Carter Bankshares Exit Contentious Relationship with Justice Companies
Virginia-based Carter Bankshares has successfully navigated its way out of a longstanding, problematic relationship with the Justice Companies, a conglomerate owned by the family of West Virginia Senator James Justice. The resolution came in the form of a loan sale, which significantly benefits Carter Bankshares’ lending capabilities and profitability.
At the peak of their business relationship, Carter Bankshares’ lending to the Justice Companies was estimated at a whopping $740 million. However, this relationship became strained over time, culminating in a contentious legal battle and the eventual sale of the remaining Justice family loans.
The Loan Sale: A Transformative Outcome
On Thursday, Carter Bankshares announced the sale of its remaining loans linked to the Justice family. The $209.5 million loan portfolio was sold to an undisclosed buyer for $289.5 million. This sale price not only covers the loan principal but also accounts for much of the interest lost when Carter transitioned the Justice loans to nonaccrual status back in 2023.
Analysts view this sale as a crucial step for Carter Bankshares. Feddie Strickland, an analyst from Hovde Group, hailed the loan sale as “an even better outcome than we had modeled,” indicating its transformative implications for the bank. Christopher Marinac, Director of Research at Brean Capital, echoed this sentiment, labeling the loan sale as a “catalyst.”
Implications for Carter Bankshares
With the sale, Carter Bankshares is poised to refocus on its core banking operations, leading to enhanced earnings per share growth. According to a report filed with the Securities and Exchange Commission, the bank anticipates its year-end 2025 asset size to increase to $4.95 billion and the ratio of nonperforming loans to total loans to drop to 0.82%. The transaction also allows the bank to reduce its allowance for loan losses and reverse an $18 million specific reserve.
Strickland projects that Carter’s net interest margin will increase from 2.92% to 3.30% by the end of 2026. He also hinted at the bank’s consideration to hire lending teams in Southern Virginia, East Tennessee, and South Carolina.
Understanding the Carter-Justice Relationship
The Justice Companies, with diverse interests in sectors like coal, farming, and hospitality, started their relationship with Carter Bankshares under the stewardship of the bank’s founder and CEO, Worth Harris Carter. However, after his death in 2017 and the subsequent appointment of Litz Van Dyke as CEO, the bank decided to scale down its relationship with the Justice Companies. This decision led to a series of legal battles, ending with the sale of the Justice Companies’ remaining loans.
The sale of these loans not only resolves the contentious relationship between Carter Bankshares and the Justice Companies but also paves the way for the bank to focus on its core operations, providing a significant boost to its lending capabilities and profitability.
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