Already battered and under pressure from regulators to raise capital or find a buyer, Virginia Business Bank continued to struggle in the first three months of the year.
The Richmond-based bank lost $1.2 million during the first quarter and saw its capital reserves continue to diminish as it works several options to get itself out of trouble.
VBB has been under close watch by regulators since it entered into a written agreement in August 2009 after loan losses ate away at its capital base. That agreement included a provision that prohibits the bank from making new commercial loans, all but killing its business model and main source of income.
VBB has watched its total risk-based capital levels, a vital figure in the eyes of regulators, fall to $3.3 million at the end of March, according to reports filed with the FDIC. That figure was $4.7 million at the end of 2010. The bank had $10.2 million in risk-based capital in the first quarter in 2010.
The bank’s problems are rooted in its inability to lend and its reliance on interest income from existing loans to keep money coming in the door.
VBB lives off the $1.19 million in interest income on loans it brought in during the first quarter of 2011. That’s down from $1.8 million for the same quarter a year ago.
“There’s not a lot we can do to supplement the income side of our balance sheet at all,” said VBB Chairman Mark Hourigan. “We are continuing to very carefully mange the balance sheet and income statements and manage expenses as carefully as we can.”
Because of its limited income, the bank has also had to keep expenses down.
It spent about $515,000 on salary and expenses during the first quarter, according to its FDIC reports. That’s down from about $750,000 a year ago. The bank has reduced its payroll from 17 full-time employees to 11.
“At this point, there’s not a lot more of what can be cut,” Hourigan said. “There is a certain amount of core people you need to properly manage the loans and not cut expenses to the point where it’s detrimental.”
The economy and its effects on borrowers’ ability to repay loans haven’t helped VBB’s cause.
It reported $12.93 million in past due and non-accrual loans as of the end of March, down from $14.47 million at year’s end but up from $9.63 million a year ago.
The hope is that those non-performing loans will level off so that expenses and the cost of bad loans won’t eat away at the bank’s capital altogether.
“We’re okay as it sits today,” Hourigan said.
“But that can all change,” he said, referring to the potential of a real estate project to sour.
In the meantime, VBB continues to search for a savior. Whether that acquirer would buy the bank as a whole or just pieces remains to be seen.
“Those conversations continue, and it’s really a nonstop effort on our part until we find the right partner and the right situation,” Hourigan said.
Hourigan said the bank has worked hard to make sure the true condition of the loans on its books is up to date in the hopes of attracting someone to buy the portfolio.
It has hired Scott & Stringfellow to make a deal happen.
Most recently the Federal Reserve issued a prompt corrective action order Jan. 27 giving the bank 90 days to raise capital or find a merger partner or acquirer.
Those 90 days have come and gone. Hourigan said the bank is still operating as it was prior to the order being issued.
Joe Face, commissioner of the Virginia Bureau of Financial Institutions, which regulates VBB, said that in some circumstances a 90-day order can be extended.
“Every situation is unique,” said Face, who would not comment specifically on VBB. “We’re keeping a close eye on all the banks under our regulatory watch.”
VBB has $97 million in total assets. That’s compared with $107 million at the end of 2010 and $159 million a year ago.
Although it is able to continue taking deposits, its total deposit base has fallen $49 million over the last year from $133 million to $84 million.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected].
Already battered and under pressure from regulators to raise capital or find a buyer, Virginia Business Bank continued to struggle in the first three months of the year.
The Richmond-based bank lost $1.2 million during the first quarter and saw its capital reserves continue to diminish as it works several options to get itself out of trouble.
VBB has been under close watch by regulators since it entered into a written agreement in August 2009 after loan losses ate away at its capital base. That agreement included a provision that prohibits the bank from making new commercial loans, all but killing its business model and main source of income.
VBB has watched its total risk-based capital levels, a vital figure in the eyes of regulators, fall to $3.3 million at the end of March, according to reports filed with the FDIC. That figure was $4.7 million at the end of 2010. The bank had $10.2 million in risk-based capital in the first quarter in 2010.
The bank’s problems are rooted in its inability to lend and its reliance on interest income from existing loans to keep money coming in the door.
VBB lives off the $1.19 million in interest income on loans it brought in during the first quarter of 2011. That’s down from $1.8 million for the same quarter a year ago.
“There’s not a lot we can do to supplement the income side of our balance sheet at all,” said VBB Chairman Mark Hourigan. “We are continuing to very carefully mange the balance sheet and income statements and manage expenses as carefully as we can.”
Because of its limited income, the bank has also had to keep expenses down.
It spent about $515,000 on salary and expenses during the first quarter, according to its FDIC reports. That’s down from about $750,000 a year ago. The bank has reduced its payroll from 17 full-time employees to 11.
“At this point, there’s not a lot more of what can be cut,” Hourigan said. “There is a certain amount of core people you need to properly manage the loans and not cut expenses to the point where it’s detrimental.”
The economy and its effects on borrowers’ ability to repay loans haven’t helped VBB’s cause.
It reported $12.93 million in past due and non-accrual loans as of the end of March, down from $14.47 million at year’s end but up from $9.63 million a year ago.
The hope is that those non-performing loans will level off so that expenses and the cost of bad loans won’t eat away at the bank’s capital altogether.
“We’re okay as it sits today,” Hourigan said.
“But that can all change,” he said, referring to the potential of a real estate project to sour.
In the meantime, VBB continues to search for a savior. Whether that acquirer would buy the bank as a whole or just pieces remains to be seen.
“Those conversations continue, and it’s really a nonstop effort on our part until we find the right partner and the right situation,” Hourigan said.
Hourigan said the bank has worked hard to make sure the true condition of the loans on its books is up to date in the hopes of attracting someone to buy the portfolio.
It has hired Scott & Stringfellow to make a deal happen.
Most recently the Federal Reserve issued a prompt corrective action order Jan. 27 giving the bank 90 days to raise capital or find a merger partner or acquirer.
Those 90 days have come and gone. Hourigan said the bank is still operating as it was prior to the order being issued.
Joe Face, commissioner of the Virginia Bureau of Financial Institutions, which regulates VBB, said that in some circumstances a 90-day order can be extended.
“Every situation is unique,” said Face, who would not comment specifically on VBB. “We’re keeping a close eye on all the banks under our regulatory watch.”
VBB has $97 million in total assets. That’s compared with $107 million at the end of 2010 and $159 million a year ago.
Although it is able to continue taking deposits, its total deposit base has fallen $49 million over the last year from $133 million to $84 million.
Michael Schwartz covers banking for BizSense. Please send news tips to [email protected].