Bank says dispute over Justice family loans has cost it more than $48 million in interest

A long-running conflict between a Martinsville-based bank and West Virginia Gov. Jim Justice’s family over the family’s overdue loans has caused the bank to miss out on more than $48 million in interest income since mid-2023, the bank said Thursday.

Carter Bank & Trust reached an agreement with Justice and his family companies last month regarding the repayment of more than $300 million in loans that were due in April 2023. That came after years of legal clashes in Martinsville and in federal courts , as well as an attempt to auction off Justice-owned property.

In the second quarter of 2023, the bank placed the Justice loans in nonaccrual status, which means they weren’t earning interest because payments weren’t being made. The bank said that its interest income “has been negatively impacted by $48.4 million in the aggregate” since then.

The figure was revealed in a news release that the bank issued Thursday as it announced a profit of $4.8 million, or 21 cents per share, for the second quarter of this year. Its revenue included $54.6 million in interest income for the quarter.

Carter Bank & Trust has $4.5 billion in assets and more than 60 locations in Virginia and North Carolina. Its stock ( NASDAQ:CARE ) closed Thursday at $16.78 a share, up 0.06% for the day and up 34% since the agreement with the Justices was announced on June 26.

Justice; his wife, Cathy; their son, Jay; and their network of family companies are collectively the bank’s largest borrower, comprising 8.3% of the company’s total loan portfolio as of June 30, according to the news release. The bank said that the Justices have begun repaying their loans and their balance has decreased from $301.9 million as of March 31 to $294.1 million as of June 30.

“Obviously, the large nonperforming lending relationship continues to have a negative impact on our financial results, but aside from this issue, we believe our financial performance for the second quarter was solid and our asset quality remains strong across all credit metrics,” Carter Bank & Trust CEO Litz Van Dyke said in the news release. “We continue to feel positive about the fundamentals of the Company and the structure of our balance sheet.”

Jim Justice, West Virginia’s Republican governor since 2017, is vying for the U.S. Senate seat being vacated by former Democrat Joe Manchin.

The family owns The Greenbrier luxury resort in White Sulphur Springs, West Virginia, and a variety of coal, agricultural and hospitality businesses. The Justices personally guaranteed their loans with Carter Bank and used some of their properties as collateral.

The Justices have said in court papers that they and the bank had a good relationship beginning with a $4.5 million real estate loan in 2001 from Worth Carter Jr., who later merged 10 banks to form Carter Bank & Trust. After Carter died in 2017 and new management took over, that relationship soured, the Justices have said.

The Justices accused Carter Bank & Trust of violating banking regulations and stopping the family from working with other lenders. The bank consistently denied the allegations, saying it worked with the family and their companies over the years to extend existing loans and advance new credit as it tried to reduce its overall exposure to the Justice family.

With last month’s agreement came the dismissal of the Justices’ most recent federal lawsuit , which sought $1 billion from the bank and its directors, along with assurances that the Justices would begin repayment.

“This was a favorable outcome for our Company and we remain committed to resolving this lending relationship in a manner that best protects the Company, the Bank and shareholders,” Van Dyke said.

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