Carter Bank & Trust (CARE 0.23%) has failed to file its annual report with the Federal Insurance Deposit Corporation, according to a regulatory filing yesterday.

The bank, based in Martinsville, Virginia, said in the filing that, along with its auditor, it is still evaluating the collateral behind an impaired loan relationship.

Analyzing the books.

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"The results of a pending independent appraisal regarding the collateral supporting this impaired loan relationship could potentially impact the financial statements to be included in such Form 10-K if it results in a reserve being necessary for this loan relationship," Carter Bank & Trust's CFO, Wendy Ball, said in the filing. "In addition, there is a potential deficiency in internal controls primarily relating to the valuation of impaired loans within the Allowance for Loan Losses, which could affect prior periods."

Banks set aside allowance for loan losses each quarter so they have sufficient funding to cover faulty loans. The number directly impacts earnings. Carter Bank & Trust, in its filing, said it does not expect the impaired loan to result in any changes to the provision for loan losses.

Overall, allowance for loan losses at the bank improved in the fourth quarter of 2019, according to the bank's fourth-quarter earnings release. The bank also did not have any loans modified as troubled debt restructurings through the first three quarters of 2019, according to its third-quarter earnings report. Net charge-offs, which are debts unlikely to be collected, were greatly reduced for the year after the bank charged off a $10.1 million legacy commercial real estate loan in 2018.

Still, the fact that the bank is having trouble with an impaired loan relationship months later could suggest a more significant problem, especially for a small bank.