Even after many large southern companies bought up Virginia's biggest banks in the mid to late 1990s - Signet, Crestar, Central Fidelity, Dominion - the state was still headquarters to at least one regional player: Falls Church-based First Virginia Banks Inc.
But that changed Tuesday, when BB&T Corp. announced it is acquiring $11.2 billion-asset First Virginia, by far the state's largest local banking company. After the sale closes, which is expected in the third quarter, $1.5 billion-asset First Community Bankshares Inc. in Bluefield would rank as the largest local bank in the nation's 12th most populous state. And in Northern Virginia, one of the nation's most deposit-rich markets, there would be no local banks with even $1 billion of assets.
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But gauging the importance of the loss of First Virginia is a matter of debate. Some analysts are saying that, these days, it matters little where a bank is based and that some large banks, BB&T among them, have become expert at acting like local banks.
Some of First Virginia's competitors have a different view, however - even if they do stand to gain a fair amount of runoff from the deal.
Bernard H. Clineburg, the chairman and chief executive officer of $486 million-asset Cardinal Financial Corp., in Fairfax, said that First Virginia gave the state's banking industry prestige and called the sale of the company "a sad day for banking in Virginia."
"It was the last great, old bank headquartered in Virginia, and now it's gone, just like that," Mr. Clineburg said, adding that First Virginia was Northern Virginia's "hometown bank."
With roots stretching back to 1890, First Virginia, the state's oldest bank holding company, is probably known best for its superb asset quality. As of Dec. 31, the company reported nonperforming assets and loans 90 days past due equal to 0.20% of total assets. First Virginia concentrates on indirect automobile lending, which is 48% of its loan portfolio, and home equity and first mortgage, which makes up another 24%.
G. William Beale, the president and chief executive officer of $1.1 billion-asset Union Bankshares Corp., in Bowling Green, said that he was also disappointed to hear that another large Virginia bank sold out.
Mr. Beale said his company, which would rank as the second largest banking company headquartered in the state after the First Virginia deal is complete, never planned on being one of the largest banks in the state.
"I think it is important in Virginia to have strong banking and financial services in the state," Mr. Beale said. "Now it means that us smaller banks have to fill the void, but it's going to take a long time to become the size and have the impact that First Virginia and Crestar had before they decided to merge."
However, some bank analysts said Virginia won't suffer for its lack of a large community bank.
Steve Maraschi, an analyst with Andersen & Strudwick Inc. in Richmond, Va., said that so many large banks have been bought up in the state in recent years that the banking industry has adapted with more smaller institutions. "I don't think it matters," he said. "Small banks are popping up to replace the big banks that were absorbed, and the customers that want a local bank will go to these small banks."
Fifty-one Virginia banks have been acquired since 1997, over half by out-of-state acquirers, including six by BB&T. Its acquisition of First Virginia would be the largest deal for a Virginia bank since then-First Union Corp. purchased Signet Banking Corp. for $3.3 billion in November 1997.
In the same period, 31 new banks have opened in the state.
Gray Medlin, an analyst with The Carson Medlin Company in Raleigh, N.C., said that since many of the large acquirers, like BB&T, have kept local management and decision making in place, it does not matter much to customers where the bank has it headquarters.
"I don't think anyone will be suffering. Florida and Texas have been getting along just fine for sometime without any large bank headquartered," Mr. Medlin said. "And does it really matter where the bank is based if they offer personal service?"
Still, community bankers expect to pick up some deposits from the BB&T/First Virginia deal. Mr. Clineburg predicted that many First Virginia depositors would move their accounts to local community banks, such as Cardinal. He also said that he planned to contact First Virginia and BB&T about pending branch sales. BB&T's chairman and chief executive officer, John Allison, said the combined company would sell between 16 and 22 branches and consolidate another 120.
"There will be some crumbs that fall off this table," Mr. Clineburg said.
Mr. Beale also said that Union would be looking to pick up some business and to get some former First Virginia employees to join his company.
Henry Coffey, an analyst with Ferris Baker Watts, Inc. said that these Virginia banks would also have to compete for these branches and deposits with regional banks looking to get into the Washington, D.C., area. He added that regional banks would also be eyeing these smaller banks as takeover targets now that the two largest banks in the Washington area are gone. Baltimore-based Allfirst Banks Inc., with $18 billion of assets, announced in September that it would be sold to M&T Corp. in Buffalo.
"With BB&T coming up from the south and M&T and others coming down from the north, we are starting to see a big car crash in the mid-Atlantic," he said. "And these smaller institutions that are in the Washington market are starting to feel pressure."
