After long slog, bank has cause to celebrate

Essex Bank branch

Essex Bank has 25 branches, including 14 in Virginia. (Photo by Michael Schwartz)

A Glen Allen bank has gotten a monkey off its back.

Essex Bank and its holding company, Community Bankers Trust Corp., announced Tuesday that they had been released last week from a written agreement with regulators, making Essex the first local financial institution since the recession to work its way out from under such an agreement.

It marks a big step forward for a bank that two years ago was battling tens of millions of dollars in losses and soured loans.

“I’m having a good day,” Rex Smith, president and chief executive of Essex and CBTC, said Tuesday after the announcement. “I think it’s truly a great story of achievement through good planning, good execution and team effort.”

The bank is also now freer to pay dividends, raise capital, pursue mergers or acquisitions, and pay off the $17.6 million in TARP funds it still holds.

“It’s a strong vote of confidence that we are a solid and safe franchise,” Smith said. “It builds confidence for our employees, our customers and our shareholders.”

Twenty months ago, the $1.1 billion bank entered into the agreement with Federal Reserve Bank of Richmond and the state Bureau of Financial Institutions. The forced move was designed to get the bank on stable ground by dealing with its troubled loans and adding management that could handle the problems.

“The written agreement was the wakeup call,” said Smith, who was appointed interim CEO of Essex in October 2010, about six months before the agreement.

At that time, the bank had lost $24 million through the first three quarters of the year. It had $44 million in non-performing assets. And its stock price was trading at about $0.70 per share. That was on top of a rough 2009, when the bank lost $30 million.

“There’s no question we deserved to be in it,” Smith said. “We created a mess.”

Then came the turnaround. The bank posted a $1.53 million profit in the third quarter of 2012 and $3.18 million in profit through the first three quarters of the year. It has its non-performing assets down to $37 million.

“The lesson we have learned is that planning, execution and monitoring is everything,” Smith said.

Community Bankers Trust Corp. 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.

Those acquisitions doubled the size of the bank twice within one year, Smith said, and it turned out to be more than the bank could handle.

“Our situation was that we grew too quickly without the proper controls and procedures in place to manage that growth,” Smith said.

Then the real estate market crashed. The bank has since been burned by loans gone bad on some of the area’s largest real estate developments, including the stalled Roseland project in Chesterfield, several local projects from the Tetra Companies and a couple of Justin French properties.

Essex wasn’t alone while under the agreement. At one point in the wake of the recess, seven local banks were under such agreements: Village Bank, Central Virginia Bank, Bank of Virginia, EVB, Essex, Virginia Business Bank, and Consolidated Bank and Trust.

That number stands at four after Essex’s exit, the merger of Consolidated Bank into another bank and the failure of Virginia Business Bank.

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