Carter Bankshares (CARE) risk factors, FY2024 10-K

Other

1. 01nonperforming assets and 97.2% of the Company’s nonperforming loans and 7.0% of total portfolio loans at December 31, 2024
2. 02A large percentage of the Company’s commercial loans are secured by real estate, and an adverse change in the real estate market or in economic conditions more generally may result in losses and adversely affect our profitability
3. 03The Company relies on independent appraisals to determine the value of the real estate which secures a significant portion of our loans, and the values indicated by such appraisals may not be realizable if foreclosure on such loans is forced
4. 04The Company’s level of credit risk is elevated due to the concentration of commercial real estate loans and commercial real estate construction loans in its portfolio
5. 05The Company’s exposure to hospitality at December 31, 2024 equated to approximately $354.7 million, or 9.8% of its total loan portfolio. These were mostly loans secured by upscale or top tier flagged hotels, which have historically exhibited low leverage and strong operating cash flows
6. 06Our allowance for credit losses may be insufficient
7. 07Our real estate lending business can result in increased costs associated with Other Real Estate Owned (“OREO”)
8. 08ITEM 1A. RISK FACTORS - (continued)

Risks Related to Market Conditions, Interest Rates and Investments

1. 09The Company’s business is subject to interest rate risk and fluctuations in interest rates may adversely affect its earnings and capital levels
2. 10The value of our investment securities could decline
3. 11Changes in interest rates could adversely affect our income and cash flows and may result in higher defaults and lower collateral values in a rising rate environment
4. 12Inflation could negatively impact our business, our profitability, and our stock price

Risks Related to Our Operations, Cybersecurity and Technology

1. 13A failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt the Company’s businesses, and adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm
2. 14The Company relies on third-party providers and other suppliers for a number of services that are important to our business. An interruption or cessation of an important service by any third-party could have a material adverse effect on our business
3. 15The Company is dependent on its management team, and the loss of any senior executive officers or other key personnel could impair its relationship with its customers and adversely affect its business and financial results
4. 16The success of our business strategies depends on our ability to identify and recruit individuals with experience and relationships in our primary markets

Risks Related to Liquidity

1. 17Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, may have a material adverse effect on our financial condition and results of operations
2. 18The Company’s liquidity could be impaired by an inability to access short-term funding or the inability to monetize liquid assets
3. 19We rely substantially on deposits obtained from customers in our target markets to provide liquidity and support growth, and impairment of our access to funding may negatively affect our financial performance
4. 20Our ability to meet contingency funding needs, in the event of a crisis that causes a disruption to our core deposit base, is dependent on access to wholesale markets, including funds provided by the FHLB of Atlanta
5. 21We rely on dividends from our subsidiaries for most of our revenue

Risks Related to Our Business Strategy

1. 22Our profitability depends significantly on economic conditions
2. 23We face strong competition from financial services companies and other companies that offer banking services which could negatively affect our business
3. 24Our customers may increasingly decide not to use the Bank to complete their financial transactions, which would have a material adverse impact on our financial condition and operations

Risks Related to Regulatory Compliance and Legal Matters

1. 25We are subject to extensive government regulation and supervision
2. 26The financial services industry may be subject to new or changing legislation, regulation, and government policy, which could affect the banking industry and the broader economy
3. 27Regulatory capital standards may require the Company and the Bank to maintain higher levels of capital and liquidity, which could adversely affect its return on equity and otherwise affect its business
4. 28Failure to maintain effective systems of internal control over financial reporting and disclosure controls and procedures could have a material adverse effect on our results of operation and financial condition
5. 29“material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis
6. 30Claims and litigation against the Company could result in significant expenses or losses or damage to our reputation, which may have a material adverse effect on its financial condition, results of operation or business
7. 31Our risk management framework may not be effective in mitigating risk and loss
8. 32Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies
9. 33Increased scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to environmental, social and governance (“ESG”) practices may impose additional costs on the Company or expose it to new or additional risks
10. 34The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our business

Risks Related to Owning Our Stock

1. 35The market price of our common stock may fluctuate significantly in response to a number of factors
2. 36Future issuances of the Company’s common stock could adversely affect the market price of the common stock and could be dilutive
3. 37Common stock is equity and is subordinate to the Company’s existing and future indebtedness and effectively subordinated to all the indebtedness and other non-equity claims against the Bank