Carter Bankshares' $20M Buyback: A Bold Bet on Undervaluation and Shareholder Value

In an era where regional banks face headwinds from rising interest rates and economic uncertainty, Carter Bankshares (NASDAQ: CARE) has taken a decisive step to signal confidence in its stock’s undervaluation. The $20 million share repurchase program, announced this month, represents a strategic pivot toward capital allocation that could meaningfully enhance shareholder value—if executed wisely. For long-term investors, this move demands scrutiny of its implications for valuation, peer comparison, and risk.

Why Now? A Calculated Move on Undervaluation

Carter’s buyback, which can remain active until May 2026, is sizable relative to its $361.5 million market cap—equivalent to roughly 5.5% of its current valuation. This suggests management believes shares are undervalued, a stance bolstered by its Forward P/E ratio of 8.8, well below the industry median of 14.5. To put this in perspective:

The stock’s recent volatility, marked by a trough in late 2023 and a partial recovery in early 2025, aligns with the company’s forward valuation swings. By deploying capital into buybacks now, management is making a contrarian bet that the stock’s current price underestimates its intrinsic value. This is a stark contrast to its -0.6% 1-Year Share Buyback Ratio as of March 2025—worse than 64.7% of peers—which hints at prior restraint.

The Math of Buybacks: EPS Accretion Potential

The buyback’s financial impact hinges on how many shares are repurchased and at what price. If Carter buys back shares at its current price of around $15 (based on a trailing P/E of 13.15 and EPS of $1.20), reducing the outstanding shares by 5.5% could boost EPS by approximately 5.8%, assuming earnings remain flat. This accretion becomes more compelling if the stock trades below its book value or tangible common equity—a metric where Carter’s community banking model, with $4.6 billion in assets, could shine.

Peer Comparison: Lagging Buybacks, but a Strategic Opportunity

While Carter’s recent buyback activity lagged behind peers like Truist Financial (TFC) and Wells Fargo (WFC), which maintain robust capital return programs, its smaller size and regional focus offer flexibility. Unlike national banks, Carter’s 65 branches in Virginia and North Carolina are less exposed to systemic risks, making it a “best-of-breed” play in community banking.

Peer	Forward P/E	1-Year Buyback Ratio	Dividend Yield
Carter Bankshares (CARE)	8.8	-0.6%	2.1%
Truist Financial (TFC)	10.2	+1.2%	1.8%
Wells Fargo (WFC)	11.5	+0.9%	2.5%

Carter’s 8.8 Forward P/E is lower than both TFC and WFC, suggesting the market is pricing in risks not yet reflected in its fundamentals. This creates an asymmetrical opportunity: upside if the stock reverts to historical valuation multiples, and downside limited by its tangible book value.

Risks to Consider

No investment is without risk. Carter’s reliance on net interest margin—a common vulnerability for banks—could suffer if the Fed hikes rates further or loan demand weakens. Additionally, its small-cap status means liquidity is thin, and macroeconomic shocks could amplify volatility. The departure of board member E. Warren Matthews, while not signaling discord, reduces governance bandwidth at a critical juncture.

The Bottom Line: A Compelling Entry Point

Despite risks, Carter’s buyback program underscores management’s commitment to shareholder returns at a price that reflects pessimism rather than reality. With a Forward P/E nearly half the industry average and a buyback capable of boosting EPS meaningfully, this is a stock primed for a valuation re-rating. For investors seeking exposure to a resilient regional bank at a discount, Carter Bankshares presents a rare combination of strategic execution and undervaluation—a compelling case for a long-term position.

The question isn’t whether Carter can navigate macro challenges—it’s whether investors can afford to ignore its valuation gap. This buyback isn’t just a confidence vote; it’s an invitation to participate in a turnaround story before the market catches on.