Carter Bank & Trust said Thursday that the amount of interest income it has lost from past-due loans owed by West Virginia Gov. Jim Justice and his family companies has risen to $57.2 million.
That’s up $8.8 million since last quarter, when the Martinsville-based bank said it had missed out on $48.4 million in total interest income since mid-2023, when it placed the Justices’ loan portfolio totaling more than $300 million in nonaccrual status. Nonaccrual status is when loans don’t earn interest because payments aren’t made.
The Justice companies’ loans have been the focus of years of legal wrangling that came to a head in April 2023 when the portfolio became overdue; in June of this year, the bank and the companies announced that they had reached a settlement regarding repayment.
“Although the large nonperforming lending relationship continues to have a negative impact on our financial and credit metrics, aside from this impact, our financial performance and asset quality metrics remain solid,” Carter Bank & Trust CEO Litz Van Dyke said in a news release. “We continue to feel positive about the fundamentals of the Company and the structure of our balance sheet.”
The Justice family companies did not respond to a request for comment.
Jim Justice, West Virginia’s Republican governor since 2017, seeks the U.S. Senate seat being vacated by former Democrat Joe Manchin. The family companies own a variety of coal, agricultural and hospitality businesses in Virginia, West Virginia and North Carolina, including The Greenbrier luxury resort in White Sulphur Springs, West Virginia.
The family companies previously owed the bank as much as $775 million before the balance was paid down to approximately $300 million in April 2023, when the loans became overdue and the bank took legal action seeking repayment.
Before June’s settlement announcement, the bank and the Justices clashed in the courts for several years over the loans, with the Justices alleging that the bank deliberately stymied their repayment plans to preserve interest income, the bank accusing the Justices of stalling on paying what they owe, and each side denying the respective allegations.
Justices reduced loan balance further in third quarter
The new interest income number and Van Dyke’s comments came as Carter Bank & Trust’s parent company, Carter Bankshares Inc. (NASDAQ:CARE) reported a third-quarter profit of $5.6 million, or 24 cents per share, up 56% from $3.6 million, or 16 cents per share, during the same quarter last year.
The bank said that the Justice companies paid $7.8 million during the second quarter and $13.2 million during the third quarter. That reduced the overdue loan balance from $301.9 million as of the end of March to $280.9 million as of the end of September.
The bank noted that it “cannot give any assurance as to the timing or amount of future payments or collections on such loans or that the Company will ultimately collect all amounts contractually due under the terms of such loans.”
The Justices have said in court filings that they and the bank enjoyed a friendly relationship starting with a $4.5 million real estate loan in 2001 from Worth Carter Jr., who later consolidated 10 banks to form Carter Bank & Trust. After Carter died in 2017 and new management took over, that relationship soured, the Justices have said; Carter Bank has maintained that the new management simply sought to reduce the bank’s credit exposure to the Justices and was forthcoming about this goal.
Carter Bank & Trust has $4.5 billion in assets and more than 60 locations in Virginia and North Carolina, and the Justices and their companies collectively are the bank’s largest borrower.
The loans are personally guaranteed by the governor; his wife, Cathy; and their son, Jay; and are backed by collateral including property at the Greenbrier Sporting Club, which the bank at one time sought to auction. That auction was later canceled.
Bank says payment made in lawsuit settlement
Carter Bank & Trust said in Thursday’s news release that it made a payment related to the settlement of a $226 million federal lawsuit that was brought in February by GLAS Trust Company, LLC.
GLAS represented investors who backed financing that the now-insolvent lender Greensill UK extended to Bluestone Resources, a network of coal-mining companies owned by Jim and Jay Justice.
The lawsuit alleged that after Bluestone Resources borrowed hundreds of millions of dollars from Greensill UK, Carter Bank “forced” the Justices to repay debt not directly owed by Bluestone, hindering the repayment of other Bluestone creditors such as those represented by GLAS. The bank called those allegations “false and misleading.”
In August, the bank announced that GLAS voluntarily dismissed the lawsuit and agreed not to bring any future suits against Carter Bank related to the same allegations.
The dismissal ended all lawsuits against Carter Bank & Trust that were connected to the Justice family companies. When the loan repayment plan was announced in June, Carter Bank said the Justices also agreed to drop a $1 billion federal lawsuit against the bank and its board of directors.
On Thursday, the bank said that because the Justices had previously agreed to indemnify Carter Bank & Trust against the GLAS lawsuit’s claims, some of the Justice companies executed a promissory note related to making the lawsuit’s settlement payment.
Because the Justices are behind on their loans and because the settled claims involved allegations of preferential payments made on those loans, Carter Bank & Trust recognized those Justice companies’ promissory note as a charge-off, which is when a bank considers a debt as unlikely to be repaid.
The bank did not specify the exact amount of the settlement payment but its earnings release noted a $15 million charge-off related to its “other” category of loans, of which the Justices’ portfolio comprises a “significant majority.”
“As previously noted, the lawsuit filed by GLAS Trust Company, LLC was voluntarily dismissed with prejudice during the third quarter of 2024, and the Justice Entities have continued to curtail their debt … These are favorable outcomes for our Company and represent continued progress towards the ultimate resolution of our large nonperforming relationship,” Van Dyke said.
