Essex Bank has become the sixth local bank to enter into a written agreement with regulators.
Essex and its Glen Allen-based parent Community Bankers Trust Corp. said Tuesday that they inked the agreement with the Federal Reserve Bank of Richmond and the Virginia Bureau of Financial Institutions.
Essex joins a handful of local peers already under such agreements: Virginia Business Bank, Central Virginia Bank, Bank of Virginia, EVB and Consolidated Bank & Trust.
Community Bankers Trust Corp. disclosed last year that it expected the agreement to come during the first quarter of 2011.
“We knew it was coming,” said Rex Smith, who has been serving as CBTC’s interim CEO since October and is expected to be named the company’s permanent leader.
Essex and CBTC have been battling rising levels of non-performing loans since the recession took hold.
CBTC lost $20 million in 2010, according to its latest SEC filings. That was a significant improvement over the almost $30 million it lost in 2009.
The bank had $1.1 billion in total assets at year’s end, a loan portfolio of $614 million and $961 million in total deposits.
The company reported more than $42 million in non-performing assets at the end of 2010, double the amount it had on the books a year earlier.
The big losses were due in part to setting aside bundles of cash to cover potential bad loans.
“Between third and fourth quarter, we scrubbed the portfolio very diligently and came up with a pretty big number that we thought would cover it,” Smith said.
Written agreements lay out steps banks must take to improve their financial situations. In the case of Essex and CBTC, improvements were aimed at getting a handle on all its problem loans and doing a better job of vetting potential borrowers and identifying potential problem loans in the future.
“It’s getting a handle on risk identification, not only just on the credit portfolios that we own now but how we bring in new loans into the bank,” Smith said.
Many of the changes the agreement calls for have already been carried out or are underway. The bank removed former top dog George Longest last year in favor of Smith. The bank also added a new chief credit officer and a new senior lending officer. Two new board members with experience in handling problem loans were also added.
“The only unfortunate part is things that are in those agreements are things that we’ve taken care of long ago,” Smith said.
For some banks, written agreements put in place restrictions on certain types of lending. That is not the case with Essex and CTBC.
Smith said he remains cautiously optimistic about his company’s future.
“Last year was a long tough road,” he said. “But things are starting to settle in.”
He said Essex’s Maryland operations are performing better than expected but that loan demand in the Richmond market is lagging.
Smith said he recognizes that banks under written agreement are often juicy takeover or merger targets.
“There’s always a lot of talk in the air. I do believe that banks will see some consolidation of some of the weaker players,” Smith said. “But I see us as being one of the survivors.”
CBTC was created in 2005 as a bank acquisition company. It began its growth in 2008 by acquiring banks and bank holding companies in Virginia and the assets of a failed bank in Georgia. It acquired another failed bank in Maryland in early 2009. Those banks were brought under the Essex Bank umbrella, which now consists of 25 branches, including 14 in Virginia, seven in Maryland and four in Georgia.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected].
Essex Bank has become the sixth local bank to enter into a written agreement with regulators.
Essex and its Glen Allen-based parent Community Bankers Trust Corp. said Tuesday that they inked the agreement with the Federal Reserve Bank of Richmond and the Virginia Bureau of Financial Institutions.
Essex joins a handful of local peers already under such agreements: Virginia Business Bank, Central Virginia Bank, Bank of Virginia, EVB and Consolidated Bank & Trust.
Community Bankers Trust Corp. disclosed last year that it expected the agreement to come during the first quarter of 2011.
“We knew it was coming,” said Rex Smith, who has been serving as CBTC’s interim CEO since October and is expected to be named the company’s permanent leader.
Essex and CBTC have been battling rising levels of non-performing loans since the recession took hold.
CBTC lost $20 million in 2010, according to its latest SEC filings. That was a significant improvement over the almost $30 million it lost in 2009.
The bank had $1.1 billion in total assets at year’s end, a loan portfolio of $614 million and $961 million in total deposits.
The company reported more than $42 million in non-performing assets at the end of 2010, double the amount it had on the books a year earlier.
The big losses were due in part to setting aside bundles of cash to cover potential bad loans.
“Between third and fourth quarter, we scrubbed the portfolio very diligently and came up with a pretty big number that we thought would cover it,” Smith said.
Written agreements lay out steps banks must take to improve their financial situations. In the case of Essex and CBTC, improvements were aimed at getting a handle on all its problem loans and doing a better job of vetting potential borrowers and identifying potential problem loans in the future.
“It’s getting a handle on risk identification, not only just on the credit portfolios that we own now but how we bring in new loans into the bank,” Smith said.
Many of the changes the agreement calls for have already been carried out or are underway. The bank removed former top dog George Longest last year in favor of Smith. The bank also added a new chief credit officer and a new senior lending officer. Two new board members with experience in handling problem loans were also added.
“The only unfortunate part is things that are in those agreements are things that we’ve taken care of long ago,” Smith said.
For some banks, written agreements put in place restrictions on certain types of lending. That is not the case with Essex and CTBC.
Smith said he remains cautiously optimistic about his company’s future.
“Last year was a long tough road,” he said. “But things are starting to settle in.”
He said Essex’s Maryland operations are performing better than expected but that loan demand in the Richmond market is lagging.
Smith said he recognizes that banks under written agreement are often juicy takeover or merger targets.
“There’s always a lot of talk in the air. I do believe that banks will see some consolidation of some of the weaker players,” Smith said. “But I see us as being one of the survivors.”
CBTC was created in 2005 as a bank acquisition company. It began its growth in 2008 by acquiring banks and bank holding companies in Virginia and the assets of a failed bank in Georgia. It acquired another failed bank in Maryland in early 2009. Those banks were brought under the Essex Bank umbrella, which now consists of 25 branches, including 14 in Virginia, seven in Maryland and four in Georgia.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected].