Waiting is the hardest part.
Bank of Virginia was supposed to close on its deal to raise up to $15 million in capital and sell majority ownership to a Washington bank investment group by the end of the third quarter.
But that date came and went last week, and the bank said Oct. 1 that the closing date for the deal has been extended until Dec. 31 and the per-share price of the deal fell by $1.
The delay has been caused by a hold-up in the regulatory approval process that the investor, Cordia Bancorp, must go through to become a bank holding company.
The decline in the share price from $3 to $2 is related to further hits the bank expects on its balance sheet when its third quarter results are released next month. The bank said it anticipates between $4.5 million and $5.5 million in write-offs on bad loans and increases to its reserves to cover other potential loan losses for the quarter that ended Sept. 30.
But the good news is that Cordia agreed to spend more money on the deal.
Cordia originally agreed to pay $3 per share for a minimum investment of $6 million and a maximum of $15 million. In light of the better price, Cordia is looking to get more for its money and has since decided to spend at least $10 million and a possible maximum of $20 million to buy Bank of Virginia shares for $2 each.
Michelle Hastings, an assistant vice president and spokesperson, said that, despite the changes, the deal was never in danger of falling apart.
“Cordia has been committed throughout the entire process,” Hastings said. “This reaffirmed their commitment. This ultimately is good news.”
Hastings said she wasn’t able to comment on what percentage of the bank Cordia will own once the deal in inked. The first deal said Cordia would own at least 52 percent of the bank. The plan was announced in April. Bank of Virginia shareholders approved the deal in July.
The bank lost $625,000 through the first half of 2010. It lost $4.2 million in all of 2009.
As of June 30, Bank of Virginia had $220.2 million in assets, down about a million since the end of the year. It had $192.6 million in deposits at the end of the second quarter, down about $500,000 since the end of the year. And its loan portfolio has shrunk by almost $10 million since year’s end to $156.4 million.
Bank of Virginia entered into a written agreement and turnaround plan with state and federal regulators in January.
It reported $10.3 million in past due and non-accrual loans at the end of the second quarter, up from $8.2 million at the end of 2009. Hastings said those loans consist mostly of commercial loans from around Central Virginia.
The bank also announced more changes in its executive ranks.
A new CFO has been named, but she won’t take over until the Cordia deal is done. The bank had already said that CEO Frank Bell will be replaced by Cordia’s CEO. Bell will stay on as president.
The bank’s current CFO Kenneth Mulkey will eventually be replaced by Nancy Corsiglia, who has been working at the bank as a consultant and strategic advisor.
“Mr. Mulkey has decided to move on and pursue other opportunities,” Hastings said.
If and when Cordia receives approval from the Federal Reserve to become a bank holding company, the capital deal must once again be approved by shareholders in light of the change in the share price. It then must be approved by state and federal regulators.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected]