Chief of Adams National Resigns

By Binyamin Appelbaum
Washington Post Staff Writer
Thursday, September 4, 2008

The chief executive of District-based Adams National Bank resigned on the eve of a meeting scheduled for today with federal banking regulators to review the company's financial condition. Jeanne Delaney Hubbard also stepped down as chairwoman and chief executive of the bank's parent company, Abigail Adams National Bancorp.

Adams National faces mounting losses on real estate loans and this summer disclosed that it had been classified as "troubled" by its regulator, the Office of the Comptroller of the Currency, subjecting the bank to greater scrutiny. Last week, the Abigail Adams board voted to suspend quarterly dividend payments to shareholders.

The company offered no explanation for Hubbard's departure, but Marshall Reynolds, the largest shareholder, said it was connected to the rising losses, though not because of pressure from regulators.

"The bank stubbed its toe under her direction," said Reynolds, a West Virginia businessman who brought Hubbard to the company more than a decade ago. "The last year or two we've had pretty poor results, and obviously she's a very proud person and I think it's what she thought would be best for her and everyone else."

Reynolds said the bank would now focus on correcting its problems, beginning with a board meeting today to discuss possible replacements for Hubbard. He emphasized that Adams National remained profitable and well-capitalized, meaning that it has more money in reserves than is required by federal regulators.

A bank spokesman, Louis Ackers, said Hubbard was not available to comment.

Adams National was founded in 1978 as Women's National Bank. It was mostly owned and run by women and focused on lending to businesses owned by women and minorities. That was both a cause and an opportunity. At the time, serving a niche was one of the few ways to get a federal banking charter.

Over the years, the bank drifted toward a more traditional business model. In the mid-1980s, it took the name Adams National to signal its attempt to attract a broader customer base. In the mid-1990s, Reynolds saved Adams National from being taken over by another bank and became its largest investor. He and his supporters took control of the board in 1998.

Kathleen W. Carr, who ran Adams National for seven years ending in 2005, said that the bank continued to lend to women and minorities because that was the natural market in the District but that the sense of mission was gone, in part because other banks had long since learned the value of chasing female and minority customers.

Indeed, the signature success during Carr's tenure was a small business started by a white man: Under Armour, the Baltimore athletic clothing company, got its early rounds of financing from Adams National.

The bank also turned increasingly to real estate lending. John Shroads Jr., the chief lending officer, said the bank shifted its focus as the District's small-business owners were displaced by large retail chains. The move was part of a broader trend as the banking industry consolidated and large banks increasingly dominated niches less risky than real estate development lending.

Hubbard was part of the investor group assembled by Reynolds, a multi-millionaire entrepreneur who liked buying troubled banks. Hubbard was working as the senior lending officer at a Reynolds's first bank, in his home town of Huntington, W.Va. She became chief executive of Abigail Adams, and following Carr's departure in 2005, took over as chief executive of Adams National as well.

In recent years, Adams National made several large loans to condominium developers, including some for affordable-housing projects. As the real estate market soured and would-be home buyers struggled to qualify for loans, some developers found themselves unable to sell their products -- or to repay their banks.

The problems in the Washington area have been relatively mild compared with Sun Belt markets such as Arizona, Nevada, California and Florida. But Adams National fared worse than most Washington area banks. Reynolds estimated that the bank could eventually be forced to write off up to $10 million in bad loans, roughly twice the losses it has acknowledged.

Abigail Adams also strained under a mandate to produce high returns for its investors. Its dividend payouts of $866,000 in the first half of 2008 exceeded its income of $647,000 during the same period, draining its reserves.

Regulators gradually increased their scrutiny of the bank's operations. In 2006, Adams National was included on a list of banks with high concentrations of construction and development loans. Regulators scrutinized those loans and encouraged the bank to diversify its lending.

With the bank now on the list of "troubled" institutions, the board must submit the name of Hubbard's replacement for federal approval.

Reynolds said that the board would discuss the hiring process at its meeting today and that he hoped to hire a new chief executive "reasonably soon." He said he would like to hire a woman.

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