Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 27, 1993 TAG: 9302270030
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
FIRST UNION BUYS ANOTHER VA. BANK
First Union Corp. expanded its Virginia bank dramatically Friday, buying First American Metro Corp., a McLean-based bank with 174 branches in the Washington and Hampton Roads areas.Once the purchase is completed, the bank will be operated from First Union's Virginia headquarters in Roanoke, the soon-to-be-former Dominion Bankshares Corp. First Union's acquisition of Dominion is scheduled to be completed Monday.
First Union, based in Charlotte, N.C., outbid Signet Banking Corp. and Crestar Financial Corp., both of Richmond, and other banks, offering $453 million for First American, which has $4.6 billion in assets.
First American was under a federal court order to be sold by June 23 because of its past illegal ownership by the now-defunct Bank of Credit and Commerce International. First American has operated under close supervision of the Federal Reserve since the fall of 1991.
BCCI, headed by Pakistanis and owned by Persian Gulf investors, pleaded guilty a year ago to federal racketeering charges and agreed to forfeit a record $550 million in U.S. assets.
The sale of First American to First Union is subject to approval by federal and state regulators, as well as U.S. District Judge Harry W. Albright Jr., the court-appointed trustee overseeing the sale.
Albright said in a statement he was "very, very pleased" by the sale agreement, which he said will allow "First American's banking franchise in metropolitan Washington [to] be sold intact to a strong banking institution."
John Georgius, president of First Union, said First Union has no plans "at this time" to shift its Virginia headquarters to McLean, where First American has its main office.
He said First Union likes Roanoke and intends to stay there, but said there will be movement of people within its multistate system in the Southeast.
First Union Chairman Edward E. Crutchfield Jr. said the First American transaction will have no immediate impact on the bank's Roanoke work force.
But he said "the bigger the bank," the more likely First Union would be to move jobs to Virginia.
Speaking at a news conference from Washington, Crutchfield repeated statements he made in September when First Union announced it had agreed to acquire Dominion.
He said acquisition of First American means First Union intends to move jobs to Roanoke because of the strong work ethic of its employees and availability of office space. It has been widely assumed that First Union would use Dominion's operations center to house some processing functions that will grow significantly larger when First American's business is added to Dominion's.
R. Jeep Bryant, a spokesman for First Union, said jobs definitely will be added in Roanoke. It's too early to be specific, he said, but "there will be growth there."
Warner Dalhouse, chairman of Dominion and of First Union's Virginia bank, said Friday's acquisition "can't be anything but positive" for Roanoke.
Processing jobs may be added over time, he said, and the larger size of the Virginia operation makes it "much more likely" that other First Union jobs will move to Roanoke.
Crutchfield said that First Union, "if we had our druthers," would "take a breather" from further acquisitions.
But, he added, "you never know." He said First Union is "opportunistic" about filling in its Virginia franchise, possibly with thrifts being sold by the government's Resolution Trust Corp.
Unlike the stock swap through which it is acquiring Dominion, First Union will pay cash for First American.
Crutchfield said the company has the cash on hand and will not have to issue more stock or restructure.
First Union's bid is equal to 1.24 times First American's book value, or the base accounting value of the company's total assets. The American Banker, a trade newspaper, has reported that the average merger deal among major banks was for 1.98 times book in 1992 and was 1.5 times book in 1991.
First Union will cut First American's operating expenses by 30 percent, or $62 million, including closing of branches that overlap Dominion's network, Crutchfield said.
But he said the two Virginia banks complement each other because Dominion is strong in the Roanoke and Richmond areas while First American operates primarily in Northern Virginia and Hampton Roads.
First Union expects to close the First American deal in May but will not fully integrate its operations into the First Union system until the end of the year.
Crutchfield predicted that the transaction would add 19 cents per share of its common stock to its earnings in 1994 after a dilution of 13 cents this year.
Dalhouse said the acquisition catapults First Union into second place among the state's banks. It is second in the Washington metro area in terms of market share based on deposits.
He said First Union will have about 12 percent of market share in Virginia and about 9.5 percent in Washington.
NationsBank ranks first in both geographical areas.
First Union will have 387 branches in Virginia, Washington and Maryland although some are to be closed. Also to be closed is First American's single branch in Lexington, its only presence in Western Virginia.
Georgius said that more than 200 First Union employees had devoted more than 10,000 man-hours to examining the First American's books before the agreement was signed Thursday night.
To protect its own credit quality, First Union will discount the value of First American's $650 million in troubled loans by 45 percent and place them in a special portfolio for early disposition.
Crutchfield said First Union's acquisition is free of any of First American's BCCI-related problems because it involves only the Virginia, Washington and Maryland banking subsidiaries of First American Bankshares Inc. Banking subsidiaries in Florida and Tennessee were sold earlier.
Crutchfield said First Union has for many years wanted a strong presence in Virginia and the Washington area.
The company did the First American deal, he said, "because it was there to do."
THe Associated Press contributed to this story.