The Midlothian-based bank announced Monday the closing of a deal through which it gave up majority ownership to a group of Virginia investors in exchange for $10.3 million in fresh capital.
That cash will go a long way to helping the bank work out its shaky loan portfolio and might also give it some clout for expansion and even some possible acquisitions.
The deal, which closed Friday, was first announced in April and was supposed to close in the third quarter. But Cordia, a group of former bankers and investment bankers, first had to become a bank holding company, and approval from regulators took longer than expected.
“It’s been a very slow and difficult period for raising capital and getting regulatory approval,” said Jack Zoeller, Bank of Virginia’s new CEO, who came from Cordia. “We’ve done both. We think it’s a good position to be in.”
During the delay, Bank of Virginia’s balance sheet deteriorated, forcing it to lower its share price for the deal. Cordia then increased its stake.
Cordia purchased 6.77 million shares of Bank of Virginia stock for $1.52 per share, for a total investment of $10.3 million. That gives it ownership of 59.8 percent of the bank. Cordia has the option to buy $9 million more in stock at the same price through next fall.
For Bank of Virginia, the capital is timely. The bank lost $4.9 million during the third quarter and has lost $5.5 million through the first nine months of the year. The losses are mostly due to non-performing loans.
The bank 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.
Zoeller said Cordia has felt all along that the bank has done a good job of working to identify potential weaknesses in its loan portfolio and set aside reserves accordingly.
With the money and change in ownership also comes a new leadership regime.
In addition to Zoeller taking over as chief executive of the bank, Bank of Virginia’s former CEO Frank Bell is now president.
Zoeller, 61, previously served on the board of the former TransCommunity Financial Corp., which merged into what is now Essex Bank, owned by Glen Allen-based Community Bankers Trust Corp.
Five other Cordia executives are now members of the Bank of Virginia board of directors, three of whom were also formerly with TransCommunity.
Zoeller said that he recognizes that Bank of Virginia shareholders have given up a lot to get to this point and that he’s motivated to make that sacrifice worth the price.
To read more about his thoughts on the Bank of Virginia/Cordia deal and his plans for the future of the bank, tune in Monday for an in-depth Q&A with Zoeller.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected]