Regulators request turnaround plan from Va. Business Bank

virginiabusinessbankAt the request of state and federal regulators, Richmond-based Virginia Business Bank must submit a plan to improve management and financial conditions.

The bank must also stop making dividend payments “without prior written approval” from federal officials or from the Virginia Bureau of Financial Institutions. (You can see the full filing here.)

Merlin Henkel, the chief executive at the bank, said that the trouble stems from the second quarter, when the bank set aside reserves on certain commercial real estate loans. That action made the bank less well capitalized, he said.

Earlier this month, BizSense reported that the bank has hired Davenport & Co. to to find ways to raise capital. That could include selling more stock or possibly selling the bank altogether.

“The agreement spells out some plans, either to devise a plan [or] to raise more capital, which we are already working on,” Henkel said. “If we do that, many of the other things take care of themselves.”

“We are still solvent and still have plenty of deposits. We just have to find the capital,” Henkel said.

The bank is the second one in the past three years in Virginia to require a survival plan. The other, Danville-based First State Bank, received notice in 2007. That bank has recovered, said Joe Face, Virginia’s commissioner of financial institutions (part of the State Corporation Commission).

“This is a written public document designed to memorialize steps that need to be taken,” Face said.

“It’s a road map, and often times when corrective measures are implemented, the bank improves. Of course, it could go the other way, too.”

According to the agreement, which the bank’s chairman Frank. B. Miller III authorized, VBB must submit plans within 30, 45 and 60 days about how to improve its operations.

•    Within 30 days, the bank must address how to improve its overall condition. That document has to address the board of directors’ actions to supervise major operations as well as explain how to improve “credit risk, loan review, liability management and earnings.”

•    Within 60 days, the directors have to file an assessment of management to make sure they are properly qualified and properly staffed.

•    Within 45 days, the bank must submit a plan to strengthen commercial real estate, including steps to reduce risks.  The bank must also be more cautious in lending more money to businesses that are falling behind on loan payments, or whose extension of credit has been classified as “doubtful” or “substandard.” And the bank must file a written request to continue lending to businesses that have fallen behind.

The bank cannot pay any dividends without written approval of the Federal Reserve Bank.

As of March 31, the bank had $11.12 million in capital, $137.38 million in deposits and $136.69 million in loans, of which $1,296,000 were non-accruing, according to FDIC reports.

Face said that raising capital would help the bank’s situation. “We regulators like capital,” Face said.

“If the corrective measures are undertaken and implemented, it is our expectation that the bank will proceed as a going concern,” Face said.

Aaron Kremer is the BizSense editor. Please send news tips to [email protected]

virginiabusinessbankAt the request of state and federal regulators, Richmond-based Virginia Business Bank must submit a plan to improve management and financial conditions.

The bank must also stop making dividend payments “without prior written approval” from federal officials or from the Virginia Bureau of Financial Institutions. (You can see the full filing here.)

Merlin Henkel, the chief executive at the bank, said that the trouble stems from the second quarter, when the bank set aside reserves on certain commercial real estate loans. That action made the bank less well capitalized, he said.

Earlier this month, BizSense reported that the bank has hired Davenport & Co. to to find ways to raise capital. That could include selling more stock or possibly selling the bank altogether.

“The agreement spells out some plans, either to devise a plan [or] to raise more capital, which we are already working on,” Henkel said. “If we do that, many of the other things take care of themselves.”

“We are still solvent and still have plenty of deposits. We just have to find the capital,” Henkel said.

The bank is the second one in the past three years in Virginia to require a survival plan. The other, Danville-based First State Bank, received notice in 2007. That bank has recovered, said Joe Face, Virginia’s commissioner of financial institutions (part of the State Corporation Commission).

“This is a written public document designed to memorialize steps that need to be taken,” Face said.

“It’s a road map, and often times when corrective measures are implemented, the bank improves. Of course, it could go the other way, too.”

According to the agreement, which the bank’s chairman Frank. B. Miller III authorized, VBB must submit plans within 30, 45 and 60 days about how to improve its operations.

•    Within 30 days, the bank must address how to improve its overall condition. That document has to address the board of directors’ actions to supervise major operations as well as explain how to improve “credit risk, loan review, liability management and earnings.”

•    Within 60 days, the directors have to file an assessment of management to make sure they are properly qualified and properly staffed.

•    Within 45 days, the bank must submit a plan to strengthen commercial real estate, including steps to reduce risks.  The bank must also be more cautious in lending more money to businesses that are falling behind on loan payments, or whose extension of credit has been classified as “doubtful” or “substandard.” And the bank must file a written request to continue lending to businesses that have fallen behind.

The bank cannot pay any dividends without written approval of the Federal Reserve Bank.

As of March 31, the bank had $11.12 million in capital, $137.38 million in deposits and $136.69 million in loans, of which $1,296,000 were non-accruing, according to FDIC reports.

Face said that raising capital would help the bank’s situation. “We regulators like capital,” Face said.

“If the corrective measures are undertaken and implemented, it is our expectation that the bank will proceed as a going concern,” Face said.

Aaron Kremer is the BizSense editor. Please send news tips to [email protected]

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