Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 27, 1994 TAG: 9403290137
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: By MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
Although Guy W. Byrd Jr., the proposed bank's president, and A. Wayne Lewis, its senior vice president, say they are confident of success in founding and expanding a new bank for the Roanoke Valley, they are bucking current trends. Still, others in the industry say, this is a good time to establish a new bank.
The American Banker, an industry newspaper, has reported that only 59 commercial banks were started last year, the smallest number of start-ups since 1953. The newspaper said potential founders are put off by weak economic conditions and "increasingly dense banking regulations."
Arnold G. Danielson, president of Danielson Associates, a bank consulting firm based in Rockville, Md., said no bank has been established in Virginia since 1991. One bank was founded in Maryland last year, but none in Washington, D.C., since 1990.
"It's been a slow time for opening banks," Danielson said. On the other hand, he said, there has been growing interest in the subject over the last few months.
"I think it's a very good time for opening a bank" in Roanoke, Danielson said. The new Valley Bank, he said, "will take all the old Dominion customers they can get." That's because many people don't want to deal with an out-of-state bank.
Danielson said the market share of community banks in Virginia, the District of Columbia and Maryland rose from 13.5 percent to 17 percent between the end of 1990 and mid-1993. He said that share drained from larger banks and smaller thrifts.
The timing for founding a bank, said Walter Ayers, executive vice president of the Virginia Bankers Association, "is as good as any." He believes there is a potential market for a new bank with a niche as a community bank.
He said Virginia has 135 community banks as opposed to eight major banks, defined as those with assets of $1 billion or more. Of the latter, six are based in Richmond and two (First Union and NationsBank) call Charlotte, N.C., home.
Most community banks are doing very well because their localities support them, Ayers said. In the southeastern United States, he said, community banks have increased their market share in the years since interstate banking arrived on the scene.
"It's a very good time to open a community bank," according to Vittorio Bonomo, associate professor of finance, insurance and business law at Virginia Tech and a banking industry consultant. The evidence shows they are successful in competing against big banks, he said, because people are disturbed by acquisitions.
He cited the example of Pembroke in Giles County, where the local bank was purchased years ago by Dominion and later closed by First Union for lack of business. People had moved their accounts to nearby communities, he said, and now Pembroke has no bank.
Another example is the New River Valley where, he said, First Union and First Virginia have slowly lost market share over the years to First National Bank of Christiansburg and National Bank of Blacksburg. People in this area, he said, support what they see as their local banks.
Salem Bank and Trust has been very successful in that city, Bonomo pointed out.
The same is true in Roanoke, he said. People will feel more secure if their money is in a bank headquartered at home. Valley Bank will have no trouble getting a charter, Bonomo said, and it will be "very profitable to invest in."
As with schools, he said, banking is best controlled on the local level. "Around here, there's real sensitivity to local control."
"I don't see how they can lose," Bonomo said of Valley Bank. "I see nothing but success."
Even Charles O. Meiburg predicts Valley Bank has a strong chance of success. Meiburg is a professor of business administration at the Darden Graduate School of Business Administration at the University of Virginia and is well-known for his long-held opinion that there are too many banks. Even so, he thinks Valley Bank is "a good idea. Businesses in Roanoke will have a local provider."
A certain set of customers are willing to pay a premium to deal with a local bank, Meiburg said. And there will be a premium, he noted, because a small bank is not able to realize economies of scale.
A local board is more responsive to local needs, Meiburg said, and there is a "hard core of people" unwilling to wait for a decision about a loan or line of credit from Richmond or Charlotte.
NationsBank can give loans of $10 million, Meiburg said, but what Roanoke really needs is a bank willing to lend $50,000 to get a local business started.
Clark Owen, president of Salem Bank and Trust, said he expects Valley Bank to compete with every bank in the valley if it is successful in opening. Salem Bank and Trust is the only other locally owned community bank in the Roanoke metropolitan area. He said he could not comment on Valley Bank until he sees its prospectus, still to be published.
Byrd confirmed that his vision is a community bank "highly oriented toward the consumer sector. Within that sector, he said, Valley Bank will be attuned to the professional and small business communities.
Obviously, he said, it will not have the high lending limits to finance major businesses nor the ability to offer cash management services to companies. For larger businesses, he said, Valley Bank will be a depository rather than a supplier of credit.
Valley Bank's products will be tailored to the needs of the consumer and professional customer, from younger people, those with kids in college to senior citizens. Valley Bank will be "a high touch, a high-tech bank," Byrd said. It will be "service intensive" and sensitive to customer needs.
Valley Bank, he said, will be accessible even though it is starting with only two branches. Automated teller machines are obviously such an accessibility device, Byrd conceded, but he would not disclose other high-tech avenues until the bank opens.
Byrd denied Valley Bank is aiming to steal business from First Union or any other specific bank. It's target consumer and business customers will be drawn from all other banks, he said.
So will its staff. Byrd and Lewis said they are receiving resumes and calls from employees at many banks throughout the valley.
Lewis said he had four reasons for moving to establish a new bank after his job as executive vice president and corporate secretary was abolished in the First Union acquisition. He had worked for Dominion for 31 years.
"I began thinking about forming a new bank back during the Dominion/First Union negotiations, when I realized what the takeover of the last and largest hometown bank would mean for the bank, the community and me personally," Lewis said. He began work on the project when his job at Dominion was terminated, he said.
He rejected opportunities outside the region, in Washington and Atlanta, because of quality of life issues. "To me, it is important, if possible, to work where you live, not live where you work."
His second reason was that he has lived in Roanoke all of his life and this is where his family is located. "I missed a lot of family enjoyment by putting work first, and I didn't want to compound that by relocating to another city."
Next is community. He said the city needs a locally owned and managed bank. "It's also history. I hope this bank is here a hundred years from now and people can pore through its archives, as I did at First National Exchange Bank [Dominion's predecessor] and remark on the then seemingly curious appearances of the founders."
Finally, he said that he believes Valley Bank represents a sound business opportunity.
"We have an outstanding group of organizers, quality management and a gaping void in the market," Lewis said. "I am convinced that Valley Bank will be highly successful, and I will be making (for me) a sizable financial investment in it."
Byrd gave up a bank presidency in Charleston, W.Va., to chance a new bank in Roanoke partly because he had lived here for 14 years when he was regional executive officer for Signet Bank. His children were raised and educated here. "We consider this our home," Byrd said.
And the opportunity to establish a new bank, he said is "a rare thing ... It holds a special meaning and attraction."
Valley Bank, he said, "will be a real force and factor in this community," yet today it is a sheet of blank paper.
Having worked for a series of big institutions such as CitiBank in New York and Signet in Roanoke, he said, he had often questioned how he would do things better. Now with a small bank, he added, he has the opportunity to try out those ideas.
Of course, he said, Valley Bank "won't be all that small all that long."
by CNB