Downtown-based Xenith Bank has had its first profitable year, bringing in $4.4 million in 2011, according to an earnings report released last week.
“It’s nice to see what you thought you could do come to fruition,” CEO Gaylon Layfield said. “But we’re not satisfied.”
Founded a couple of years ago, Xenith started out well into the red — as expected. It lost $6.26 million in 2009 and $5.91 million in 2010. (There’s a rule of thumb in the banking world that says startup banks should typically hit profitability around their third year.)
In 2011, Xenith worked a series of deals to almost double its size, strengthen its capital reserves and push itself into the black.
Xenith closed out 2011 with $477.5 million in assets, up from $251.2 million the previous year. Its loan portfolio grew to $321.9 million from $151.4 million. And its deposit base reached $375 million compared with $175.1 million in 2010.
It also beefed up its capital reserves in 2011 with a $17.8 million public offering and $8.38 million from the federal Small Business Lending Fund.
“I don’t know whether we’re a startup, but it feels like we are in a lot of ways,” Layfield said. “But to get to profitability in two years — we’re pleased with that.”
Xenith’s annual profit comes with a bit of a caveat.
It cut a deal with the FDIC to buy the assets of the failed Virginia Business Bank, and then Xenith received a cash boost of $8.6 million in what’s known as a bargain purchase gain.
Without that gain on its books, Xenith would have been at a slight loss for the year. But its fourth quarter profit of $215,000 was pure, free of any such VBB-related gains.
That’s the kind of profit Layfield wants to see grow.
“We still have our eye very sharply on the objective of achieving profitability on a stabilized basis,” he said.
Xenith will continue to look for ways to grow, Layfield said, both though acquisition and by simply picking up more business from loans and deposits in all three of its markets.
It has 100 employees and six branches spread across Richmond, Hampton Roads and Northern Virginia.
The bank also has a target in mind.
“We continue to believe that we have to be well over a billion dollars [in assets] to get to the size that allows us to adequately execute our business strategy,” Layfield said.
He wouldn’t say exactly how long the bank thinks it could take to get that $1 billion threshold.
Xenith opened its doors in late 2009 when it acquired SuffolkFirst Bank in Hampton Roads. That deal was made solely to get SuffolkFirst’s charter, which was a scarce entity as the economy imploded and banks struggled.
Xenith then worked back-to-back acquisitions last summer when it bought the Richmond operations of Paragon Commercial Bank and some of the assets of Virginia Business Bank, a Richmond institution that was shut down by regulators.
“I think it’s fair to say we’re a bit of a hybrid as it relates to [being a startup bank],” Layfield said.