Mergers and acquisitions
Big banks consolidate, benefiting Virginia-based institutions
In 2019, banks continued to merge and consolidate, and some closed branches in Virginia’s rural counties and small towns, a trend expected to continue well into the 2020s.
The big news of last year was the completion of the $66 billion merger of BB&T Corp. and SunTrust Banks Inc. in December, creating Charlotte, North Carolina-headquartered Truist Financial Corp., the sixth-largest bank in the country. It’s expected to take up to two years for the banks to fully merge operations and most branches will continue doing business under the BB&T and SunTrust brands until at least summer 2021.
Meanwhile, in November 2019, United Bank’s parent company entered into a $1.1 billion merger agreement with CresCom Bank’s parent. Like the BB&T-SunTrust deal, the two participating banks are headquartered outside of Virginia, but United has more than 60 branch locations here, primarily in Northern Virginia and the Shenandoah Valley. The deal is expected to close in the second quarter of this year.
Local banks had an eventful year, with more branch closures, battles with an activist investment firm and a dispute with Virginia Credit Union.
The Federal Reserve Board noted in a November report that rural counties across the country are losing bank branches, including four counties in Virginia classified as “deeply affected.” In 2015, Virginia had 120 banks, and now there are 100; about 50% of the branch locations in Bland, Lunenburg, Surry and Caroline counties have shut down since 2017.
Also, an activist investment firm founded by a University of Virginia alum has put pressure on two small Virginia banks. Driver Management Co., based in New York, has bought stock to become shareholders on banks’ boards across the country, with the express purpose of convincing them to sell to competitors. Earlier this year, the firm targeted Essex Bank in Richmond and, in 2019, the National Bank of Blacksburg, which repurchased 1 million of its 7 million outstanding shares last March, following investors’ request that the bank share excess capital with them.
In other financial news last year, local banks objected to the Virginia Credit Union’s membership offer to the Medical Society of Virginia’s 10,000 members, a move approved by the state Bureau of Financial Institutions last July. The Virginia Bankers Association and seven community banks filed a request for a stay on the society’s credit union membership, which the State Corporation Commission granted in August. The banks said that VACU, which has more than $3.7 billion in assets and had recently purchased Henrico County real estate firm Joyner Fine Properties, enjoys an uneven playing field with fewer taxes and a lighter regulatory burden — and could cause competing local banks to lose customers.
In late January, the SCC hearing examiner ruled that the case will go to an evidentiary hearing this May or June.