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For the year ended December 31, 2021, net income was $31.6 million, or $1.20 diluted earnings per share, compared to a net loss of $45.9 million, or $1.74 per share for the year ended December 31, 2020. The loss was related to a one-time charge resulting from goodwill impairment. This impairment charge reduced net income by $62.2 million, resulting in a net loss in 2020. Pre-tax pre-provision income ¹ was $37.8 million for the full year December 31, 2021 and $35.1 million for December 31, 2020 excluding the goodwill impairment charge.

Full Year 2021 Financial Highlights

• NPLs decreased significantly by $24.6 million, or 76.9%, compared to December 31, 2020, primarily due to the resolution of our largest NPL relationship during 2021 and a significant reduction of our second largest NPL relationship. NPLs as a percentage of total portfolio loans were 0.26% at December 31, 2021 compared to 1.09% at December 31, 2020;

• The provision for credit losses totaled $3.4 million for the year ended December 31, 2021, compared to $18.0 million for the full year December 31, 2020;

• Net interest income increased $6.1 million, or 5.8%, to $111.2 million for the full year 2021 compared to $105.1 million for the full year 2020 primarily due to the collection of significant late fees and enhanced return on restructured loan assets, as well as a decline in funding costs during 2021;

• Net interest margin, on an FTE basis ³ , increased four basis points to 2.84% for the year ended 2021 compared to 2.80% for the year ended 2020;

• Total deposits increased $13.8 million from December 31, 2020 primarily from increased core deposits, offset by the intentional runoff of higher cost certificates of deposit ("CDs") of $270.5 million, as well as the sale of four branches with deposits totaling $84.7 million, and the closure of an additional 20 branches during 2021.

"We continue to be pleased with the direction of the Company, demonstrated by our progress in 2021. The continued decline in problem assets is a positive reflection of our efforts to improve the asset quality of the Company. Credit quality metrics with respect to delinquency and NPLs are currently at record lows for our Company, and are in the top quartile of our peer group," stated Litz H. Van Dyke, Chief Executive Officer. "We also continue to make progress in improving the fundamentals of the Company, including a better deposit mix, a continued reduction in our cost of funds, an improved net interest margin and improved financial metrics. All of these improving factors assist us in driving toward creating more operating leverage and stronger financial performance. We are very proud of our associates in helping to drive these positive trends, while professionally and safely dealing with the challenges presented by the pandemic. We believe we are well positioned to meet the challenges that 2022 will bring."

Van Dyke continued, "On December 13, 2021, we announced a stock repurchase program to purchase up to two million shares of the Company's common stock over the next twelve months. Given our strong capital position, we believe that this program is the most prudent way to generate shareholder value and increase our Company's valuation. We have actively been in the market buying shares since late December."

Fourth Quarter of 2021 Operating Highlights

Net interest income decreased $1.4 million, or 4.6%, to $28.1 million compared to the third quarter of 2021 and increased $1.9 million, or 7.3%, as compared to the fourth quarter of 2020. The net interest margin, on an FTE basis ³ , decreased 14 basis points to 2.82% for the fourth quarter of 2021 compared to 2.96% for the quarter ended September 30, 2021 and increased 11 basis points compared to the fourth quarter of 2020. The yield on interest-earning assets decreased 20 basis points and 15 basis points compared to the quarters ended September 30, 2021 and December 31, 2020, respectively. Funding costs declined eight basis points compared to the previous quarter and 33 basis points compared to the same quarter of 2020.

The Company continues to focus on the expansion of net interest income and net interest margin. The decline during the fourth quarter of 2021 compared to the third quarter of 2021 was primarily due to the collection of significant late fees related to one large credit relationship restructured during the third quarter of 2021. Certain of these restructured loans may not be renewed at maturity and/or may not otherwise impact the net interest income and net interest margin as significantly in future periods.

The provision for credit losses increased to $0.9 million for the fourth quarter of 2021 compared to $(0.4) million in the third quarter of 2021. The increase to the provision for credit losses during the fourth quarter was primarily driven by charge-offs that were not previously reserved of $0.5 million related to the sale of two notes in the fourth quarter of 2021 and a $0.5 million decline in valuation on one impaired loan offset by a reduction in reserves due to curtailments. The provision in the third quarter of 2021 was attributable to the sale of nine loans within two performing relationships that had been previously reserved and released.

The provision for unfunded commitments in the fourth quarter of 2021 was a release of $(0.3) million compared to a release of $(0.1) million in the third quarter of 2021.

At December 31, 2021, NPLs declined $1.5 million, or 16.6%, to $7.4 million since September 30, 2021. The decrease was driven by paydowns of $2.4 million from borrower asset sales in addition to the net charge-offs totaling $1.9 million. The recognition of charge-offs totaling $1.9 million occurred in the largest NPL relationship as of the quarter ended December 31, 2021. This relationship was comprised of four notes with various sources of repayment and collateral; however, all notes were cross-collateralized as part of the workout strategy.

During the fourth quarter of 2021 we received $2.4 million from borrower asset sales which concluded one of the principal notes and allowed us to quantify the remaining loss in the relationship. The Bank recognized net-charge-offs of $1.9 million, which were previously established reserves. The NPL balance of this relationship is $0.8 million and is adequately protected with collateral resulting in no individually evaluated loan reserve.

This relationship also includes two performing loans with an aggregate balance of $0.5 million as of December 31, 2021. This decrease in NPL noted above was offset by new NPLs totaling $2.8 million, of which $2.7 million is related to one loan. This individually analyzed loan has a specific allocation of $1.0 million as of December 31, 2021. Although this loan was transferred to NPL in the fourth quarter of 2021, it was previously accounted for as an individually evaluated loan with a reserve of $1.2 million as of September 30, 2021. In the fourth quarter of 2021, we received a principal reduction of $0.3 million, which reduced the individually evaluated loan reserve by $0.2 million, net of estimated liquidation expenses.

Net charge-offs were $4.3 million for the fourth quarter of 2021 compared to $0.7 million for fourth quarter of 2020. The fourth quarter increase related to $2.2 million net charge-offs from the aforementioned loan sale of two notes which resulted in additional provision expense of $0.5 million and a net charge-off of $1.9 million for a lot development relationship that was classified as NPL during the fourth quarter of 2021.

As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 0.60% and 0.09% for the fourth quarter of 2021 and 2020, respectively. Generally, these net charge-offs were part of an overall strategy to reduce NPLs. NPLs as a percentage of total portfolio loans were 0.26%, 0.31% and 1.09% as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

Total noninterest income was $5.8 million for the fourth quarter of 2021, a decrease of $1.1 million, or 16.5%, from the third quarter of 2021 and an increase of $0.2 million compared to the fourth quarter of 2020. The decrease of $1.1 million from the third quarter of 2021 was primarily driven by the declines in net security gains of $0.9 million and lower commercial loan swap fees of $0.7 million, offset by an increase of $0.4 million in insurance commissions. The increase of $0.2 million from the fourth quarter of 2020 was impacted by a $1.2 million increase in insurance commissions and $0.1 million increase in service charges, commission and fees, offset by declines in net security gains of $0.5 million and lower commercial loan swap fees of $0.6 million. The fluctuations in commercial loan swap fee income is due primarily to the timing and demand for this product in the current low interest rate environment.

Total noninterest expense was $26.2 million for the fourth quarter of 2021, an increase of $1.6 million, or 6.3%, compared to the third quarter of 2021 and an increase of $2.4 million compared to the fourth quarter of 2020. The increase from the third quarter of 2021 was primarily due to the $2.3 million increase in salaries and employee benefits. These increases are a result of additional profit sharing of $1.1 million due to better financial performance in the second half of 2021, $0.4 million in higher medical expenses and $0.6 million in vacation carryover. Offsetting these increases were decreases, compared to the third quarter of 2021, of $0.4 million in losses on sales and write-downs of other real estate owned ("OREO") due to a $0.6 million loss on the sale of OREO on 13 properties recorded in the third quarter and decrease in Federal Deposit Insurance Corporation ("FDIC") insurance of $0.3 million in the fourth quarter of 2021 as a result of improved financial metrics.

There were various fluctuations impacting the increase of $2.4 million from the fourth quarter of 2020 with the majority included in salaries and employee benefits of $1.8 million and unfunded loan commitment expense of $0.5 million. Similar to the above mentioned increases in salaries and employee benefits, profit sharing increased $1.1 million and medical expenses increased $0.7 million compared to the year ago period in 2020. The increase in unfunded loan commitment expense is a result of the adoption of Current Expected Credit Loss ("CECL") as unfunded loan commitment expense is now recorded as part of provision for credit losses instead of noninterest expense, where it was previously recorded. Other items impacting the increase included $0.3 million in other noninterest expense, $0.2 million in debit card expense, $0.2 million in tax credit amortization and $0.1 million in advertising expense. Offsetting these various increases from the year ago quarter was the above mentioned decrease in FDIC insurance expense of $0.4 million due to improved financial metrics, as well as a decline in professional and legal expenses of $0.3 million.

Full Year 2021 Operating Highlights

Net interest income increased $6.1 million, or 5.8%, to $111.2 million for the full year 2021 compared to $105.1 million for the full year 2020.The net interest margin, on an FTE basis ³ , increased four basis points to 2.84% for the year ended 2021 compared to 2.80% for the year ended 2020. The yield on interest-earning assets decreased 33 basis points compared to December 31, 2020 and funding costs declined 45 basis points compared to the same period.

The Company elected to defer its adoption of CECL in accordance with relief provided under the U.S. Coronavirus Aid, Relief, and Economic Security ("CARES") Act until January 1, 2021. Management believes the allowance for credit losses ("ACL") is adequate to absorb expected losses in the Bank's loan portfolio at December 31, 2021.

The provision for credit losses decreased $14.6 million to $3.4 million for the year ended 2021 compared to $18.0 million for the year ended 2020. The decline in the provision for credit losses is primarily due to the adoption of CECL in 2021, an increase in qualitative loss factors as a result of the estimated economic impact of COVID-19 during 2020 and the relatively stable economy from the date of adoption through December 31, 2021.

The release of $1.3 million was recorded in 2021 for the provision for unfunded commitments. Per the guidance related to CECL, unfunded loan commitments are included as part of the provision for credit losses rather than noninterest expense, where it was previously recorded.

Net charge-offs were $23.1 million for the full year 2021 compared to $2.7 million for the full year 2020. The increase in charge-offs is primarily attributable to the resolution of five problem relationships during 2021, in which the majority were previously reserved. As a percentage of average portfolio loans, on an annualized basis, net charge-offs were 0.79% and 0.09% for the years ended 2021 and 2020, respectively.

Total noninterest income increased $2.3 million to $28.9 million for the full year 2021 compared to $26.6 million for the full year 2020. The increases included $2.0 million in service charges, commission and fees, $1.4 million in debit card interchange fees and $0.7 million in other noninterest income, offset by lower commercial loan swap fee income of $1.6 million. Service charges, commission and fees increased due to reinstating fees that were previously waived during 2020 for customers affected by the COVID-19 pandemic, debit card interchange fees increased due to usage and other noninterest income increased due to gains received on the sale of bank branches during 2021. The fluctuations in commercial loan swap fee income is due primarily to the timing and demand for this product in the current low interest rate environment.

Total noninterest expense decreased $56.5 million to $102.3 million for the full year 2021 compared to $158.8 million compared to the full year 2020. The decline was driven by the aforementioned one-time charge resulting from goodwill impairment of $62.2 million recorded in the third quarter of 2020. Offsetting the decrease were increases of $2.2 million for nonrecurring write-downs related to closed bank branches, which are included in losses on sales and write-downs of OREO, net, $1.8 million in salaries and employee benefits, $1.1 million in data processing expense and $0.6 million in tax credit amortization. Similar to the quarterly increase in salaries and employee benefits was increased profit sharing of $1.1 million and higher medical expenses of $1.7 million, offset by lower salaries of $1.3 million due to our branch network optimization project. Higher data processing expenses resulted from increased customer accounts and new modules added to our core processor and the increase in tax credit amortization was due to new historic tax credits entered into throughout 2021.

Financial Condition

Total assets decreased $45.4 million to $4.1 billion at December 31, 2021 compared to $4.2 billion at December 31, 2020. Total portfolio loans decreased $135.0 million, or 4.6%, to $2.8 billion at December 31, 2021 compared to December 31, 2020 primarily due to $62.0 million of loan sales, large commercial loan payoffs and mortgage refinancing sold in the secondary markets. OREO decreased $4.8 million at December 31, 2021 compared to December 31, 2020 due to the sale of 23 branches and six OREO properties during 2021.

Closed retail bank office carrying values decreased $1.5 million and have a remaining book value of $1.0 million at December 31, 2021 compared to $2.5 million at December 31, 2020. During 2021, 20 branch closures were completed and 16 of these were sold as part of our branch network optimization project that aligns with our strategic goals to enhance franchise value and improve operating efficiency.

Federal Reserve Bank excess reserves increased $12.7 million to $176.2 million at December 31, 2021 from $163.5 million at December 31, 2020 due to active balance sheet management.

The securities portfolio increased $143.7 million, or 18.5%, and is currently 22.3% of total assets at December 31, 2021 compared to 18.6% of total assets at December 31, 2020. The increase is a result of active balance sheet management. We have further diversified the securities portfolio as to bond types, maturities and interest rate structures.

Total deposits increased $13.8 million to $3.7 billion at December 31, 2021 compared to December 31, 2020. The increase from December 31, 2020 was due to an increase of $369.0 million, or 18.6% in all core deposit categories, which includes noninterest-bearing and interest-bearing demand deposits, money market accounts and savings accounts. The increase in core deposits was offset by the intentional runoff of $270.5 million of higher cost CDs and $84.7 million of deposits held-for-assumption in connection with the sale of four bank branches, which were completed during the second quarter of 2021. At December 31, 2021, noninterest-bearing deposits comprised 20.2% compared to 19.0% of total deposits at December 31, 2020. CDs comprised 36.3% and 43.8% of total deposits at December 31, 2021 and December 31, 2020, respectively.

The Bank provided loan payment deferrals to customers under Section 4013 of the CARES Act and regulatory interagency guidance regarding loan modifications. The Bank launched successive deferral programs with short-term expirations. The Part I program was launched on March 23, 2020 and expired on August 31, 2020. The deferrals in Part I provided for deferral of principal and up to the deferral of principal and interest, if requested through the expiry. The Part II program extended deferrals through December 31, 2020 subject to the collection of updated financial information and validation of need. For these borrowers the Bank requested verification of business and/or guarantor liquidity to ascertain the viability of the business in a post-pandemic environment. Prior to the extension of the CARES Act, the Bank launched the Part III program which offered borrowers in the Part II program an extension of deferrals through June 30, 2021. Borrowers who opted into the Part III program were required to provide monthly financial statements and remit payments on a quarterly basis equal to the lesser of: i) 90% of free cash flow (EBITDA) or, ii) the otherwise contractual payment ("recapture payment"). Following the expiration of the deferral programs on June 30, 2021, for term loans, payments were applied to accrued interest first and once accrued interest is current, payments will be applied to principal. Deferred principal will be due at maturity. For interest only loans, such as lines of credit, deferred interest will be due at maturity. Cumulative deferred interest totaled $12.0 million as of June 30, 2021, but declined to $1.8 million as of December 31, 2021.

The Bank also participated in the Paycheck Protection Program ("PPP") established by the CARES Act. During the first round of PPP, we approved 451 loans that were referred to an online small business lender, totaling $17.9 million. Through the second round we had approved 515 loan applications totaling $39.9 million through our internal lending program, of which 498 loans totaling $38.5 million have been fully forgiven by the Small Business Administration ("SBA"). The $57.8 million in PPP loans originated during the first two rounds of PPP generated $1.5 million in fees, which have been, or will be, recognized in income as loans are forgiven, or over the remaining life of the loan for any portion that is not forgiven. On December 22, 2020 Congress passed legislation that was signed into law on December 27, 2020, making available a third round of PPP funding. We provided access to the program through our internal lending program for our current business customers. As of December 31, 2021, we had approved 136 loan applications totaling $11.0 million, of which 125 loans totaling $9.8 million have been fully forgiven by the SBA and generated an additional $0.6 million in fees. These loans, as they were forgiven, generated fee income of $0.1 million and $0.2 million, and $1.1 million and $0.3 million, for the three and twelve months ended December 31, 2021 and December 31, 2020, respectively.

The Company remains well capitalized. The Company's Tier 1 Capital ratio was 14.21% at December 31, 2021 as compared to 13.08% at December 31, 2020. The Company's leverage ratio was 10.62% at December 31, 2021 as compared to 10.26% at December 31, 2020. The Company's Total Risk-Based Capital ratio was 15.46% at December 31, 2021 as compared to 14.33% at December 31, 2020. In March 2020, the banking regulators issued an interim final rule ("IFR") to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The IFR maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL's effect on regulatory capital, relative to the incurred loss methodology's effect on regulatory capital, followed by a three-year transition period (five-year transition option). We adopted CECL effective January 1, 2021 and elected to implement the capital transition relief over the permissible three-year period.

Total capital of $407.6 million at December 31, 2021, reflects a decrease of $32.6 million as compared to December 31, 2020. This decrease during 2021 is primarily due to the transitional adjustment of $50.7 million, net of tax for the adoption of CECL, a $14.0 million decrease in other comprehensive income due to changes in fair value of available-for-sale investment securities and the $0.5 million related to the repurchase of common stock, offset by net income of $31.6 million for the year ended December 31, 2021. The remaining difference of $1.0 million is related to restricted stock activity through December 31, 2021.

At December 31, 2021, funding sources accessible to the Company include borrowing availability at the Federal Home Loan Bank ("FHLB"), equal to 25.0% of the Company's assets or approximately $1.0 billion, subject to the amount of eligible collateral pledged, federal funds unsecured lines with six other correspondent financial institutions in the amount of $145.0 million and access to the institutional CD market. In addition to the above funding resources, the Company also has $743.8 millionof unpledged available-for-sale investment securities as an additional source of liquidity.

On December 13, 2021, the Company authorized, effective December 10, 2021, a common share repurchase program to purchase up to two million shares of the Company's common stock in the aggregate over a period of twelve months. As of December 31, 2021, 30,407 common shares had been repurchased under this program at an average price of $15.22 per share.

About Carter Bankshares, Inc.

Headquartered in Martinsville, VA, Carter Bankshares, Inc. (NASDAQ: CARE) provides a full range of commercial banking, consumer banking, mortgage and services through its subsidiary Carter Bank & Trust. The Company has $4.1 billion in assets and 69 branches in Virginia and North Carolina. For more information or to open an account visit www.CBTCares.com.

Important Note Regarding Non-GAAP Financial Measures

In addition to traditional measures presented in accordance with GAAP, our management uses, and this press release contains or references, certain non-GAAP financial measures and should be read along with the accompanying tables in our definitions and reconciliations of GAAP to non-GAAP financial measures. This press release 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. Non-GAAP measures should not be considered as an alternative to any measure of performance as promulgated under GAAP, nor are they necessarily comparable to non-GAAP performance 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 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.

Important Note Regarding Forward-Looking Statements

This information contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, litigation to which the Company is or has been a party and the potential impacts thereof, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels and asset quality. 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. 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. 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 depending on a variety of uncertainties or other factors including, but not limited to: changes in accounting policies, practices, or guidance, for example, our adoption of CECL; cyber-security threats, attacks or events; rapid technological developments and changes; changes in the Company's liquidity and capital positions; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts or public health events (such as the ongoing COVID-19 pandemic), 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; sensitivity to the interest rate environment including a prolonged period of low interest rates, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; regulatory supervision and oversight; legislation affecting the financial services industry as a whole, and the Company and the Bank, in particular; the outcome of pending and future litigation and governmental proceedings, including litigation or actions arising from the Company's participation in and administration of programs related to COVID-19, including, among other things, the PPP under the CARES Act; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or more costly than anticipated; material increases in costs and expenses; reliance on significant customer relationships; general economic or business conditions, including unemployment levels, continuing supply chain disruptions and slowdowns in economic growth, particularly related to the sustained economic impacts of the COVID-19 pandemic; changes in the Company's branch expansions and consolidations, including that the anticipated benefits of the Company's branch network optimization project are not fully realized in a timely manner or at all, deterioration of the housing market and reduced demand for mortgages; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses. Many of these factors, as well as other factors, are described in our filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are prepared. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events 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 any forward-looking statement to reflect developments occurring after the statement is made.

Carter Bankshares, Inc.
Wendy Bell, 276-656-1776
Senior Executive Vice President & Chief Financial Officer
wendy.bell@CBTCares.com

CARTER BANKSHARES, INC.
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CARTER BANKSHARES, INC.
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