Carter Bankshares, Inc. 10-Q

ITEM 1- LEGAL PROCEEDINGS In the normal course of business, the Company is subject to various legal and administrative proceedings and claims. Legal and administrative proceedings are subject to inherent uncertainties and unfavorable rulings could occur, and the timing and outcome of any legal or administrative proceeding cannot be predicted with certainty. As of September 30, 2021, the Company is not involved in any material pending or threatened legal proceedings other than proceedings occurring in the ordinary course of business. As previously disclosed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, the Bank and its directors were named as defendants in a lawsuit filed in the United States District Court for the Southern District of West Virginia (the “District Court”) by James C. Justice, II, Cathy L. Justice, James C. Justice, III and various related entities that he and/or they own and control (such entities, the “Justice Entities” and collectively, the “Justice Parties”). The allegations contained in the lawsuit related to a series of loans (the “Loans”) made by the Bank to certain Justice Entities that are secured by collateral pledged by certain Justice Entities and are backed by personal guarantees from James C. Justice, II and Cathy L. Justice and, in certain cases, by personal guarantees from James C. Justice, III. In July 2021, the Bank filed confessions of judgment against certain of the Justice Parties in Virginia state courts to collect amounts owed on certain of the Loans that were past due and in default. In August 2021, the Bank and the Justice Parties reached an agreement to restructure the Loans. In connection with this agreement, the Bank obtained a voluntary dismissal with prejudice of the lawsuit filed by the Justice Parties in the District Court. The Bank withdrew the creditor collection actions it had filed against certain of the Justice Parties in Virginia state court. The Bank believes that it is fully secured on all loans outstanding to the Justice Parties. In connection with the dismissal of the lawsuits and the restructuring of the Loans, the Justice Parties executed documents that waive any and all causes of action of any kind they might claim to have against the Bank, reaffirm the Loans owed to the Bank, and enhance the Bank’s collateral position, including cross-collateralizations, with respect to all loans outstanding to the Justice Parties. The Company and the Bank denied and continue to deny all allegations contained in the lawsuit filed against the Bank by the Justice Parties. Based on information presently available to the Company and the Bank and based on consultation with legal counsel, the Company believes that the legal proceedings described above are concluded and will not have a material adverse effect on the Company’s consolidated financial statements as a whole. ITEM 1A – RISK FACTORS As of September 30, 2021, there have been no material changes in the risk factors faced by the Company from those disclosed in our 2020 Annual Report on Form 10-K as supplemented by the risk factor disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None. ITEM 4 – MINE SAFETY DISCLOSURES None.