A Virginia Beach-based thrift holding company needs to raise significant capital within the next three months to stave off seizure by regulators.
Essex Bancorp, a $320 million-asset company that nearly failed three years ago and has been restructuring under new management ever since, recently scrapped its public rights offering in favor of a private placement to raise $15 million.
The company reported that as a result of exceedingly high loan loss provisions the principal subsidiary, called Essex Savings Bank, fell below capital requirements in the fourth quarter of last year.
The core capital ratio was 3.68%, and the risk-based capital ratio was 7.55%, Essex said. To be adequately capitalized according to federal requirements, those ratios need to be at least 4% and 8%, respectively.
Essex now has 45 days to file a capital restoration plan with the Office of Thrift Supervision.
While the private offering will have a dilutive effect on the stock, management believes it is in "the best interests of the common shareholders in order to prevent a regulatory takeover," a company statement said. Essex's stock has plunged in recent weeks to around $2.87, down from 52- week high of $7.50
The setback is just the latest in a long run of troubles for the company stretching back almost to the time of its founding in 1989. The recession in the early 1990s, changing regulatory requirements, bad loans, bank fraud, and, ultimately, lawsuits all beset the company during the past six years.
Its current chief executive, Gene D. Ross, hired 2#1/2 years ago to revitalize the company, has overhauled its structure and has exorcised more than half the nonperforming assets that nearly sank it.
Mr. Ross could not be reached for comment.
The company, which has eight offices in Virginia and North Carolina, earned $18.2 million in the fourth quarter, but that figure was bolstered by a one-time $20.4 million debt extinguishment from PaineWebber Inc. to settle a lawsuit filed by the original investors in the company.
Essex suffered a $2.2 million operating loss in the fourth quarter, the company reported.