Ten Virginia banks bound by an unusual holding company structure are merging into a single bank that would be among the largest headquartered in the state.
The new bank, to be based in Martinsville, would have $2.5 billion of assets and 126 branches in Virginia and North Carolina. Once the consolidation is completed, the bank plans to ask regulators for permission to open as many as 25 more branches, according to a news release issued Monday.
Worth Harris Carter Jr., the chairman, president, and majority shareholder of each bank, would be the chairman and president of the combined entity, to be called Carter Bank and Trust. The consolidation is expected to be completed in the fourth quarter.
In an interview Monday, Mr. Carter said regulatory burden is one reason he is merging the 10 banks, which despite having one owner have operated independently. Echoing many community bankers, he said compliance has grown increasingly cumbersome - and expensive - over the past 10 years. The merger would save $500,000 a year in examination fees alone, he said.
Mr. Carter, who is 68, said that because of legal restrictions he could not say what other factors prompted his decision to merge the banks. He said more details would be included in a proxy statement to be released in the next six weeks.
The 10 banks once were models of efficiency, but their performance and profitability ratios have slipped in recent years, largely because of heavier regulation.
For example, the $386 million-asset Patrick Henry National Bank in Bassett had an efficiency ratio of 70.04% in the first quarter, versus 56.36% in the first quarter of 2003, according to Federal Deposit Insurance Corp. data. Its return on equity dropped from 15.74% to 10.64% in the three years.
At the $255 million-asset Blue Ridge Bank in Floyd, the efficiency ratio went from 46.78% to 77.71% in the three years, and at the $115 million-asset Shenandoah National Bank in Staunton it went from 55.14% to 81.06%.
Mr. Carter's banks are connected by what has been called an "upside down" holding company.
Under this structure, each of the banks has its own boards of directors and stockholders, and each owns a portion of the holding company, Mortgage Co. of Virginia.
The holding company also owns Bank Services of Virginia, which takes care of all the banks' back-office operations.
The roots of Mr. Carter's current operation can be traced to the $277 million-asset First National Bank in Rocky Mount, Va., which he opened in 1974 in a single office with eight employees. By the end of 1985 he had opened four additional banks. When three of those were divided into eight different banks in 1995 and 1996, Mr. Carter found himself running a 10-bank enterprise.
Carter Bank and Trust would be largest state-chartered commercial bank headquartered Virginia and one of the five largest banks or thrifts based in the state.
"It's an exciting time," Mr. Carter said.
His other banks are Central National Bank in Lynchburg; Community National Bank in South Boston; First National Exchange Bank in Roanoke; Mountain National Bank in Galax; Patriot Bank in Fredericksburg; and Peoples National Bank in Danville.
No jobs are expected to be eliminated as a result of the consolidation.
