Four months ago, the board of CertusBank fired its founders and top executives after millions of dollars in losses and allegations of lavish spending. Now the board has been overhauled, a change that appears to put control of the Greenville, S.C., bank more firmly in the hands of its investors.

Six new directors were elected to the board at Certus' annual meeting last week, and all five current board members were reelected, according to a news release Wednesday.

John Poelker, who was hired as the interim chief executive in April, was named chairman of the bank and has been made its permanent CEO. He replaces Robert Wright as chairman, but Wright remains chairman of the holding company's board and a director at the bank level.

The new directors were chosen in close consultation with the investors, Poelker said. One new director, Andrew Jones, is the founder of Connecticut hedge fund North Star Partners, which holds a stake in Certus.

"It wouldn't surprise anyone to say the investors are unhappy with the financial results of the bank over the last couple years," Poelker said. "They know that there is no easy fix, and they seem to be satisfied that we are pursuing all of the available options to restore or protect their investment in Certus."

The election appears to complete the overhaul that some Certus investors have long demanded. Certus was founded in 2011 with the backing of about a dozen hedge funds and institutional investors to buy failed banks across the Southeast. After a profitable first year, the bank began suffering heavy losses amid claims of executive overspending and mismanagement, and many investors soured on the bank's leadership.

In March of this year, Benjamin Weinger of the hedge fund 3-Sigma Value Financial Opportunities, circulated a letter among the other investors demanding that the board resign or risk being replaced. A month later, following an American Banker article highlighting the dispute, the board fired Milton Jones, Walter Davis and Angela Webb, the bank's founders and top executives, and installed Poelker. A fourth founder, co-CEO Charles Williams, resigned in late March.

The fired executives later sued Weinger and Certus for defamation, claiming they were ousted as part of a racially motivated conspiracy to seize control of the bank. The case is pending in the U.S. District Court for South Carolina.

The bank lost $15 million last quarter, but Poelker says much of that loss was tied to costs associated with the restructuring efforts.

Certus cut three branches, leaving it with 32, and reduced headcount by 21% in Poelker's first quarter in charge. It also left the wholesale lending business in order to "refocus on a more traditional community banking model," Poelker said.

Certus is also working to sell loans in order to improve its capital position. It holds Tier 1 capital of 7.43%, below the 10% minimum required by its charter. While Certus' regulators are not immediately concerned about the soundness of the bank, they are worried that its losses are gradually eroding capital levels, Poelker says.

"What they have asked us for, and what we are doing, is developing a more precise outlook on earnings and on capital enhancement strategies that might be available to us moving forward," he said.

Besides Jones, Certus' new directors are Bruce Campbell of the risk-management firm ALCO Partners; Howard Hoffmann of De Novo Properties, a consultancy; Nooruddin Karsan, co-founder of IBM Kenexa Smarter Workforce, a staffing-technology company; Bradford Kopp, a financial-services consultant; and L. Spencer Wells of Drivetrain, an investment-management consultancy. They will serve in a non-voting advisory role until approved by regulators.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.