Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, April 19, 1994 TAG: 9404190143
SECTION: BUSINESS PAGE: C-10 EDITION: METRO
SOURCE: By MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
The move would mean the new issues of stock of two Roanoke Valley banks will be on sale more or less simultaneously. A new institution, Valley Bank, has already announced plans to sell stock worth $8 to $12 million in late spring or early summer.
Southwest Virginia said it will sell stock largely to its depositors, who own the mutual bank plan, and some borrowers. Valley Bank must sell all its shares on the open market to all investors.
Southwest Virginia said the amount of stock it will offer will be determined by an independent appraisal of the bank and is subject to review by the Office of Thrift Supervision, the federal agency governing savings and loans.
The current plan is for the thrift to file its application for conversion to the Office of Thrift Supervision in the second quarter, then receive regulatory approval during the second half of the year.
B.L. Rakes, president of Southwest Virginia, said the bank would become a subsidiary of a newly formed holding company. Under the mutual form of ownership, the board of directors is elected by the depositors and certain borrowers.
A capital stock savings bank and its holding company differ in that voting rights are held by stockholders. The holding company will own all of the outstanding stock of the converted savings bank; the holding company will be owned by the stockholders, who buy shares of its common stock in the conversion stock offering.
Many thrifts reorganized as capital stock companies during the 1980s in attempts to raise capital. Rakes said Southwest Virginia's board has been studying such a conversion for a long time.
As owners of the holding company's common stock, Rakes said, the stockholders will have the opportunity to participate in any growth or profitability of the holding company, including the bank.
Rakes said the conversion will infuse "significant equity capital" into the bank, although he said the bank is strong without the new capital. He said it exceeds all requirements of the federal government for capital strength.
As a stock company, Rakes said, the bank will be able to expand and diversify into other related financial activities. He declined to say what these opportunities might be in advance of regulatory action.
Southwest Virginia will offer the shares in the holding company to current and certain former members of the bank in a subscription offering. To the extent any shares remain unsold, Rakes added, they will be offered to the general public. Preference for purchase will be given to residents of the Roanoke Valley communities where the bank operates.
Assuming approval, he said, members will vote on the conversion at a special meeting. "In connection with the stock offering," he said, "we will mail a prospectus to eligible subscribers and an order form for purchasing stock." The order form will indicate the maximum amount of stock, $100,000, which can be bought initially under the plan. Any stock over that amount must be purchased in the open market.
Rakes said he could not comment on the impact of Valley Bank's concurrent stock sale.
Guy Byrd Jr., president of Valley Bank, said his company's stock may come to the market a little ahead of Southwest Virginia's if the Office of Thrift Supervision must give its approval before the stock can be offered.
"I don't think it will have any import, mainly because ours is a new project." People interested in a new bank will decide on that risk separately; with most people, he said, it will not be an "either-or" choice.
Byrd said conversion to stock company status "is happening frequently in the thrift industry."
Rakes said the conversion will not affect the operations of Southwest Virginia, including the provision for federal insurance on deposits.
Trident Securities Inc. of Raleigh, N.C., will manage the offering of stock in the conversion.
by CNB