Cary Street Partners’ Tom Tullidge, quoted in banking M&A and Xenith Bankshares article

From: SNL Financial
In Richmond, Va., Xenith Bankshares has appetite for ‘bite-size’ deals
5/27/11

After completing a common stock offering in April, Richmond, Va.-based Xenith Bankshares Inc. ($264.5 million) is open to “bite-size” deals, President and CEO T. Gaylon Layfield III told SNL.

At the time Xenith filed for its offering, the company said it intended to contribute a substantial amount of the net proceeds from the offering to unit Xenith Bank, potentially to be used for acquisitions.

As previously reported, Tom Tullidge Jr., a managing director at Cary Street Partners LLC, singled out Xenith as one of several potential acquirers in Virginia. “They didn’t necessarily need capital for their existing operations. They had plenty of capital. But they were looking to build their war chest,” Tullidge told SNL.

During an interview with SNL, Layfield confirmed Xenith’s intentions, saying part of the motivation for the capital raise was to give the company “dry powder” for M&A opportunities.

“The real motivation for that capital raise was to support ongoing organic growth. At the same time, we did say and continue to say that we are aware of circumstances in the market and we are always looking to see whether there might be some opportunities that we might want to take advantage of from a consolidation standpoint,” Layfield said.

Such dry powder would likely be deployed through traditional M&A. “In Virginia, there just aren’t going to be very many FDIC-assisted transactions, thankfully,” Layfield said, noting that Virginia banks are in good shape relative to other states. “While we may have two or three, I don’t anticipate there will be a lot of those.”

Worsening regulatory burdens will provide ample motivation for a wave of consolidation in the state, and Xenith “certainly would consider” whole-bank acquisitions, Layfield said. “Our strategy is much more middle-market business focused than it would be a general mass-market focus. As a result of that, to find the right whole-bank acquisition for us, we have to be fairly selective if it’s going to fit from a strategic standpoint,” he said.

Xenith is most interested in the Northern Virginia, Hampton Roads and Richmond markets, where Layfield said it is unlikely that there will be many franchises that fit the company’s acquisition strategy. “There might be a handful,” he said.

Layfield seemed more optimistic about the potential to do selected branch acquisitions, as banks reconfigure their balance sheets and the markets in which they participate. “We are more inclined to try and hit singles and doubles than we are to hit home runs. I think something that’s of reasonably modest size and bite-size pieces would be more our appetite than some really big transaction,” he said.

Another potential player in the Richmond market is Glen Allen, Va.-based Corp. Somewhat more of a heavyweight at $1.25 billion in assets; all eight of the newly converted thrift’s branches are located in the Richmond metropolitan statistical area.

Richard Wheeler Jr., chairman, president and CEO of Franklin Financial and unit Franklin Federal Savings Bank, told SNL that he was not prepared to discuss the company’s plans beyond what is laid out in the company’s prospectus.

Franklin Financial said in a prospectus filed in February that it intends to actively pursue expansion opportunities in areas in or adjacent to its existing market. “We will look to be opportunistic to expand primarily through the acquisition of community banking institutions in our market area, including through FDIC-assisted transactions, and believe additional capital will better position us to take advantage of those opportunities,” the filing stated.

While Franklin Financial and Xenith are looking to expand, Richmond-based Virginia Business Bank ($95.8 million) is seeking to downsize.

As previously reported, Virginia Business Bank is doing its utmost to cut costs while it actively seeks to sell the bank, either in pieces or as a whole.

Xenith’s Layfield declined to comment on Virginia Business Bank.

Virginia Business Bank did not return calls requesting comment. But as Chairman Mark Hourigan told Richmond BizSense at the beginning of May, the bank is engaged in “a nonstop effort” to find the right partner and the right situation.