Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, July 20, 1994 TAG: 9407200082
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: By MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
While other banks have gobbled up each other in recent mergers, Crestar Financial Corp. has concentrated on acquisition of a string of savings and loans, a strategy that has made it a major player in the Washington, D.C., market and increased its total assets by 10 percent.
Richard Tilghman, chairman of the Richmond-based parent of Crestar Bank, said in an interview Tuesday that a series of smaller mergers can be managed efficiently with a minimum disruption to employees and customers.
Tilghman, who was in Roanoke to meet with nearly 300 officers from throughout the company's Western Region, said that "banks ought to grow in the same proportion to the growth rate in our own economies.''
The Virginia market is fragmented, he said, with the top three financial institutions owning less than 50 percent of the deposits. In California, by contrast, the top banks hold more than 60 percent of deposits
Virginia, he said, has 110 financial institutions, each with assets below $1.5 billion.
Since 1990, Crestar has picked up 13 thrifts, five of them in the first half of this year, according to Tilghman. The 13 together added $1.5 billion in assets to the bank's $14.3 billion in assets.
Largest was Perpetual Savings Bank which, with 20 well-located branches, "put us on the map in Washington."
Merging with a thrift is "very doable," he said. Signs come down from the old institution one day and Crestar has the branch the next morning. The process causes the least pain to the employees and the least disruption to the bank.
A second reason Crestar has bought out thrifts is that these institutions wanted to sell. Either they feared for their competitiveness, Tilghman said, or no succession of management was apparent. Crestar was able to fill a need for them.
Crestar is not averse to a large merger, Tilghman said, but such a move could dilute the company's stock. Crestar, he added, is "dilutive averse."
Besides, he said, not too many merger opportunities exist for institutions with assets over $5 billion.
"You get good people," Tilghman said of the thrift employees who now work for Crestar. They have no cultural differences with the bank, nor are the customers different. He believes that's because thrifts these days act a lot like banks.
Acquisitions also are a profitable way to grow loans, especially mortgage and consumer lending business.
Crestar's loans were up 20 percent in the first half of 1994, and Tilghman said about 15 of those percentage points were due to acquisitions.
He said "the neat thing" is that loan business is on the rise again after lagging in the recession. That includes strong credit card growth, consumer loans and, lately, commercial borrowing. "I think it will continue to improve."
If the economy continues to move forward, he said, loan business will come back. He hears business people beginning to talk about expansion and, when industries end their massive layoffs, consumers will come back as well.
He doesn't see a boom, however, and that will be good.
Crestar, he said, has a "vibrant" credit card operation. Tilghman said Crestar charges relatively low interest and, in turn, is relatively more selective in choosing its customers. It also boasts a 24-hour customer service center operated by ''real'' people who can take loan applications by phone.
Crestar, he said, is the largest independent bank based in Virginia and therefore able to serve its customers. On the other hand, he said, "we're the hometown boys, if you will ... small enough to be hometown."
Tilghman said Crestar's profits were up 27 percent in the last quarter and he looks for the bank - and all Virginia banks - to perform well in the recovering market.
The real estate bust in the Washington and Hampton Road markets is ending with rising rentals and occupancy rates, Tilghman said.
Banks have recovered from the tough real estate market, he said, and "I guess that will continue for a while."
Despite defense cutbacks, Tilghman said, "Virginia is doing very well." He's optimistic about the state's economy: "Bankers are always cautiously optimistic."
by CNB