Virginia Business Bank, Richmond, VA, was closed today by state regulators. The FDIC, appointed as receiver, sold the failed bank to Xenith Bank, Richmond, Virginia. Xenith Bank will assume all deposits of the failed bank.
Virginia Business Bank, established in 2006 by local area bank executives, focused on lending to small and mid-sized businesses in Central Virginia.
The locally owned one branch Bank specialized in commercial and construction lending, acquisition and development lending and private investment lending. According to the Virginia Business Bank web site, the Bank “focuses on commercial customers whose borrowing needs for real estate development, business expansion, private investment, and acquisition are in the $1 million to $5 million range”.
Virginia Business Bank opened at the peak of the real estate market and lent in the high risk business sectors. By early 2009, borrowers began defaulting on loans as real estate values collapsed. In August 2009, the Bank signed a consent decree with the Federal Reserve that required the Bank to “restore and maintain the Bank to a safe and sound condition”.
In addition, Virginia Business Bank was required to present an “acceptable written plan to maintain sufficient capital at the Bank”.
Virginia Business Bank attempted to raise additional capital through a $30 million common stock offering. In October 2010, the Bank withdrew the common stock offering due to lack of interest by investors. Defaulting loans at the Bank continued to soar and by March 2011, the Bank’s troubled asset ratio soared to 181%. The vast majority of banks with a troubled asset ratio in excess of 100% wind up failing and Virginia Business Bank was no exception to this rule.
At March 31, 2011, Virginia Business Bank had total deposits of $85.0 million and total assets of $95.8 million. All assets of the failed bank were purchased by Xenith Bank.
Xenith Bankshares, Inc. operates as the bank holding company for Xenith Bank, and has been losing money since 2009. In the quarter ending March 31, 2011, the Bank lost $1.5 million and the company’s stock sells for less than half its value in 2007. At March 31, 2011, Xenith Bankshares had total assets of $252 million
The estimated loss for the failure of Virginia Bank is $17.3 million. Virginia Business Bank is the nation’s 59th banking failure and the first in Virginia.