Carter Bankshares (CARE) FY2025 10-K Risk Factors: 35 New, 25 Dropped

What the changes say

Concentration in commercial real estate loans exposes Carter Bankshares to elevated credit risk and potential default losses.

What changed since the prior 10-K

New

NewRisks Related to Credit
Nonperforming assets can take significant time to resolve and may adversely affect the Company’s results of operations and financial condition, and could result in additional losses in future periods
Nonperforming loans reached $244.0 million or 6.29% of the portfolio as of December 31, 2025, and take significant time to resolve.
NewRisks Related to Credit
The Company’s level of credit risk is elevated due to relationship exposure to the Company’s largest credit relationship
Credit risk is elevated due to $214.0 million in loans reduced to judgments for James C. Justice, II entities.
NewRisks Related to Credit
A significant portion of the Company’s commercial loan portfolio is secured by real estate, and adverse changes in the real estate market or economic conditions could adversely affect our results
Approximately 94.4% of the commercial loan portfolio is secured by real estate as of December 31, 2025.
NewRisks Related to Credit
The Company relies on independent appraisals and other valuation techniques in evaluating and monitoring loans secured by real estate collateral securing a significant portion of its loan portfolio, which may not accurately describe the net value of the asset
The company relies on subjective independent third-party appraisals to evaluate real estate collateral values, which may prove inaccurate.
NewRisks Related to Credit
the Company could be unable to recover the outstanding principal and accrued interest, which may lead to higher credit losses and adversely affect the Company’s financial condition and results of operations
Inaccurate collateral valuations and updated appraisals may lead to higher credit losses and incorrect allowance for credit losses.
NewRisks Related to Credit
A significant part of the Company’s lending business is focused on small to medium-sized business which may be impacted more severely during periods of economic weakness
A significant portion of commercial lending focuses on small to medium-sized businesses that suffer more severely during economic weaknesses.
NewRisks Related to Credit
The Company’s allowance for credit losses may be insufficient to absorb expected losses in its loan portfolio, which may adversely affect its business, financial condition and results of operations
The allowance for credit losses under CECL requires complex forward-looking estimates that may prove insufficient if economic conditions worsen.
NewRisks Related to Credit
Our real estate lending activities may result in the acquisition of OREO, which could increase expenses and negatively impact our financial condition and results of operations
Foreclosing on real estate collateral creates other real estate owned properties requiring ongoing maintenance and potential write-downs.
NewRisks Related to Market Conditions, Interest Rates and Investments
Interest rate movements also influence the demand for and origination of loans, the timing of loan prepayments, the fair value of our assets and liabilities, investment activity, deposit retention and growth, the yields earned on loans and investment securities, and the rates paid on deposits or other funding sources
Interest rate movements influenced by Federal Reserve actions impact loan demand, prepayments, asset values, and deposit costs.
NewRisks Related to the Company’s Operations, Cybersecurity and Technology
A failure, disruption, or breach of our operational, cybersecurity, or information technology systems, or those of third-party service providers, could disrupt the Company’s business and adversely affect our results of operations, liquidity, financial condition, and reputation
Cyberattacks, system failures, or human errors at the bank or third-party vendors could disrupt operations and compromise financial data.
NewRisks Related to the Company’s Operations, Cybersecurity and Technology
Failure to keep pace with technological change could adversely affect the Company’s business and ability to remain competitive, and it may experience operational challenges when implementing new technologies
Failure to keep pace with financial technology changes could impair competitiveness and cause operational challenges.
NewRisks Related to the Company’s Operations, Cybersecurity and Technology
The Company’s success depends significantly on the leadership, experience, and expertise of its executive officers and other key personnel. These individuals possess substantial knowledge of the markets the Company serves, maintain important customer and community relationship, and provide critical strategic direction
The unexpected loss of executive officers or key personnel like James C. Justice relationship managers could disrupt operations.
NewRisks Related to the Company’s Operations, Cybersecurity and Technology
The Company uses models in its business, and could be adversely affected if its design, implementation, or use of models is flawed
NewRisks Related to the Company’s Operations, Cybersecurity and Technology
The Company is subject to physical and financial risks associated with climate change and other weather and natural disaster impacts
NewRisks Related to Liquidity
Liquidity risks and adverse developments affecting the financial services industry could materially adversely affect our financial condition and results of operations
NewRisks Related to Liquidity
The Company’s reliance on customer deposits for funding and liquidity could adversely affect its financial performance if access to such funding becomes impaired
NewRisks Related to Liquidity
The Company’s ability to meet contingency funding needs during periods of financial stress depends on access to wholesale funding sources, including the FHLB of Atlanta, and any disruption to these sources could materially adversely affect its liquidity
NewRisks Related to Liquidity
amplify customer concerns and accelerate withdrawal activity. These factors may heighten funding pressures and increase the Company’s reliance on contingency liquidity sources
NewRisks Related to Liquidity
The Company is a separate legal entity from the Bank and relies primarily on dividends from the Bank to provide the funds necessary to meet our obligations, including the payment of operating expenses, servicing of any outstanding debt, and the payment of future dividends on our common stock
NewRisks Related to the Company’s Business Strategy
The Company’s profitability is significantly influenced by economic conditions in the markets that it serves
NewRisks Related to the Company’s Business Strategy
The Company faces significant competition from financial institutions and other providers of banking and financial services, which could adversely affect its growth and profitability
NewRisks Related to the Company’s Business Strategy
Customers may increasingly bypass traditional banking relationships, which could adversely affect the Company’s revenue and funding sources
NewRisks Related to the Company’s Business Strategy
Our ability to execute our business strategy depends on attracting and retaining qualified personnel
NewRisks Related to the Company’s Business Strategy
Competition for qualified financial services professionals is intense and has contributed to rising compensation and employee benefit costs, a trend that may continue. Sustained increases in personnel expenses could place pressure on the Company’s profitability and operating results
NewRisks Related to Regulatory Compliance and Legal Matters
The Company is subject to extensive regulation and supervision, and changes in laws or regulatory expectations could materially adversely affect its business
NewRisks Related to Regulatory Compliance and Legal Matters
The CFPB may increase our regulatory compliance burden and could affect the consumer financial products and services that the Company offers
NewRisks Related to Regulatory Compliance and Legal Matters
Legislation, regulatory, and governmental policy changes could materially affect the economy, the financial services industry and our business
NewRisks Related to Regulatory Compliance and Legal Matters
In addition, regulatory expectations regarding liquidity management may require the Company to maintain higher levels of liquid assets, lengthen the duration of its funding, or modify aspects of its business model. Such measures could reduce net interest income and overall profitability
NewRisks Related to Regulatory Compliance and Legal Matters
Claims, litigation, and other legal proceedings could expose the Company to significant costs and liabilities and adversely affect its reputation, financial condition and results of operations
NewRisks Related to Regulatory Compliance and Legal Matters
Heightened scrutiny and evolving expectations regarding environmental, social and governance (“ESG”) matters may increase costs and expose the Company to additional risks
NewRisks Related to Regulatory Compliance and Legal Matters
To the extent the Company relies on AI technologies developed or operated by third parties, it faces additional risk related to vendor oversight, data security, operational resilience, and the effectiveness of those third parties’ risk management and mitigation, over which it may have limited control or visibility
NewRisks Related to Regulatory Compliance and Legal Matters
The Company is subject to losses due to errors, omissions or fraud by its associates, clients, counterparties or other third parties
NewRisks Related to Owning the Company’s Stock
The market price of the Company’s common stock may fluctuate significantly and could decline, which could result in losses to its investors
NewRisks Related to Owning the Company’s Stock
The market price of the Company’s common stock has been volatile in the past and may fluctuate significantly in the future in response to a variety of factors, many of which are beyond the Company’s control
NewRisks Related to Owning the Company’s Stock
The trading volumes in our common stock may not provide adequate liquidity for investors

Dropped

Dropped
A 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
Dropped
The 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
Real estate loan concentration of 94.1% as of December 31, 2024.
Dropped
The 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
Reliance on independent appraisals for real estate loans.
Dropped
Our allowance for credit losses may be insufficient
Dropped
Our real estate lending business can result in increased costs associated with Other Real Estate Owned (“OREO”)
Hospitality exposure of $354.7 million and construction loan risks of $505.2 million.
Dropped
ITEM 1A. RISK FACTORS - (continued)
Allowance for credit losses sufficiency under CECL.
DroppedRisks Related to Market Conditions, Interest Rates and Investments
Changes 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
Costs associated with other real estate owned properties.
DroppedRisks Related to Our Operations, Cybersecurity and Technology
A 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
Real estate ownership tax, maintenance, and cash flow risks.
DroppedRisks Related to Our Operations, Cybersecurity and Technology
The 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
DroppedRisks Related to Our Operations, Cybersecurity and Technology
The 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
DroppedRisks Related to Our Operations, Cybersecurity and Technology
The success of our business strategies depends on our ability to identify and recruit individuals with experience and relationships in our primary markets
Interest rate changes affecting income, cash flows, and defaults.
DroppedRisks Related to Liquidity
Adverse 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
DroppedRisks Related to Liquidity
We 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
Operational or security system failures and third-party risks.
DroppedRisks Related to Liquidity
Our 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
Dependence on third-party technology providers and core operating systems.
DroppedRisks Related to Liquidity
We rely on dividends from our subsidiaries for most of our revenue
Dependence on management team and senior executive officers.
DroppedRisks Related to Our Business Strategy
Our profitability depends significantly on economic conditions
Ability to recruit and retain skilled personnel and rising salary costs.
DroppedRisks Related to Our Business Strategy
We face strong competition from financial services companies and other companies that offer banking services which could negatively affect our business
Financial services industry instability, liquidity concerns, and social media contagion.
DroppedRisks Related to Our Business Strategy
Our 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
DroppedRisks Related to Regulatory Compliance and Legal Matters
We are subject to extensive government regulation and supervision
DroppedRisks Related to Regulatory Compliance and Legal Matters
The 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
DroppedRisks Related to Regulatory Compliance and Legal Matters
Regulatory 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
DroppedRisks Related to Regulatory Compliance and Legal Matters
“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
DroppedRisks Related to Regulatory Compliance and Legal Matters
Claims 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
DroppedRisks Related to Regulatory Compliance and Legal Matters
Increased 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
DroppedRisks Related to Owning Our Stock
The market price of our common stock may fluctuate significantly in response to a number of factors

Reworded

99% rewrittenRisks Related to Regulatory Compliance and Legal Matters
The Company’s risk management framework may not be effective in identifying or mitigating risks, which could adversely affect its financial condition and results of operations
Expanded to specify that risk management analytical tools and models may fail due to human error, design limitations, or market conditions.
Was: Our risk management framework may not be effective in mitigating risk and loss
99% rewrittenRisks Related to Credit
The Company’s concentration in commercial real estate loans, including construction loans, increases its credit risk and could adversely affect its financial condition and results of operations
Updated CRE concentration figures showing loans excluding construction rose to $2.2 billion or 57.1% of the portfolio as of December 31, 2025.
Was: The 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
99% rewrittenRisks Related to Liquidity
The Company’s liquidity could be adversely affected if it were unable to access short-term funding or monetize liquid assets
Refined language regarding short-term funding access, third-party operational difficulties, and unfavorable investment security sale prices.
Was: The Company’s liquidity could be impaired by an inability to access short-term funding or the inability to monetize liquid assets
98% rewrittenRisks Related to Owning the Company’s Stock
The Company’s common stock is subordinate to its existing and future indebtedness and is structurally subordinated to the claims of the Bank’s creditors
Clarified structural subordination mechanics for holding company common stock relative to bank depositors and creditors in insolvency proceedings.
Was: Common 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
97% rewrittenRisks Related to Market Conditions, Interest Rates and Investments
The Company’s business is subject to interest rate risk and fluctuations in interest rates may adversely affect its earnings, income, cash flow, capital levels and credit quality
Broadened interest rate risk impact factors to explicitly cover liquidity, funding strategies, capital levels, and financial condition.
Was: The Company’s business is subject to interest rate risk and fluctuations in interest rates may adversely affect its earnings and capital levels
96% rewrittenRisks Related to Regulatory Compliance and Legal Matters
Failure to maintain effective internal control over financial reporting and disclosure controls could materially adversely affect the Company’s financial condition and results of operations
Emphasized the ongoing necessity of internal controls to safeguard assets and prevent fraud alongside reliable financial reporting.
Was: Failure 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
96% rewrittenRisks Related to Market Conditions, Interest Rates and Investments
Inflation could negatively impact the Company’s business, its profitability, and its stock price
Linked inflation risks more directly to potential reductions in borrower creditworthiness and decreased investment security values.
Was: Inflation could negatively impact our business, our profitability, and our stock price
95% rewrittenRisks Related to Regulatory Compliance and Legal Matters
The Company’s earnings and financial condition are significantly influenced by monetary and fiscal policies of the federal government and its agencies
Added specific references to Federal Reserve balance sheet management and liquidity measures impacting net interest margin.
Was: Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies
94% rewrittenRisks Related to Market Conditions, Interest Rates and Investments
The value of the Company’s investment securities could decline
Was: The value of our investment securities could decline
93% rewrittenRisks Related to Regulatory Compliance and Legal Matters
The development and use of Artificial Intelligence (“AI”) technologies present risks that could adversely affect the Company’s business, financial condition, and results of operations
Was: The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our business
93% rewrittenRisks Related to Owning the Company’s Stock
Future issuances of the Company’s common stock or securities convertible into common stock could dilute existing shareholders and adversely affect the market price of its common stock
Was: Future issuances of the Company’s common stock could adversely affect the market price of the common stock and could be dilutive
27% rewrittenRisks Related to Credit
This credit relationship comprises 87.7% of the Company’s nonperforming assets and NPLs and 5.5% of total portfolio loans at December 31, 2025
Was: nonperforming assets and 97.2% of the Company’s nonperforming loans and 7.0% of total portfolio loans at December 31, 2024

All 47 risk factors

Headings as the filing states them, in filing order.

Risks Related to Credit

01Nonperforming assets can take significant time to resolve and may adversely affect the Company’s results of operations and financial condition, and could result in additional losses in future periodsNew
02The Company’s level of credit risk is elevated due to relationship exposure to the Company’s largest credit relationshipNew
03This credit relationship comprises 87.7% of the Company’s nonperforming assets and NPLs and 5.5% of total portfolio loans at December 31, 202527% rewritten
04A significant portion of the Company’s commercial loan portfolio is secured by real estate, and adverse changes in the real estate market or economic conditions could adversely affect our resultsNew
05The Company relies on independent appraisals and other valuation techniques in evaluating and monitoring loans secured by real estate collateral securing a significant portion of its loan portfolio, which may not accurately describe the net value of the assetNew
06the Company could be unable to recover the outstanding principal and accrued interest, which may lead to higher credit losses and adversely affect the Company’s financial condition and results of operationsNew
07The Company’s concentration in commercial real estate loans, including construction loans, increases its credit risk and could adversely affect its financial condition and results of operations99% rewritten
08A significant part of the Company’s lending business is focused on small to medium-sized business which may be impacted more severely during periods of economic weaknessNew
09The Company’s allowance for credit losses may be insufficient to absorb expected losses in its loan portfolio, which may adversely affect its business, financial condition and results of operationsNew
10Our real estate lending activities may result in the acquisition of OREO, which could increase expenses and negatively impact our financial condition and results of operationsNew

Risks Related to Market Conditions, Interest Rates and Investments

11The Company’s business is subject to interest rate risk and fluctuations in interest rates may adversely affect its earnings, income, cash flow, capital levels and credit quality97% rewritten
12Interest rate movements also influence the demand for and origination of loans, the timing of loan prepayments, the fair value of our assets and liabilities, investment activity, deposit retention and growth, the yields earned on loans and investment securities, and the rates paid on deposits or other funding sourcesNew
13The value of the Company’s investment securities could decline94% rewritten
14Inflation could negatively impact the Company’s business, its profitability, and its stock price96% rewritten

Risks Related to the Company’s Operations, Cybersecurity and Technology

15A failure, disruption, or breach of our operational, cybersecurity, or information technology systems, or those of third-party service providers, could disrupt the Company’s business and adversely affect our results of operations, liquidity, financial condition, and reputationNew
16Failure to keep pace with technological change could adversely affect the Company’s business and ability to remain competitive, and it may experience operational challenges when implementing new technologiesNew
17The Company’s success depends significantly on the leadership, experience, and expertise of its executive officers and other key personnel. These individuals possess substantial knowledge of the markets the Company serves, maintain important customer and community relationship, and provide critical strategic directionNew
18The Company uses models in its business, and could be adversely affected if its design, implementation, or use of models is flawedNew
19The Company is subject to physical and financial risks associated with climate change and other weather and natural disaster impactsNew

Risks Related to Liquidity

20Liquidity risks and adverse developments affecting the financial services industry could materially adversely affect our financial condition and results of operationsNew
21The Company’s liquidity could be adversely affected if it were unable to access short-term funding or monetize liquid assets99% rewritten
22The Company’s reliance on customer deposits for funding and liquidity could adversely affect its financial performance if access to such funding becomes impairedNew
23The Company’s ability to meet contingency funding needs during periods of financial stress depends on access to wholesale funding sources, including the FHLB of Atlanta, and any disruption to these sources could materially adversely affect its liquidityNew
24amplify customer concerns and accelerate withdrawal activity. These factors may heighten funding pressures and increase the Company’s reliance on contingency liquidity sourcesNew
25The Company is a separate legal entity from the Bank and relies primarily on dividends from the Bank to provide the funds necessary to meet our obligations, including the payment of operating expenses, servicing of any outstanding debt, and the payment of future dividends on our common stockNew

Risks Related to the Company’s Business Strategy

26The Company’s profitability is significantly influenced by economic conditions in the markets that it servesNew
27The Company faces significant competition from financial institutions and other providers of banking and financial services, which could adversely affect its growth and profitabilityNew
28Customers may increasingly bypass traditional banking relationships, which could adversely affect the Company’s revenue and funding sourcesNew
29Our ability to execute our business strategy depends on attracting and retaining qualified personnelNew
30Competition for qualified financial services professionals is intense and has contributed to rising compensation and employee benefit costs, a trend that may continue. Sustained increases in personnel expenses could place pressure on the Company’s profitability and operating resultsNew

Risks Related to Regulatory Compliance and Legal Matters

31The Company is subject to extensive regulation and supervision, and changes in laws or regulatory expectations could materially adversely affect its businessNew
32The CFPB may increase our regulatory compliance burden and could affect the consumer financial products and services that the Company offersNew
33Legislation, regulatory, and governmental policy changes could materially affect the economy, the financial services industry and our businessNew
34In addition, regulatory expectations regarding liquidity management may require the Company to maintain higher levels of liquid assets, lengthen the duration of its funding, or modify aspects of its business model. Such measures could reduce net interest income and overall profitabilityNew
35Failure to maintain effective internal control over financial reporting and disclosure controls could materially adversely affect the Company’s financial condition and results of operations96% rewritten
36Claims, litigation, and other legal proceedings could expose the Company to significant costs and liabilities and adversely affect its reputation, financial condition and results of operationsNew
37The Company’s risk management framework may not be effective in identifying or mitigating risks, which could adversely affect its financial condition and results of operations99% rewritten
38The Company’s earnings and financial condition are significantly influenced by monetary and fiscal policies of the federal government and its agencies95% rewritten
39Heightened scrutiny and evolving expectations regarding environmental, social and governance (“ESG”) matters may increase costs and expose the Company to additional risksNew
40The development and use of Artificial Intelligence (“AI”) technologies present risks that could adversely affect the Company’s business, financial condition, and results of operations93% rewritten
41To the extent the Company relies on AI technologies developed or operated by third parties, it faces additional risk related to vendor oversight, data security, operational resilience, and the effectiveness of those third parties’ risk management and mitigation, over which it may have limited control or visibilityNew
42The Company is subject to losses due to errors, omissions or fraud by its associates, clients, counterparties or other third partiesNew

Risks Related to Owning the Company’s Stock

43The market price of the Company’s common stock may fluctuate significantly and could decline, which could result in losses to its investorsNew
44The market price of the Company’s common stock has been volatile in the past and may fluctuate significantly in the future in response to a variety of factors, many of which are beyond the Company’s controlNew
45Future issuances of the Company’s common stock or securities convertible into common stock could dilute existing shareholders and adversely affect the market price of its common stock93% rewritten
46The Company’s common stock is subordinate to its existing and future indebtedness and is structurally subordinated to the claims of the Bank’s creditors98% rewritten
47The trading volumes in our common stock may not provide adequate liquidity for investorsNew

Other Carter Bankshares 10-Ks

FY2024 10-K risk factors
37 risks
Real estate loan concentrations, particularly in commercial real estate and construction, dominate the company risk profile. Heavy reliance on customer deposits and wholesale liquidity sources for funding creates structural vulnerabilities. Interest rate fluctuations and broader economic conditions in Virginia and North Carolina significantly impact profitability.
Filed Mar 07, 2025

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The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.