared to $75.6 million, or 2.09%, of total portfolio loans at December 31, 2024.

The ACL was $52.5 million, or 1.41%, of total portfolio loans at March 31, 2026 compared to $71.5 million, or 1.84%, of total portfolio loans at December 31, 2025.

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 at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Allowance for Credit Losses to Total Portfolio Loans

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Allowance for Credit Losses to Nonperforming Loans 219.03 % 29.30 %

Net Charge-offs to Average Portfolio Loans

Net Charge-offs (annualized) $ 506 $ 16,413

Net (Recoveries) / Charge-offs to Average Portfolio Loans

Net (Recoveries) / Charge-offs (annualized) $ (60,545) $ 472

Average Total Portfolio Loans 3,908,452 3,759,496

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

Net (Recoveries) / Charge-offs to Average Portfolio Loans (1.55) % 0.01 %

The (recovery) provision for credit losses, which includes a (recovery) provision for losses on loans and a (recovery) provision on unfunded loan 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.

During the three months ended March 31, 2026, the Company recognized a recovery for credit losses of $33.9 million and a recovery for unfunded loan commitments of $0.2 million, primarily reflecting the release of previously established specific reserves of $18.0 million, as well as a $15.0 million recovery associated with the Judgments, in each case related to the Transaction.

As a result, the Company recorded a net benefit to the recovery for credit losses, contributing to a decline in the allowance for credit losses to total portfolio loans.

The decline in the reserve for unfunded loan commitments was due to decreased unfunded loan commitments reflecting an increase in the construction loan segment in 2026.

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

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

First, the reserve rate is extrapolated from the reserve rates calculated for certain commercial real estate funded loans within the ACL model.

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

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

contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 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.

The proportion of these segments affect the weighting.

Third, volume changes impact the total reserve calculation.

Net (recoveries) were $14.9 million for the three months ended March 31, 2026 compared to net charge-offs of $0.5 million for the year ended December 31, 2025.

As a percentage of average portfolio loans, net recoveries were 1.55% for the three months ended March 31, 2026, compared to net charge-offs of 0.01% for the year ended December 31, 2025.

The $15.0 million recovery recognized in connection with the Transaction during the quarter ended March 31, 2026 represents the recovery of the $15.0 million principal charge-off related to the Other segment of the loan portfolio during the year ended December 31, 2025.

CARTER BANKSHARES, INC.

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

Net charge-offs were $0.4 million for the nine months ended September 30, 2025 and $16.4 million for the year ended December 31, 2024.

As a percentage of average portfolio loans, net charge-offs were 0.01% for the nine months ended September 30, 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 impacted by the $15.0 million principal charge-off related to the Other segment of the loan portfolio.

At September 30, 2025, NPLs decreased $0.7 million since December 31, 2024.

NPLs as a percentage of total portfolio loans were 6.74% and 7.15% as of September 30, 2025 and December 31, 2024, respectively.

The following table summarizes portfolio loans past due 30-89 days for the periods presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024 $ Change

(Dollars in Thousands) March 31, 2026 December 31, 2025 $ Change

Loans 30 to 89 Days Past Due

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Total Loans 30 to 89 Days Past Due $ 3,166 $ 3,236 $ (70)

Portfolio loans that were past due 30 to 89 days or more and still accruing decreased by $1.2 million to $3.6 million at September 30, 2025, compared to $4.8 million at December 31, 2024.

The decline was primarily due to a $2.4 million CRE loan that moved to nonperforming status in the first quarter of 2025, partially offset by a $1.0 million residential mortgage loan that became 30 days past due in the third quarter of 2025.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

There were no portfolio loans past due more than 90 days and still accruing at March 31, 2026 or December 31, 2025.

Loans past due 30 to 89 days and still accruing decreased by $0.1 million to $3.2 million at March 31, 2026, compared to December 31, 2025.

The following tables represent credit exposures by internally assigned risk ratings at the dates presented:

September 30, 2025

March 31, 2026

(Dollars in Thousands) Commercial Real Estate Commercial & Industrial Residential Mortgages Other Consumer Construction Other Total

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Total Portfolio Loans $ 2,114,314 $ 231,921 $ 822,141 $ 28,416 $ 465,613 $ 217,155 $ 3,879,560

As of September 30, 2025 and December 31, 2024, the Company had no loans classified as doubtful.

The levels of special mention and substandard loans declined at September 30, 2025, compared to December 31, 2024, reflecting decreases of $6.2 million in special mention and $3.1 million in substandard loans.

The decline in special mention loans primarily related to a $4.4 million construction loan that paid off during the second quarter of 2025, as well as the previously mentioned $2.4 million CRE loan that was downgraded to substandard in the first quarter of 2025.

The decline in substandard was primarily related to the previously mentioned $23.4 million curtailment payments received during the nine months ended September 30, 2025 and a $3.4 million C&I payoff during the first quarter of 2025.

These declines were partially offset by the downgrade of a CRE loan of $14.6 million in the third quarter of 2025, the downgrade of the above CRE loan of $2.4 million from special mention to substandard during the first quarter of 2025, and $7.1 million CRE downgrades from pass to substandard in the first quarter of 2025.

Refer to Note 5, Allowance for Credit Losses, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company’s ACL.

At March 31, 2026 and December 31, 2025, the Company had no loans classified as doubtful.

The levels of special mention and substandard loans at March 31, 2026, compared to December 31, 2025, reflected a decrease of $10.8 million in special mention and a decrease of $207.7 million in substandard loans.

Special mention loans decreased primarily due to an upgrade of a $10.8 million CRE office building loan that was moved to watch from special mention during the first quarter of 2026.

Substandard loans decreased $207.7 million during the quarter ended March 31, 2026 compared to December 31, 2025, primarily reflecting the Transaction.

At year-end December 2025, the Judgments had an aggregate balance of approximately

CARTER BANKSHARES, INC.

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

$214.0 million, which balance was reduced to zero as a result of the Transaction.

Additional reductions included the payoff of a construction loan totaling $5.4 million, as well as two residential mortgage loans transferred to OREO totaling $2.9 million.

The Company also recognized $1.5 million in proceeds on a CRE relationship related to the sale of property in receivership during the first quarter of 2026.

Further contributing to the improvement, a borrower relationship consisting of two C&I loans totaling $0.9 million returned to accruing status, or pass rating, due to improved payment performance.

Partially offsetting these improvements, a new construction loan totaling $17.2 million was downgraded to substandard during the first quarter of 2026.

Collectively, these actions drove a meaningful decline in substandard loans and reflect continued progress in enhancing overall credit quality.

The following table presents the composition of deposits at the dates presented:

(Dollars in Thousands) September 30,

(Dollars in Thousands) March 31,

2026 December 31,

6 unchanged sentences

Total Deposits $ 4,235,250 $ 4,210,889 $ 24,361 0.58 %

Deposits are the Company’s primary source of funds.

The Company believes that the deposit base is stable and that the Company has the ability to attract new depositors while diversifying the deposit composition.

Total deposits at September 30, 2025, i ncreased $56.9 million , primarily due to $55.9 million of deposits assumed in the Branch Purchase.

The decrease in savings was primarily due to customer preferences shifting to higher-yielding deposit products or repositioning funds into transactional deposit accounts.

The decrease in certificates of deposit was primarily due to clients diversifying a portion of their deposits into more liquid, interest-bearing demand and money market products.

At September 30, 2025 , noninterest-bearing deposits comprised 14.4% of total deposits compared to 15.3% at December 31, 2024 .

CDs comprised 45.3% and 46.3% of total deposits at September 30, 2025 and December 31, 2024 , respectively.

As of September 30, 2025, 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 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 78.2% of retail deposits.

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.

At March 31, 2026, total deposits increased $24.4 million, primarily driven by growth in interest-bearing demand deposits of $63.2 million, noninterest-bearing demand deposits of $17.5 million and savings accounts of $0.7 million.

These increases were partially offset by decreases in money market accounts of $39.6 million and CDs of $17.4 million.

At March 31, 2026, noninterest-bearing demand deposits represented 15.1% of total deposits, compared to 14.7% at December 31, 2025.

CDs comprised 44.5% of total deposits at March 31, 2026, compared to 45.2% at December 31, 2025.

Based on the assumptions used in preparing regulatory call reports, approximately 82.8% of our total deposits of $4.2 billion were insured under standard FDIC insurance coverage limits at March 31, 2026, while approximately 17.2% were uninsured, compared to approximately 81.3% insured and 18.7% uninsured at December 31, 2025.

The following table presents additional information in relation to deposits at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Noninterest-Bearing Public Funds Deposits $ 27,504 $ 33,220

6 unchanged sentences

This estimate was determined based on the same methodologies and assumptions used for regulatory reporting requirements.

Maturities of CDs over $250,000 or more, excluding brokered deposits, not covered by deposit insurance at September 30, 2025 are summarized as follows:

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

Maturities of CDs over $250,000 or more, excluding brokered deposits, not covered by deposit insurance at March 31, 2026 are summarized as follows:

(Dollars in Thousands) Amount Percent

4 unchanged sentences

Total $ 303,660 100.0 %

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

FHLB Borrowings and Federal Funds Purchased

Information pertaining to FHLB borrowings and federal funds purchased at the dates presented are summarized in the table below:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Balance at Period End

13 unchanged sentences

Federal Funds Purchased — % — %

Borrowings are an additional source of liquidity for the Company.

FHLB borrowings increased $105.5 million to $175.5 million at September 30, 2025 from $70.0 million at December 31, 2024 primarily due to additional FHLB advances to fund loan growth.

The Company had no overnight federal funds purchased at September 30, 2025 or at December 31, 2024.

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 $11.6 million and $6.5 million at September 30, 2025 and December 31, 2024, respectively.

The increase in FHLB stock was due to a higher required level of stock holdings due to a higher level of FHLB borrowings.

Dividends recorded on restricted stock were $0.1 million and $0.4 million for the three and nine months ended September 30, 2025, respectively, compared to $0.2 million and $0.9 million for the same periods in 2024, respectively.

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

We hold FHLB stock because we are a member of the FHLB of Atlanta.

The FHLB requires members to purchase and hold a specified level of FHLB stock based upon the members’ asset values, level of borrowings and participation in other programs offered.

Stock in the FHLB is non-marketable and is redeemable at the discretion of the FHLB.

Members do not purchase stock in the FHLB for the same reasons that traditional equity investors acquire stock in an investor-owned enterprise.

Rather, members purchase stock to obtain access to the products and services offered by the FHLB.

Unlike equity securities of traditional for-profit enterprises, the stock of the FHLB does not provide its holders with an opportunity for capital appreciation because, by regulation, FHLB stock can only be purchased, redeemed and transferred at par value.

Borrowings represent an additional source of liquidity for the Company.

FHLB borrowings decreased $178.5 million to zero at March 31, 2026, from $178.5 million at December 31, 2025, reflecting the repayment of borrowings utilizing proceeds from the Transaction.

The Company had no overnight federal funds purchased outstanding at March 31, 2026 or December 31, 2025.

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 March 31, 2026, the Company held $3.4 million of FHLB stock, compared to $11.7 million at December 31, 2025.

The decrease in FHLB stock was attributable to the lower required level of stock holdings resulting from decreased FHLB borrowings.

Dividends recognized on FHLB stock totaled $0.2 million for the three months ended March 31, 2026, compared to $0.1 million for the same period in 2025.

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.

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

Refer to Note 9, Federal Home Loan Bank Borrowings and Federal Funds Purchased, in the Notes to Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for additional information related to the Company’s borrowings.

Liquidity and Capital Resources

Liquidity is defined as a financial institution’s ability to meet its cash and collateral obligations at a reasonable cost.

This includes the ability to satisfy the financial needs of depositors who want to withdraw funds or 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

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.

At March 31, 2026, funding sources accessible to the Company included borrowing availability at the FHLB equal to 30.0% of the Company’s total assets, or $1.4 billion, subject to eligible collateral pledged, of which the Company had the capacity to borrow an additional $816.6 million.

The Company also maintains unsecured borrowing facilities with three correspondent financial institutions totaling $30.0 million, a fully secured facility with one correspondent financial institution totaling $25.0 million, and access to the institutional CD market.

The borrowing capacity under the secured line of credit decreased by $20.0 million during the quarter ended March 31, 2026, from $45.0 million as of March 31, 2025, as a result of the sale of investment securities previously pledged as collateral to the secured facility, which reduced the borrowing capacity, as the Company did not replace the sold investment securities with new pledged assets.

Additional liquidity can be provided by $407.8 million of unpledged available-for-sale investment securities at fair value at March 31, 2026.

Refer to the Liquidity Sources table below for further detail regarding FHLB borrowing capacity and correspondent bank lines of credit.

As of March 31, 2026, approximately 82.8% of total deposits were insured under standard FDIC coverage limits, while 17.2% 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 March 31, 2026, the Bank had $599.5 million of highly liquid assets, consisting of $191.4 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 $407.8 million of unpledged securities.

This resulted in highly liquid assets to total assets ratio of 12.5%.

Total available liquidity relative to uninsured deposits was 214.5% at March 31, 2026.

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.

CARTER BANKSHARES, INC.

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

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 $544.0 million at September 30, 2025.

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 facilities as of September 30, 2025.

In addition to the above funding resources, the Company also has $416.1 million of unpledged available-for-sale investment securities, at fair value, at September 30, 2025 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 September 30, 2025, 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 and 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 fluctuations in interest rates and developments in the financial markets, and in light of 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 September 30, 2025, the Bank had $481.0 million in highly liquid assets, which consisted of Federal Reserve Board Excess Reserves and interest-bearing deposits in other financial institutions of $64.4 million, loans held-for-sale of $0.5 million and $416.1 million in unpledged securities.

This resulted in highly liquid assets to total assets ratio of 9.9% at September 30, 2025.

Total available liquidity to uninsured deposits was 157.1% at September 30, 2025.

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.

The following table provides detail of liquidity sources at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Cash and Due From Banks, including Interest-bearing Deposits $ 228,318 $ 105,163

5 unchanged sentences

Total Liquidity Sources $ 1,559,225 $ 1,225,218

CARTER BANKSHARES, INC.

AND SUBSIDIARIES

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

The following table provides total liquidity sources and ratios at the dates presented:

(Dollars in Thousands) September 30, 2025 December 31, 2024

(Dollars in Thousands) March 31, 2026 December 31, 2025

Total Liquidity Sources $ 1,559,225 $ 1,225,218

3 unchanged sentences

Total Available Liquidity to Uninsured Deposits 214.5 % 155.7 %

1 Highly liquid assets consist of Federal Reserve Board excess reserves, interest-bearing deposits in other financial institutions, loans held-for-sale and unpledged securities.

1 Highly liquid assets consist of $191.4 million in Federal Reserve Board excess reserves and interest-bearing deposits in other financial institutions, loans held-for-sale of $0.3 million and unpledged securities of $407.8 million.

Capital Resources

4 unchanged sentences

Capitalized 1

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Amount Ratio Amount Ratio

10 unchanged sentences

1 To be “well capitalized” under the prompt corrective action framework applies to the Bank only.

Total capital of $412.8 million at September 30, 2025, reflects an increase of $28.5 million compared to December 31, 2024.

The increase in total capital from December 31, 2024 is primarily due to net income of $22.9 million, an increase of $18.5 million in other comprehensive income due to positive changes in fair value of investment securities, partially offset by $14.2 million related to the repurchase of common stock that includes a 1% excise tax.

The remaining difference of $1.3 million related to restricted stock activity during the nine months ended September 30, 2025.

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 September 30, 2025 and December 31, 2024, 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.

Total capital was $504.9 million at March 31, 2026, an increase of $85.2 million compared to December 31, 2025.

The increase was primarily driven by net income of $85.8 million and a $0.2 million increase related to restricted stock activity during the first quarter of 2026, partially offset by a $0.8 million decline in other comprehensive loss due to changes in the fair value of investment securities.

The Company and the Bank remained well capitalized at March 31, 2026, exceeding all regulatory capital requirements.

The capital ratios were favorably impacted by the Transaction.

The key capital ratios included a leverage ratio of 11.10%, a Common Equity Tier 1 ratio of 13.52%, a Tier 1 ratio of 13.52%, and a Total risk-based capital ratio of 14.78%, 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.

CARTER BANKSHARES, INC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements