Burke & Herbert Bank’s recent expansion into Richmond is the culmination of a plan President and CEO David Boyle put in place when he
It may also be a harbinger of things to come, as the $3.6 billion-asset Burke & Herbert is mulling additional moves to Winchester and Norfolk.
Founded in 1852, Burke & Herbert is Virginia’s oldest bank. Last week, it announced it had established a commercial banking team in Richmond. It plans to add a commercial banking headquarters later in 2022 and as many as five branches in the next few years. Burke & Herbert has 24 branches today.
The move south to Richmond — Virginia’s capital and a market several banks have targeted in recent years — came after Burke & Herbert strengthened its treasury management platform and introduced private banking. Those investments have laid the groundwork for more commercial-and-industrial lending, which in turn supports a wider plan to expand beyond the bounds of its core Northern Virginia footprint.
“We’re a historic bank that’s spreading our wings," Boyle said.
Burke & Herbert took its first steps outside Northern Virginia last year, entering Fredericksburg, to the south of Alexandria, in May; and Ashburn, to the west, in October. Both of those moves were less ambitious than the bank’s blueprint for Richmond.
“Richmond is a fast-growing market,” Boyle said. “We’re doing an analysis of the market now and expect we will need at least three, maybe five branches for our regional consumer business and to support commercial lending. Clients still want to interact with bankers in a branch.”
The rush to Richmond
The population of the Richmond metropolitan statistical area, currently about 1.3 million, grew 10% between 2010 and 2020 and is expected to grow another 10% by 2030, according to the Greater Richmond Partnership. Between 2016 and 2021, the Richmond MSA deposit market grew by 32% to $127.3 billion.
That level of growth has attracted several banks’ attention.
JPMorgan Chase is in the midst of a multiyear plan to open 20 branches in the region. The $29.3 billion-asset United Bankshares, headquartered in Charlestown, West Virginia,
First National Corp., based in Strasburg, Virginia, moved a seven-banker team into Richmond from Knoxville, Tennessee-based SmartBank in October.
The $1.4 billion-asset First National, which opened a branch in Richmond in 2017, had been trying to build on that start for two years, according to CEO Scott Harvard. In addition to hiring a “really great, experienced Richmond team,” First National acquired an $83 million portfolio of loans the team built in less than a year, Harvard said.
“We looked hard at the portfolio and really liked it,” Harvard said. “We obviously liked the idea that they could build that big a portfolio at that kind of pace. It gives us a high degree of optimism in terms of production and opportunity in Richmond.”
Like Burke & Herbert, First National plans to add branches in Richmond in the next few years. “Clearly, our presence in Richmond will need to expand, perhaps by two or three branches … to support the team and the kind of growth we think can come to us,” Harvard said.
Benefits of diversification
Burke & Herbert’s new team is led by Seth Feibelman, who will serve as senior vice president and commercial market executive. Feibelman spent a decade with Wells Fargo in Richmond before joining Burke & Herbert earlier this month.
Burke & Herbert already has several prospective Richmond customers in its pipeline, according to Boyle. Feibleman’s group plans to cast a wide net as it continues prospecting for business among Richmond’s small and mid-size companies. The bank will focus on medical and dental practices, light manufacturing and service firms, among other business types.
The strategy of expanding outside Northern Virginia and adding commercial-and-industrial loans should diversify a bank that's focused historically on Northern Virginia commercial real estate to build its balance sheet. Non-owner-occupied real estate accounted for 55% of the bank’s $1.7 billion loan portfolio on Dec. 31, according to the Federal Deposit Insurance Corp.
“Having that balance-sheet diversity is important to us,” Boyle said. “If you become a one-trick pony, you really do subject yourself to problems if that sector has problems.”
Early results from Burke & Herbert’s Fredericksburg branch, which opened in August, have been “fantastic,” Boyle said. “In some metrics, it’s outperforming a couple of our Northern Virginia branches,” he said.
With the moves to Ashburn, Fredericksburg and Richmond still fresh, Burke & Herbert plans to wait before making its next move, but at some point Boyle expects to consider markets like Winchester in the northwest part of the state and Norfolk on its Atlantic Coast.
“We’ll evaluate those after we let this strategy mature a little bit,” Boyle said.
