Regulators withhold blessing, deal quashed

It’s time to move on for two small community banks that wanted to join forces but got sick of waiting for regulators to give their stamp of approval.

Eastern Virginia Bank and First Capital Bank announced in early April that they wanted to merge in a deal valued at $27 million.

But the deal was taking many months longer than either bank president anticipated, and with no deadline in sight, the two decided to go their own ways.

A representative with the FDIC said the federal agency does not comment on local banks.  BizSense was unable to reach an authority at Virginia’s State Corporation Commission, which regulates community banks.

John Presley, the managing director and CEO at First Capital Bank, said that he and his counterparts at EVB learned quickly that this deal would be like no others – and that was making planning hard.

“It was just dragging out to the point where we were getting into budget season and both of us had folks we need to hire,” Presley said.

First Capital spent $277,000 in merger expenses analyzing the deal, he said.

Eastern Virginia Bank spent about double that, with most of it going to fees for legal, accounting and marketing assistance.

One reason the bank wanted to join with First Capital was to bring in a new CFO for Ron Blevins, who is scheduled to retire in 2010.

But the delayed approval made that sort of planning difficult, said Joe Shearin, the CEO at EVB.

Shearin said one reason regulators are moving more slowly is the jitters in the banking system. “It’s tough to make decisions today when [everybody] is running scared, and with unemployment [creeping up].”

“We didn’t want to keep fighting the pain. It was better to go our separate ways,” he said.

Regulators are also taking longer to approve a deal between two other local banks: First Market and Union Bank & Trust.

William Beale, the president and CEO at Union Bank, said that regulators are more cautious and asking for additional information.

“They are asking us more questions than they’ve ever asked us in any other mergers we’ve done,” Beale said.

“Sometimes they are asking us the same question more than once.”

Stockholders reacted with mixed results to the news that EVB and First Capital weren’t merging.

Shares of Eastern Virginia Bankshares rose 6.49 percent to close at $7.79.

Shares of First Capital Bank dropped almost 15 percent to close at $5.39.

Aaron Kremer is the BizSense editor. Please send news tips to Editor@richmondbizsense.com.