Editors note: The intro text in the morning email blast for this story was incorrect. BizSense mistakenly posted the text from an old Bank of Virginia story from early October. The following is the most recent news based on numbers and conversations with the bank this week. We apologize for any confusion.
It sounds like a case of hurry up and wait.
Nearly seven months in the making, a group of D.C. area investors that wants to pour money into the Bank of Virginia in exchange for majority ownership, is still waiting for regulatory approval to become a bank holding company.
And given its recently released third quarter financials, time is of the essence for BofVA.
The bank lost $4.9 million during the third quarter alone and has lost $5.5 million through the first nine months of the year. The losses are mostly due to non-performing loans, of which the $219-million bank has $21.9 million to manage. It had previously warned that such losses were on the way.
Charging off those loans and making sure it has reserves in place has continued to eat away at the bank’s capital base. Midlothian-based BoVA said in its third quarter earnings report that its total risk-based capital ratio fell below the “adequately capitalized” threshold in the eyes of regulators.
The Cordia deal was first announced in April, after Bank of Virginia’s capital levels fell so low, the bank needed to enter an agreement with regulators on how to right the ship.
The deal was originally supposed to close during the third quarter. That date came and went. Now with Thanksgiving approaching, the two sides must watch the clock and wait for approval as the next deadline, Dec. 31, looms.
“We’re still waiting on the Fed,” said BofVA spokesperson Michelle Hastings. “We’re anticipating approval by the end of the year.”
As part of the pending deal, Cordia has agreed to invest a minimum of $10 million and up to $20 million to purchase ownership of the bank and take control of executive positions and seats on the board. That investment is an increase from the original proposal because of the bank’s diminishing market value. The bank’s board and shareholders have already approved the new deal.
Hastings couldn’t say what would happen to the deal if it is not inked by year’s end.
This time last year the bank had the same problem of diminished capital and managed to raise $4 million to bring it back into well-capitalized status.
“It’s not the first time [falling below the threshold], but obviously this agreement with Cordia will help with that,” Hastings said.
Despite the bank’s continued deterioration, both sides are still on board, Hastings assured.
“We definitely want this to happen. Corida wants to this to happen. And we’re looking forward to closing it,” Hastings said.
While the Cordia deal is still up in the air, the bank has significantly decreased its lending.
Its total loans decreased by $18.3 million or 11 percent so far this year. The bank said the decline is a result of chargeoffs of bad loans and “efforts to constrict the bank’s investment in real estate and construction loans and to preserve regulatory capital.”
It has however managed to grow its deposit base during that time.
The bank’s deposit base increased by $3.1 million during the first nine months of the year to $196.3 million.
Morale at the small bank is holding up, Hastings said, even though the bank’s future has been in somewhat of a holding pattern.
“It has taken a while. Everybody is obviously anxiously waiting and looking forward to this closing,” Hastings said. “We’re a strong team and are in constant communication.”
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected].