Capital has been hard to come by for many banking companies, but that is not dimming the optimism of several former executives from Signet Banking Corp. for a significant start-up effort in their Virginia environs.

The executives are teaming up with BankCap Partners, a Dallas private-equity firm, to launch Xenith Bank in Richmond, Va. The new bank could open its doors early next year.

The start-up is in the midst of raising $75 million to $100 million of capital, or five times more than the state's typical level, according to the Virginia Bureau of Financial Institutions. If it raises that much capital, it could be the biggest bank start-up in Virginia's history, the bureau said.

T. Gaylon Layfield 3rd, Xenith's president and chief executive, said he sees opportunities in today's banking environment, where large companies are pulling back on lending to conserve capital.

In an interview Tuesday, Mr. Layfield said that if his bank met its capital goal, it would have an immediate opportunity to begin targeted lending to middle-market companies with annual sales of up to $250 million.

"There is a huge opportunity for a bank with a lot of capital and great bankers," said Mr. Layfield, who was the president and chief operating officer of Signet when First Union Corp. of Charlotte (now Wachovia Corp.) bought the Richmond company in 1997.

The average equity capital as of first filing for the 48 banks and thrifts formed in the first half of this year was $17.5 million, capping their loans at $2.6 million, according to SNL Financial in Charlottesville, Va.

"If you layer on top of that the dislocation and the turmoil that exists today, it only multiplies the opportunities," Mr. Layfield said. (Four of Zenith's top executives have ties either to Signet or First Union.)

Observers offer mixed opinions about the timing of the launch.

Lee Bradley, a managing director at the Dallas investment bank and consulting firm Commerce Street Capital LLC, said in an interview that under normal economic conditions Xenith might have difficulty deploying capital, though the liquidity crisis is forcing banks to unload certain loans at low prices.

"You have all these other banks … trying to shrink their balance sheets," he said. "You probably wouldn't have to go out on your own to get loans. You could just buy loans at fire-sale prices from others."

Laurence C. Pettit 3rd, a senior vice president at the Richmond investment bank Anderson & Strudwick Inc., said in an interview Tuesday that even though "now is the best time I have ever seen to start a community bank," entrepreneurs need to try to gird for the unknown. "A lot of things can happen in the environment before the bank opens its doors. We're in that kind of market, and there is nothing anyone can do about it."

Michael W. Clarke, the president and CEO of Access National Corp. in Reston, Va., said Xenith's organizers will find the environment challenging.

"It's a lousy time to start a bank," even though "they certainly have the resumes to be successful," Mr. Clarke said. "As far as gathering retail investors, it doesn't make sense to be investing in a new bank when a lot of existing ones are trading at substantial discounts, just on industry perception. Instead of starting out with a bank that is going to be losing money, most investors would prefer to start with an existing business."

BankCap Partners is investing $35 million, and Xenith executives and directors have pledged another $5 million. Once the funds are raised, the bank can apply with the Virginia bureau for a state charter. Xenith's paperwork is also filed with Federal Deposit Insurance Corp. and the Federal Reserve Board.

The two-year old BankCap has a $100 million fund for investing in start-up banks. Last year it invested $38 million in Atlantic Capital Bank, an Atlanta start-up that raised $125 million.

Brian Jones, a BankCap partner, said its strategy involves investing in banks with a middle-market strategy. It starts by identifying markets with significant consolidation, and then it finds a management team, he said.

"We think now is the perfect time to show up in the market with lots of capital, a clean balance sheet, and the best talent," Mr. Jones said.

Scott Reed, another partner at BankCap, said it has watched how other private-equity firms have invested in the banking sector, and he acknowledges that most have fared poorly capitalizing large companies. "We also saw white space when it came to funding start-ups."

Mr. Reed said another challenge has been the regulation of bank investors. Last month the Fed issued new rules allowing an investor to own up to a third of a bank or thrift's stock without having to register as a bank holding company — though no more than 15% can be voting stock. Previously, any investor owning more than 24.99% had to register as a bank holding company. BankCap registered as a bank holding company, filing more financial information with regulators, so it could have a 35% to 50% stake in Xenith, he said. "We accept" the additional scrutiny.

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