Atlantic Bay Mortgage, Virginia Community Bank call off proposed merger

Atlantic Bay Mortgage Group and Virginia Community Bank have nixed a merger that would have been a rare instance of a nondepository lender buying a bank.

The companies decided to withdraw their merger application after struggling to secure regulatory approval. The timeline has "remained unclear," Atlantic Bay said in a press release.

"Due to these circumstances, both companies believe it is no longer in the best interests of the organizations to continue the process," Atlantic Bay added. "Atlantic Bay and Virginia Community Bank think it's best for their respective shareholders, employees and clients to move forward separately."

The decision to withdraw the application, which was submitted to the Federal Deposit Insurance Corp. and the Virginia Bureau of Financial Institutions, comes more than a year after the companies agreed to the deal. Atlantic Bay would have bought a majority stake in Virginia Community in the transaction, which was aimed at helping to diversify the lender's funding sources.

The companies will continue their original partnership, in which Atlantic Bay provides mortgage lending services and operational support to the bank through Lender Select Mortgage Group, a brand name that Atlantic Bay uses to provide private-label mortgage services to community banks.

"While this process has been an arduous one, we certainly value the relationships we have built with Virginia Community Bank through this process," Brian Holland, Atlantic Bay's CEO, said in the release.