NewDominion’s ex-president fined $3,000, ‘moving on with my life’ [The Charlotte Observer, N.C.]

Dec. 30--The former president of NewDominion Bank has been fined $3,000 and barred from bank management for "personal dishonesty" that resulted in financial gain while causing the Charlotte bank to lose money, according to an order released Friday by the Federal Deposit Insurance Corp.

Robert G. Fox Jr., who resigned from the bank in April 2010, participated in "unsafe and unsound banking practices and breaches of fiduciary duty," according to the order, which is dated Nov. 2 but was made public on Friday. Fox waived his right to a hearing on the matter, the FDIC said.

A few months after Fox's departure, state and federal regulators placed NewDominion under an order requiring it to raise capital and establish new credit processes. The bank has since rebuilt its management team and hired a new chief executive, John Hipp. Bank officials declined to comment.

Reached by the Observer while out of town Friday, Fox said he was embarrassed and sorry for what happened, but said the FDIC's response was a bit overblown.

"I'm not defending my actions. I think I've paid for it multiple times over," Fox said. "I'm retired from banking, literally and figuratively, and just moving on with my life."

Fox said the order deals with one transaction involving furniture the bank bought as it foreclosed on a house. The bank wanted to keep the furniture to help the house show better, and bought the items for $25,000, Fox said.

Two weeks later, he said, the house was resold, but the new buyer did not want to keep the furniture. Fox bought the furniture for less than the $25,000 price without asking anybody, using a third-party straw buyer to conceal the transaction, he said. Most of it was disposed of, he said.

"I honestly thought I was getting rid of it," he said.

When confronted with the actions, Fox said he admitted what he had done and resigned from the bank. He said he paid back the bank in full and also gave up a $364,000 retirement plan.

"At the end of the day, the bank did not incur any loss on the transaction ... It had nothing to do with the loan losses, nothing to do with the real estate. It had nothing to do whatsoever with the troubles that the bank has had over the last 18 months," he said.

"I'm embarrassed to tell you, but that's the God's honest truth."

Experienced banker

Fox came to the bank from First Charter Corp. in 2005, a few months after NewDominion opened, as president and chief credit officer. He brought with him a three-decade background in Charlotte's banking scene and experience putting together big deals.

The executive also had strong community ties: He served as an elected official in Mint Hill -- including a four-year stint as the town's mayor -- in the 1980s and 1990s. He now sits on Appalachian State University'sBoard of Visitors, among other roles.

The accusations against Fox contrast with the NewDominion founders' vision for the bank, which they said was built largely on faith and personal values. NewDominion got its start in January 2004 when two Charlotte businessmen, Xan Law and Lew Parham, persuaded two SouthTrust Corp. executives to leave their jobs and start a bank to serve mostly small and mid-sized businesses.

The bank opened a year later, after CEO Bradley Thompson and chief financial officer Benjie Guion raised a then-state record $40 million in startup capital. The founders were devout Christians, having participated in a men's Bible study that met in the SouthTrust board room and calling each other "accountability partners" who would help each other uphold Christian standards in their lives.

Brainstorming a name for the bank, executives decided it needed to reflect not only the company's emphasis on business customers, Internet banking and personal service by local bankers, but also strong values.

Thompson and Guion opened the bank in January 2005 with a celebration for friends, family members and directors -- and with a prayer.

"We want to be a blessing to each other," Thompson told the group gathered at the new bank's midtown Charlotte office. "We also want to be a blessing to all who walk through that door this day forward."

Shaky run

In its first year, NewDominion, which began board meetings with a prayer and had developed an ethics policy for employees, bolstered its assets, entered the mortgage brokerage business and expanded with a Lake Norman office. It added experienced loan officers and stayed afloat amid strong competition from large, regional and community banks in the Charlotte market.

The bank didn't make money -- it lost more than $3 million in the first nine months of 2005 -- but by fall 2006, New Dominion had reported the first profitable quarter in the bank's short history, making about $738,000 in the period ended Sept. 30.

The following January, NewDominion signed a 15-year lease for 32,000 square feet in the $225 million Metropolitan project near uptown, which includes condos, offices, restaurants and shops. The bank's name tops the central office building in the development between Kings Drive and Kenilworth Avenue.

Then the recession hit. Mecklenburg's community banks -- which together hold less than 1 percent of the Charlotte area's total deposits -- largely stayed under the radar for the first year or so of the financial crisis, while giant banks posted poor earnings and took bailout loans from Washington. But as the downturn dragged on, smaller banks began suffering, too.

NewDominion posted the largest loss of local community banks in the first half of 2010, bleeding $6.2 million, compared to an $80,000 profit the same period the year before as developers and other borrowers struggled to make payments.

The bank disclosed in November 2010 that the FDIC and N.C. Commissioner of Banks had placed it under an order requiring it to raise capital levels and establish new credit processes, suggesting regulators had major concerns about the bank. It brought in Hipp, who had experience turning around other troubled banks, as CEO and began rebuilding its management team and revamping its business model to focus less on real estate lending, instead serving a broader array of consumer and business customers.

The bank's losses have continued this year, though it has made a $1.5 million profit in the first nine months of the year, compared to a loss of $11.2 million the same period in 2010, it said.

Overall, things are looking up at some community banks after several quarters of losses as they waded through bad loans. Many are setting aside less money to cover for future losses and writing off fewer bad loans.

Hipp has predicted a return to profitability in 2012 for NewDominion, and officials there have said things at the bank are stabilizing.

Dunn: 704-358-5235

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