When BB&T Corp. completes its purchase of First Virginia Banks Inc. this summer, it will have swallowed the last of Virginia's statewide, locally headquartered banks and capped a 15-year transformation of the state's banking market.
The significance of the change is open to debate, but BB&T and its other large, and acquisitive, competitors in Virginia - Wachovia Corp., SunTrust Banks Inc., and Bank of America Corp. - will control half of the state's bank deposits once the deal is done. These out-of-state giants are betting that customers will buy their pitch that bigger is better.
The battle lines are already drawn. Gone are a slew of native Virginia banking names, including Crestar, Central Fidelity, Dominion, Signet - and soon, First Virginia.
BB&T, of Winston-Salem, N.C., hopes to complete its $3.4 billion purchase July 1 or soon after, around the time that Charlotte-based Wachovia will be consolidating the Virginia branch networks of First Union Corp. and the old Wachovia. (In September of 2001 First Union bought Wachovia, which had been based in Winston-Salem, and adopted its name.)
The state's deposit market will then look like the "classic barbell," with the encroaching out-of-state banks on one side and the small local ones on the other, said C.T. Hill, a former Crestar executive who now oversees the Middle Atlantic region for Atlanta-based SunTrust, which bought Richmond's Crestar Financial Corp. in 1998.
With three of its four largest banks now headquartered one state south, Virginia, like Florida, has become "a banking colony of North Carolina," said D. Anthony Plath, a banking expert and associate professor of finance at the University of North Carolina at Charlotte.
[On Thursday, a small Virginia bank turned down a merger offer because the bid was from a N.C. bank. See "
After the four leaders, the largest deposit holders in Virginia - excluding credit card, mortgage and Internet banks - are the $11 billion-asset Chevy Chase Bank, a savings and loan in McLean, Va., and the $2.5 billion-asset United Bank in Fairfax, Va.
Of course, the big banks like to tout their wider array of services as a competitive advantage.
"Our model is to operate as a series of community banks so we feel like a local institution with local decision-making," BB&T chief executive John Allison said in a presentation to analysts at its annual investor day Feb. 13. "But we're far superior to a community bank, because we can offer dramatically better products than a community bank can offer, and substantially better technology, substantially better training, and substantially better systems."
James C. Cherry, the CEO for Mid-Atlantic banking at Wachovia, is a Virginia native and a veteran of the banking wars there. He conceded that consolidation over the past decade has been at times "a painful experience" for customers.
But he added, "If you look at ... banking in Virginia five or six years ago and look at banking today, what's available to the customer is a significant improvement."
SunTrust pushes the benefits of its big trust business and capital markets and investment banking services. "What we were able to do as Crestar was very good, but what we are able to do as SunTrust is just on another scale altogether," Mr. Hill said.
The consolidation at the top of the market has been fierce. SunTrust became the largest deposit holder in Virginia when it bought Crestar. In 2000 it led the market, with 14% of deposits, but it slipped to No. 2 when Wachovia and First Union merged in 2001. As of June 30, 2002, it had 10.6% of the market, and it will be third after BB&T and First Virginia combine.
Wachovia and First Union had already completed sizable acquisitions in Virginia before they merged. In 1997 Wachovia bought Central Fidelity Banks Inc. of Richmond and Jefferson Bankshares in Charlottesville; and First Union had purchased Signet Banking Corp. in Richmond the same year.
Mr. Hill said the integration that both Wachovia and BB&T are about to undertake in Virginia offers SunTrust a chance to regain some ground. "Any time you have a change in the marketplace, it creates a market opportunity, so it's up to us to tell the SunTrust story."
Community bankers are salivating at the prospects of another big merger. "We have flourished in that environment for 15 years," said Peter Seitz, the chief administrative officer at FNB Corp., a $992 million-asset bank holding company in Christiansburg, in southwest Virginia. "We don't see anything changing. It's just another opportunity to perhaps capture market share. … It [also] makes us attractive for employment."
FNB has its eye on any branches BB&T chooses to divest in its part of the state. BB&T has said it expects to sell 16 to 22 branches, with $390 million of deposits, in Virginia, Maryland, and Tennessee after it buys First Virginia, but it has yet to identify the locations. It also expects to close at least 120 branches.
Possible disruptions from the recent deals could be a "godsend" for small rivals, said Jeff Davis, an analyst at FTN Financial Securities in Nashville.
