Central Virginia Bank and Virginia Business Bank received the lowest possible rating for safety and soundness from Bauer Financial, a Florida-based firm that rates all federally insured financial institutions each quarter. But both banks are trying hard to fix the situations.
The ratings are based on financial information the banks and credit unions submitted to federal regulators from the second quarter and include capital levels, profits and non-performing assets. The agency ranks institutions using a five-star system.
Virginia Business Bank, which was alone with zero stars in the first quarter, has some company now that CVB fell from a one-star rating to zero stars during the latest quarter.
Both banks are under written agreement with regulators and have made big moves to raise capital and turn things around.
CVB has hired a bank turnaround specialist. (You can read more about him in an RBS story here.)
Virginia Business Bank last week announced plans to raise up to $20 million, change its name and move its headquarters from Richmond to the Eastern Shore. (You can read more about its big plan here.)
Three other local banks are two steps above the basement: Bank of Virginia, Consolidated Bank and Trust and Village Bank. They all received two stars, what Bauer Financial calls a “problematic” rating.
Bank of Virginia and Consolidated Bank are both also under written agreements with regulators. BofVA has a deal in the works to sell a majority stake of its stock to an out of town group in exchange for sorely needed capital.
Consolidated Bank will soon be merged into another bank owned by its West Virginia parent company. (You can read more about that in an RBS story here.)
The other two-star local bank, Village Bank, is profitable through the first half of the year but has been battered by non-performing loans and foreclosed property. Its non-performing assets account for 7.4 percent of its $592 million in total assets, as of the end of the second quarter.
Of the 35 credit unions rated in the Richmond area, only one received less than a three-star, or adequate, rating. For the second quarter in a row, Life Line Credit Union received a one-star “troubled” rating and was the lowest rated local credit union.
Life Line has $10 million in assets and about 2,700 members, including employees and volunteers of various medical organizations in the area such as Bon Secours Richmond Health Corp., Central Virginia Health Network and Virginia Health Source.
Life Line reported net income of $35,000 through the first six months of the year. Its low rating comes from having the lowest capital ratio of any local credit union and non-performing assets that account for 3.5 percent of its total assets.
Life Line CEO Debra Ramsey could not be reached.
Of the 21 banks headquartered in the Richmond region, five are considered recommended by Bauer after having received four- or five-star ratings.
The number of five-star banks fell to three during the second quarter. They are Bank of Southside Virginia, Peoples Bank of Virginia and Trust Company of Virginia.
Glen Allen-based First Capital Bank fell from five stars last quarter to 3½ stars during the second quarter.
Twenty-two local credit unions were rated with four and five stars.
According to Bauer, 59 percent of banks nationwide received four or five stars. That’s an improvement of almost 2 percent since the first quarter and almost 4 percent from a year ago.
Bauer’s troubled and problematic bank list includes 989 banks, or 12.6 percent of all banks in the United States. That number is up from 11.5 percent compared with a year ago, but down from 13.7 percent in the first quarter of 2010.
Almost 6 percent of all credit unions in the country received four or five stars for their second quarter performance. That’s up almost 2 percent from the first quarter and from 4 percent a year ago, according to Bauer.
Local five-star banks
Bank of Southside Virginia
Peoples Bank of Virginia
Trust Company of Virginia
Local five-star credit unions
Dupont Fibers FCU
Hopewell Chemical FCU
Vantage Point FCU
Nabisco Employees CU
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected]