NewDominion Bank on Wednesday said two institutional investors have agreed to inject $20 million into the Charlotte-based community bank, setting it up to escape a regulatory order requiring higher capital levels.
The investment round is an important milestone for a bank that was hit hard by the 2008 recession. NewDominion opened in 2005 after raising a then-record $40 million in capital. But its focus on commercial real estate became a liability in the downturn.
In 2010, state and federal regulators instructed NewDominion Bank to shore up its balance sheet to make sure it had a proper cushion to cover potential losses. The latest investment will more than double its current equity capital, according to regulatory filings.
“It gets us 100 percent in compliance with the consent order,” CEO Blaine Jackson said in an interview. “How soon it goes away we’ll see, but it ought to be relatively soon.”
The investments will also allow NewDominion, which has $300 million in assets, to more than double in size over the next five years, said Jackson, who became CEO a little more than a year ago. The bank will look to grow organically by lending in the Charlotte metro area, he said.
“This capital, along with a future earnings stream, is certainly enough capital to support that doubling of the asset size of the bank,” he said.
The lead investor is Tricadia Capital Management, a New York-based firm that manages hedge funds and other investments. EJF Capital, an Arlington, Va.-based investment firm, is also investing in the Charlotte bank.
NewDominion plans to issue a combination of common stock and non-voting convertible preferred stock as part of the deal. Neither of the new investors will own more than 9.9 percent of the bank’s voting shares once the transactions are completed.
In May, NewDominion shareholders approved a plan for the bank to issue more preferred shares. That move, which some shareholders opposed, was a necessary step for the transactions announced Wednesday, Jackson said. The bank said the investments are expected to close by the end of the year.
Investment bank Sandler O’Neill + Partners served as the placement agent for the deal and Nelson Mullins Riley & Scarborough served as legal counsel. NewDominion hired Sandler O’Neill in March and started talking to investors in June, Jackson said.
NewDominion has 57 employees in offices in Charlotte and Mooresville.