Essex Bank and its parent company received approval from regulators this week to make six TARP dividend payments after falling behind in 2010.
The Innsbrook-based bank on Tuesday paid $1.32 million to the U.S. Treasury, making it current on its outstanding TARP dividends. That included five payments it missed and one that was due this month.
“The wire went out today. It’s all paid up,” said Rex Smith, president and chief executive of Community Bankers Trust, Essex Bank’s holding company. “It’s gone to Treasury’s bank.”
Essex and CBTC received $17.6 million from the TARP Capital Purchase Program in late 2008. But after huge losses on tens of millions of dollars in bad loans during the recession, the bank was forced to enter a written agreement with regulators. Such agreements require banks to receive regulatory approval prior to paying dividends of any kind.
Smith said the bank’s next step is to completely buy its way out of the government program.
“The goal is to try to just get out of TARP — period,” Smith said. “But you can’t start paying principal if you’re delinquent on the dividends.”
There’s no specific timeline as to when that goal might be reached, Smith said.
Eight local banks received a combined $191.4 million from the TARP program, which was created in the early stages of the financial crisis to give banks a capital cushion. In exchange, the government received stock in each participating bank.
Many banks have purchased the shares back from Treasury and freed themselves from the program, including locally based Union First Market Bank, C&F Bank and First Capital Bank.
In addition to Essex, Village Bank ($14.7 million), EVB ($24 million) and Central Virginia Bank ($11.3 million) remain in the program.
Gaining permission from regulators to make payments shows the bank is on the right track, Smith said.
“They would have not given us permission to pay that big of a chunk if they weren’t confident in what we’re doing,” Smith said. “They’re message is, ‘Keep doing it and we’ll allow you make payments on the principal.’”
To get to that point, Essex would first have to be released from its written agreement.
“The next phase is to try to get ourselves released from that,” Smith said. “Once we’re out of that, it opens the door for serious conversations for TARP payments.”
There’s also no set timeline on how long it might take to get out from under the agreement, he said.
“It’s really hard to tell. That process takes a little time, and [regulators] want to see a good trend. I think we’re showing those trends,” he said.
Community Bankers Trust turned a profit of $934,000 for the second quarter and $1.64 million for the first half of the year. That’s an improvement over a $1.2 million loss through the first half of 2010.
“That cures a lot of ills,” Smith said of turning a profit.
The bank is still dealing with its share of loans gone bad and foreclosed real estate. It reported $37 million in non-performing assets as of the end of the second quarter.
Essex got caught in some big local projects that went sour, such as the Federal Club, Justin French’s historic rehab scam, the Tetra Companies and Roseland.
CBTC has $1.11 billion in assets and 24 branches across Virginia, Maryland and Georgia.