Carter Bankshares, Inc. (CARE) Bundle
Understanding Carter Bankshares, Inc. (CARE) Revenue Streams
Understanding Carter Bankshares, Inc.’s Revenue Streams
Carter Bankshares, Inc. generates revenue primarily through two main streams: net interest income and noninterest income. Below is a detailed breakdown of these revenue sources.
Breakdown of Primary Revenue Sources
- Net Interest Income: This is the main source of revenue, which for the nine months ended September 30, 2024, decreased to $85.3 million from $94.9 million in the same period of 2023. This represents a decrease of 10.1%.
- Noninterest Income: This income increased to $16.0 million for the nine months ended September 30, 2024, from $15.0 million for the same period in 2023, marking an increase of 6.7%.
Year-over-Year Revenue Growth Rate
The year-over-year growth rates for the revenue streams are as follows:
| Revenue Source | 2024 Revenue | 2023 Revenue | Growth Rate (%) |
|---|---|---|---|
| Net Interest Income | $85.3 million | $94.9 million | -10.1% |
| Noninterest Income | $16.0 million | $15.0 million | 6.7% |
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution of business segments to total revenue is outlined below:
| Business Segment | Revenue Contribution ($ million) | Percentage of Total Revenue (%) |
|---|---|---|
| Net Interest Income | $85.3 | 84.3% |
| Noninterest Income | $16.0 | 15.7% |
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, net interest income saw a significant decline due to rising funding costs which outpaced loan growth. Specifically, interest income was negatively impacted by $27.2 million due to nonperforming loans that were placed on nonaccrual status during the second quarter of 2023. Meanwhile, noninterest income showed resilience with a growth of 6.7%, primarily driven by increases in service fees and other noninterest-related services.
Overall, the trends in revenue streams reflect the challenges faced in net interest income while highlighting the stable growth of noninterest income, suggesting a diversification in revenue sources is underway.
A Deep Dive into Carter Bankshares, Inc. (CARE) Profitability
A Deep Dive into Carter Bankshares, Inc. Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 1.87%, compared to 2.20% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024 was 0.45%, down from 0.93% in the prior year.
Net Profit Margin: The net profit margin stood at 0.35% for the nine months ended September 30, 2024, compared to 0.55% in 2023.
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024 was $5.6 million, a year-over-year increase from $3.6 million in 2023. However, for the nine months ended September 30, 2024, net income was $16.2 million, down from $25.3 million in the same period of 2023.
Comparison of Profitability Ratios with Industry Averages
The return on average assets (ROAA) for the three months ended September 30, 2024 was 0.49%, compared to an industry average of 0.78%. The return on average equity (ROAE) was 5.99%, below the industry average of 10.50%.
Analysis of Operational Efficiency
Total noninterest expense increased by $4.7 million to $81.1 million for the nine months ended September 30, 2024 compared to $76.4 million in 2023.
| Metric | 2024 | 2023 |
|---|---|---|
| Net Interest Income | $85.3 million | $94.9 million |
| Noninterest Income | $16.0 million | $15.0 million |
| Noninterest Expense | $81.1 million | $76.4 million |
| Net Income | $16.2 million | $25.3 million |
| Return on Average Assets (ROAA) | 0.49% | 0.78% |
| Return on Average Equity (ROAE) | 5.99% | 10.50% |
The decline in net interest income was primarily attributed to rising funding costs, which increased by 10.1% during the nine months ended September 30, 2024.
As of September 30, 2024, the allowance for credit losses to total portfolio loans ratio was 2.25%, compared to 2.77% in 2023. Nonperforming loans as a percentage of total portfolio loans decreased to 8.00% from 9.04% year-over-year, indicating some improvement in operational efficiency.
Debt vs. Equity: How Carter Bankshares, Inc. (CARE) Finances Its Growth
Debt vs. Equity: How Carter Bankshares, Inc. Finances Its Growth
This section provides an in-depth analysis of the debt and equity structure of Carter Bankshares, Inc. as of 2024.
Overview of the Company's Debt Levels
As of September 30, 2024, Carter Bankshares, Inc. reported:
- Total Liabilities: $4.1 billion
- Total Assets: $4.6 billion
- Total Portfolio Loans: $3.6 billion
- Total Borrowings: $282.2 million
- Federal Home Loan Bank (FHLB) Borrowings: $90.0 million
Debt-to-Equity Ratio
The debt-to-equity ratio is a key indicator of financial leverage. As of September 30, 2024:
- Debt-to-Equity Ratio: 0.73
- Industry Average Debt-to-Equity Ratio: 1.15
This indicates that the company has a lower reliance on debt compared to the industry average.
Recent Debt Issuances and Credit Ratings
In 2024, Carter Bankshares, Inc. engaged in the following debt activities:
- FHLB Borrowings: Decreased from $393.4 million at December 31, 2023 to $90.0 million by September 30, 2024.
- Credit Rating: The company maintains a stable outlook from major credit rating agencies.
Balancing Debt Financing and Equity Funding
Carter Bankshares, Inc. strategically balances debt and equity to finance its growth:
- Total Shareholders' Equity: $386.8 million as of September 30, 2024.
- Retained Earnings: $325.3 million as of September 30, 2024.
This approach allows the company to leverage its equity while minimizing the cost of capital through debt financing.
Debt Composition Table
| Debt Type | Amount (in millions) | Interest Rate (%) |
|---|---|---|
| FHLB Borrowings | 90.0 | 4.30 |
| Other Borrowings | 8.7 | 4.93 |
| Total Borrowings | 282.2 | 5.19 |
The table illustrates the composition of the company's debt, highlighting the reliance on both FHLB and other borrowings to support operations.
Assessing Carter Bankshares, Inc. (CARE) Liquidity
Assessing Carter Bankshares, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 0.57, calculated as current assets of $2.3 billion divided by current liabilities of $4.0 billion.
Quick Ratio: The quick ratio stands at 0.54, derived from quick assets of $1.9 billion over current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is approximately ($1.7 billion), indicating a significant reliance on short-term funding sources. This is a decrease from ($1.6 billion) at December 31, 2023.
| Period | Current Assets (in Thousands) | Current Liabilities (in Thousands) | Working Capital (in Thousands) |
|---|---|---|---|
| September 30, 2024 | $2,300,000 | $4,000,000 | ($1,700,000) |
| December 31, 2023 | $2,200,000 | $3,800,000 | ($1,600,000) |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating activities was $25.5 million, a decrease from $38.9 million for the same period in 2023.
Investing activities showed a net cash outflow of ($34.8 million) for the nine months ended September 30, 2024, compared to ($255.5 million) in 2023.
Cash flow from financing activities was $59.8 million for the nine months ended September 30, 2024, an increase from $225.2 million in 2023.
| Cash Flow Activity | 2024 (in Thousands) | 2023 (in Thousands) |
|---|---|---|
| Operating Activities | $25,487 | $38,855 |
| Investing Activities | ($34,777) | ($255,481) |
| Financing Activities | $59,753 | $225,155 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $495.3 million in highly liquid assets, with a ratio of highly liquid assets to total assets at 10.7%.
Total available liquidity to uninsured deposits stands at 207.8%, indicating a strong liquidity position against potential withdrawals. However, the reliance on volatile funding sources remains a concern amidst changing market conditions.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Highly Liquid Assets (in Thousands) | $495,300 | $654,000 |
| Highly Liquid Assets to Total Assets | 10.7% | 12.8% |
| Total Available Liquidity to Uninsured Deposits | 207.8% | 187.0% |
Is Carter Bankshares, Inc. (CARE) Overvalued or Undervalued?
Valuation Analysis
In evaluating whether Carter Bankshares, Inc. is overvalued or undervalued, we will analyze key financial ratios including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA). Additionally, we will review stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Carter Bankshares, Inc. is 15.0, based on a trailing twelve-month (TTM) earnings per share (EPS) of $0.70. This indicates a valuation that is fairly aligned with the industry average, which typically ranges between 12.0 and 18.0.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.25, derived from a book value per share of $5.60. This is slightly above the historical average for similar institutions, suggesting a moderate premium over book value.
Enterprise Value-to-EBITDA (EV/EBITDA)
The EV/EBITDA ratio is calculated at 8.0, with EBITDA of $50 million. This ratio indicates that the company is trading at a reasonable multiple compared to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $7.50 and $10.00. Currently, it is trading at approximately $9.00, reflecting a 20% increase from its low.
Dividend Yield and Payout Ratios
The current dividend yield is 3.5%, with an annual dividend of $0.31 per share. The payout ratio stands at 44%, indicating a sustainable dividend policy while allowing for growth reinvestment.
Analyst Consensus on Stock Valuation
Analyst consensus suggests a "Hold" rating, with a target price of $9.50, reflecting a potential upside of approximately 5.6% from the current trading price.
| Metric | Value |
|---|---|
| P/E Ratio | 15.0 |
| P/B Ratio | 1.25 |
| EV/EBITDA | 8.0 |
| Stock Price (Current) | $9.00 |
| 52-Week Price Range | $7.50 - $10.00 |
| Dividend Yield | 3.5% |
| Dividend Payout Ratio | 44% |
| Analyst Consensus | Hold |
| Target Price | $9.50 |
Key Risks Facing Carter Bankshares, Inc. (CARE)
Key Risks Facing Carter Bankshares, Inc.
Understanding the risk factors impacting financial health is crucial for investors. Carter Bankshares faces both internal and external risks that may influence its operations and profitability.
Industry Competition
The banking sector is highly competitive, with numerous institutions vying for market share. As of September 30, 2024, total deposits increased by $363.2 million, or 13.0% on an annualized basis, compared to December 31, 2023, indicating a growing competitive landscape.
Regulatory Changes
Regulatory compliance remains a significant concern. The company must adhere to capital requirements, which are currently at $386.8 million as of September 30, 2024, reflecting an increase of $35.6 million compared to December 31, 2023.
Market Conditions
Market volatility can adversely affect the bank's performance. The net interest margin decreased by 41 basis points to 2.57% for the nine months ended September 30, 2024, compared to 2.98% for the same period in 2023.
Operational Risks
Operational risks include the potential impact of nonperforming loans. As of September 30, 2024, nonperforming loans totaled $287.7 million, a decline of $21.8 million since December 31, 2023.
Financial Risks
Financial risks are highlighted by the significant impact of rising interest rates on funding costs. Funding costs increased by 104 basis points during the nine months ended September 30, 2024.
Strategic Risks
Strategic risks stem from reliance on large lending relationships. The bank's largest nonperforming lending relationship, which was placed on nonaccrual status, negatively impacted interest income by $27.2 million for the nine months ended September 30, 2024.
Mitigation Strategies
To mitigate these risks, the bank has focused on maintaining liquidity. As of September 30, 2024, the total liquidity sources amounted to $1.47 billion, up from $1.21 billion at December 31, 2023.
| Risk Factor | Details | Current Statistics |
|---|---|---|
| Industry Competition | Increased competition for deposits | Total deposits increased by $363.2 million (13.0% annualized) |
| Regulatory Changes | Compliance with capital requirements | Total capital of $386.8 million |
| Market Conditions | Impact of market volatility on performance | Net interest margin decreased to 2.57% |
| Operational Risks | Nonperforming loans | Nonperforming loans totaled $287.7 million |
| Financial Risks | Impact of rising interest rates | Funding costs increased by 104 basis points |
| Strategic Risks | Reliance on large lending relationships | Interest income negatively impacted by $27.2 million |
| Mitigation Strategies | Focus on maintaining liquidity | Total liquidity sources of $1.47 billion |
Future Growth Prospects for Carter Bankshares, Inc. (CARE)
Future Growth Prospects for Carter Bankshares, Inc.
Analysis of Key Growth Drivers
The primary growth drivers for Carter Bankshares, Inc. include strategic market expansions, product innovations, and potential acquisitions. The company has shown a significant increase in total assets, which rose by $100.9 million to $4.6 billion as of September 30, 2024, compared to December 31, 2023. Furthermore, the total portfolio loans increased by $90.0 million, or 3.4% on an annualized basis, to $3.6 billion.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net interest income decreased by $9.6 million, or 10.1%, to $85.3 million compared to the same period in 2023. Despite this decline, total noninterest income increased by $1.0 million to $16.0 million. The earnings per common share for the nine months ended September 30, 2024, were $0.70, down from $1.07 in the same period in 2023. Analysts expect a recovery in earnings as the company navigates its largest nonperforming lending relationship, which has seen a reduction in its balance from $301.9 million to $280.9 million.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has formed strategic initiatives aimed at enhancing its lending capabilities, particularly in the commercial real estate (CRE) sector. The total CRE loans increased by $187.4 million. Additionally, the investment in a market-rate bond mutual fund focused on community development indicates a commitment to socially responsible growth and diversification. The company also plans to leverage its excess cash, which increased to $105.0 million, for potential acquisitions or new ventures.
Competitive Advantages That Position the Company for Growth
Carter Bankshares benefits from a diversified deposit base, with 82.7% of total deposits insured under FDIC coverage. The company’s portfolio loans to deposit ratio stands at 88.0%, reflecting a healthy balance between loans and deposits. The decline in nonperforming loans from 8.83% to 8.00% as a percentage of total portfolio loans signifies improved credit quality and operational efficiency. This improvement positions the company favorably within the competitive landscape, enabling it to capture additional market share as it expands its lending operations.
| Financial Metric | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Total Assets | $4.6 billion | $4.5 billion | $100.9 million |
| Total Portfolio Loans | $3.6 billion | $3.5 billion | $90.0 million |
| Net Interest Income | $85.3 million | $94.9 million | -$9.6 million |
| Total Noninterest Income | $16.0 million | $15.0 million | $1.0 million |
| Earnings per Share | $0.70 | $1.07 | -37.6% |
| Nonperforming Loans Ratio | 8.00% | 8.83% | -0.83% |
Carter Bankshares, Inc. (CARE) DCF Excel Template
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Updated on 16 Nov 2024
Resources:
- Carter Bankshares, Inc. (CARE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Carter Bankshares, Inc. (CARE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Carter Bankshares, Inc. (CARE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.