In the midst of a regime change and still working to ditch baggage from the recession, a Midlothian bank last week unveiled a plan it hopes will get regulators off its back and put it firmly back in the black.
Village Bank and its parent company on Friday announced moves to cut expenses by $2.2 million annually, including shedding some real estate, more aggressively selling foreclosures off its books and focusing more on attracting business customers.
The effort will force the bank to leave behind its Watkins Centre headquarters on Midlothian Turnpike, a highly visible remnant of the boom times in Chesterfield that proved to be a lot to handle.
The bank will move out of the six-acre, 80,000-square-foot property this year in favor of more modest offices in 24,000 square feet of up the road.
“It’s in a sense a trophy, and the people who were involved in building it have a real emotional attachment to it,” Village Bank President Bill Foster said of having to cut ties from the headquarters building. “But you step back and you think about saving half a million a year in rent expense.
“We’re doing what all our customers have done.”
The bank will look to sell off the headquarters and in the meantime try to lease the space, of which Village currently occupies about 40 percent. The property is listed with CBRE at $16.3 million and has been on the market for more than a year.
Village will relocate its operations five miles away to two buildings it owns at 13301-13307 and 13321 Midlothian Turnpike. It took those properties back from a struggling Chesterfield developer through foreclosure last year, a twist that illustrates what the bank has struggled with in the past few years.
It will also close and put up for sale its Brandermill branch at 13521 Waterford Place in Midlothian. Foster said it will likely look to market the 2,400-square-foot branch to a non-bank user. It will have 11 branches after the closure.
Another cost-cutting measure came in December, when Village shut down its investment services division, which it said had been unprofitable. That should save $100,000 in expenses in 2014, the company said.
Village Bank reported a loss for 2013 of $4.89 million. That’s an improvement from a loss of $11.2 million in 2012. It has turned an annual profit only twice since 2008.
The losses have been fueled by real estate loans gone bad, largely on development in Chesterfield County.
“Village came into the recession with a really significant commitment to Chesterfield and real estate lending,” said Foster, who is taking over as chief executive when longtime head Tom Winfree retires this month.
Foster said the bank has sold about $15 million worth of foreclosed property in the past few years.
Village reported $45 million in soured loans and foreclosed real estate, known as nonperforming assets, at the end of 2012. It said its nonperforming asset levels declined by $6.7 million during the fourth quarter, and it plans to cut that total by another 50 percent during 2014 by working to set prices that will attract buyers for the foreclosures. Much of it is priced at about 66 cents on the dollar of the appraised value, Foster said.
“We’re not expecting to make money, and we’re hoping not to lose,” Foster said. “We just tried to call it as best we can.”
Village also added Jay Hendricks, formerly of SunTrust, as its new chief credit officer to oversee the identification and disposition of problem assets.
In another strategy adjustment, Foster said the bank would begin focusing on attracting small to medium-size businesses as clients. That should help boost deposit and loan growth, the main fuel for revenue at a bank, and reduce the riskier side of big real estate lending.
“We have got to get back to where we’re growing the revenues of the business,” Foster said. “We will still be involved in real estate lending. It just won’t be as dominant a part of our business.”
To that end, it has hired local marketing agency Madison+Main and plans to increase its marketing budget during the year.
In addition to the desire for a profit, this all comes with the goal of getting out from under scrutiny that has come with a written agreement in entered into with state and federal regulators in 2012.
Foster said the bank is aiming to accomplish these goals over the next 18 months, although the timeline isn’t set in stone.
“Every quarter we make progress on these things,” he said. “It’ll take a little more time.”