
DATE: Sunday, November 9, 1997              TAG: 9711080595

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

                                            LENGTH:  160 lines

ROLE OF BANK BRANCHES IS CHANGING MERGERS AND TECHNOLOGY LEAD TO CLOSINGS, WILL AFFECT SERVICE

Stopping by the bungalow-like bank branch in Virginia Beach has become part of Paul Sutton's daily routine.

The proprietor of Paul's Auto Service savors the personal attention he receives from tellers when dropping off deposits from his auto-repair shop.

No amount of advanced technology can replace that sort of service, Sutton declared as he walked into the Central Fidelity branch on Virginia Beach Boulevard at Rosemont Road.

But Sutton - and thousands of others in Hampton Roads - may be forced to change their banking habits as branches like this one are vacated or sold.

Wachovia Corp. of Winston-Salem, N.C., announced plans earlier this month to consolidate 10 Central Fidelity and Jefferson National Bank branches in the region by late March. As part of its expansion into Virginia, Wachovia acquired Jefferson in late October. It is scheduled to buy Central Fidelity in mid-December.

Two other mergers could mean similar changes for customers of other financial institutions in Hampton Roads. Signet Bank is due to become part of First Union National Bank in December, and Life Savings has agreed to be acquired by BB&T Corp.

In each instance, the acquiring banks are likely to shed those branches they consider inefficient or that overlap with their existing offices. When the wave of consolidation subsides, the region is likely to have fewer conventional branches.

Two groups of bank customers could be more affected than others: small businesses and residents of lower-income neighborhoods.

``We're concerned that there will be fewer choices and higher fees,'' said Jean Ann Fox, vice president of the Virginia Citizens Consumer Council, an advocacy group that has studied financial-service issues in the state.

Banks everywhere are under pressure to become more efficient. Some have responded by paring the staffs in their branches and closing those that are less productive.

Others have invested in alternative ways of providing service. These range from automated teller machines to automated phone systems and programs for home-banking by personal computer. To reach customers at large gatherings and in neighborhoods without branches, some banks have installed mobile branches on trucks.

Like many large banking companies, First Union Corp. has built a call center to process inquiries from customers. This ``direct bank'' in Charlotte also solicits business around the country.

Because of its success at bringing in customers, the bank-by-phone operation has been expanded, said Jeep Bryant, a First Union spokesman. He attributed the heavy volume of activity at the center to the ease of use.

``Many of us are still learning how to use a personal computer, but we are all accustomed to using the phone,'' Bryant said.

In fact, advances in telephone technology have enabled a handful of banks to thrive without using branches at all. One is USAA Federal Savings Bank, an affiliate of the financial services organization that provides auto and homeowners' insurance to military officers, retired officers and family members.

USAA's San Antonio-based thrift has attracted $2.5 billion of deposits, 330,000 deposit accounts and more than 2 million credit-card accounts. All of its services are delivered by telephone, automated teller machine, personal computer or mail.

That sort of service is convenient for millions of individuals whose paychecks are automatically deposited in their bank accounts and who use automated teller machines for cash withdrawals. Many bank customers rarely step inside a branch today.

Others, however, rely on tellers because they have large numbers of transactions or are uncomfortable with the alternatives. Small-business owners and managers, in particular, count on branch employees for financial services.

Greg Roberts was in between landscaping jobs when he stopped at the Central Fidelity branch at Rosemont Road and Virginia Beach Boulevard.

Roberts uses the branch two or three times a week to deposit customers' checks and withdraw cash for his business. Whatever changes the Central Fidelity-Wachovia merger brings, Roberts figures he can adapt.

``I don't know what to expect, but I don't think it's something I have to worry about,'' the Virginia Beach landscaper said.

But consumer advocacy groups have voiced concern about the effects that branch consolidations may have on customers in lower-income neighborhoods.

``The more bank branches that close the harder it is for some people to get to a bank,'' said Fox of the Virginia Citizens Consumer Council.

It's tough to argue that banks should keep open branches that are unprofitable, she acknowledged.

However, ``what you don't want are neighborhoods left without any bank branches,'' she said.

With fewer conventional branches available in lower-income neighborhoods, it becomes more difficult for residents to save money and pay bills, Fox said. Often, they resort to check-cashing operations that charge stiff fees for their services.

The availability of banking services for lower-income households is likely to become a bigger issue as the day nears for electronic deposit of Treasury payments such as Social Security. Beginning in 1999, recipients will have to have bank accounts to receive their payments.

The focus on efficiency contrasts sharply with the free-wheeling days of the 1970s and 1980s. For years, banks attracted deposits by building branches wherever they saw population growth.

``You had a marketing manager ride out and take a good look at where the new houses were being built,'' said Stan Kelly, executive vice president at Wachovia Corp. in charge of retail banking.

That approach has radically changed. Instead of relying on conventional free-standing branches, banks have tailored delivery of services to particular locations. To reach some customers, they have installed ATMs in malls and workplaces. To reach others, they have opened smaller branches inside supermarkets and discount stores.

``Bankers began to understand what retailers knew about location. You've got to go where the traffic is,'' said Edward E. Furash, president of a bank consulting firm in Washington, D.C.

Nationwide, the number of branches will continue shrinking. ``We're about halfway through a 20-year-long transition,'' said Furash.

Banks also are seeking to refine branches that will serve particular types of users, such as small businesses and more affluent consumers.

Conventional branches, however, haven't been abandoned. Heritage Bank & Trust is scheduled to open a freestanding 2,500-square-foot branch on the northern end of Colley Avenue in Norfolk later this month.

Heritage, which already has three branches, chose that location partly because some customers suggested it, said Robert J. Keogh, president and chief executive.

In addition, Old Dominion University's expansion plans and proposals for a major redevelopment effort between Colley Avenue and Hampton Boulevard are likely to offer the bank opportunities for small-business lending, Keogh said.

For decades, NationsBank and its predecessor banks held the biggest share of bank deposits in Hampton Roads. By acquiring Jefferson Bankshares and Central Fidelity Banks, Wachovia is likely to gain the dominant share of deposits in the region.

But deposits by themselves are less important to banks than they once were. The disappearance of interest-rate ceilings on bank accounts, the deregulation of interstate banking and intense competition have made it more costly for banks to gather deposits, their raw material for loans.

Today, bankers use more sophisticated measures when deciding where to locate a new branch - and whether to keep an existing branch open.

When Wachovia weighed which Central Fidelity and Jefferson branches to vacate, it relied more on several analytical measures and less on human intuition than it might have a few years ago, said Kelly, the executive in charge of Wachovia's retail banking. In addition to considering the amount of deposits held by a particular branch, the company measured the volume of customer transactions and investment products purchased at each branch.

Like other banks, Wachovia will refine the shape and location of its branches to meet the needs of particular types of users, such as small-business customers, Kelly said.

``In time, branches may take on the personality of the markets they serve,'' he said. But even in an era when efficiency is crucial, ``there will be a place for branches.'' ILLUSTRATION: Color photo

MARK MITCHELL/The Virginian-Pilot

The Central Fidelity Bank branch on Virginia Beach Blvd...

Graphics

KEN WRIGHT/The Virginian-Pilot

BANK DEPOSITS IN HAMPTON ROADS

SOURCES: Federal Deposit Insurance Corp. and banks

THE CONTEST FOR BANK DEPOSITS

SOURCE: SNL Securities

[For complete graphics, please see microfilm]