- Why it's important: A Virginia bank is looking forward to a big boost to lending and profitability after selling a large portfolio of nonperforming loans on favorable terms.
- Supporting data: At its height, Carter Bankshares' lending relationship with the Justice Companies totaled $740 million.
- Expert quote: The loan sale announced Thursday is "an even better outcome than we had modeled." — Hovde analyst Feddie Strickland
Carter Bankshares in Martinsville, Va., has overcome a major strategic stumbling block, exiting a
The $4.85 billion-asset Carter announced Thursday that it sold its remaining Justice family loans, $209.5 million in all, to an undisclosed buyer for $289.5 million. The sale price covers the loans' principal plus much of the interest lost when Carter moved the Justice loans to nonaccrual status in 2023.
The loan sale represents "an even better outcome than we had modeled," Hovde Group analyst Feddie Strickland wrote Friday in a research note. "We view this event as truly transformative."
In a similar vein, Brean Capital Director of Research Christopher Marinac termed Carter's sale of the Justice loans as a "catalyst" in his research note Friday.
"There is substantial value in [Carter Bancorp's] deposit franchise," Marinac wrote. "The ability to refocus on core banking operations can lead to better earnings-per-share growth."
While a Carter Bankshares spokesman declined to comment Friday, the company detailed some of the benefits stemming from the loan sale in a report filed Thursday with the Securities and Exchange Commission. According to Carter, its year-end 2025 asset size would have been $4.95 billion, instead of the reported $4.85 billion. Meanwhile, the ratio of nonperforming loans to total loans would have been 0.82%, instead of the reported 6.29%.
In addition, the loan sale permits Carter to substantially downsize its allowance for loan losses and reverse an $18 million specific reserve it had set aside. Moreover it boosts tangible book value per share by $3.49.
Strickland forecast a steady increase in Carter's net interest margin, 2.92% at Dec. 31, to 3.30% at year-end 2026 as the company deploys sale proceeds into income-producing loans and securities.
"Management continues to see solid loan pipelines," Strickland wrote.
Carter is also considering hiring lending teams in Southern Virginia, East Tennessee and South Carolina, according to Strickland.
The Justice Companies are active in coal, farming and hospitality, including the famed Greenbriar resort in White Sulphur Spring, West Virginia.
The family's relationship with Carter Bankshares began during the tenure of founder and CEO Worth Harris Carter, who launched the bank in 1974 and ran it until his
But after Carter's death and the
The litigation was settled in June 2024 when the sides reached an agreement that provided for the curtailment and payoff of the Justice Companies' remaining loans, which then totaled approximately $294.1 million.
In a Jan. 29 research note, Strickland noted that the steady pace of paydowns that followed the settlement made refinancing the debt outside the bank more likely.
Sen. Justice had not responded to a reporter's request for comment at deadline.
