ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, October 13, 1996 TAG: 9610110009
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
CENTRAL Fidelity Bank has confirmed it will move its regional headquarters from Roanoke to Lynchburg next year, and there's renewed talk that some of First Union Corp.'s Virginia executives may be leaving town.
But amid the recent and pending comings and goings among financial institutions, the Roanoke Valley has become something of a regional headquarters as several out-of-state banks have planted their operations in the valley.
Decisive factors in attracting these facilities appear to be the valley's strategic location, a low cost of doing business and a work force with a good reputation.
The question, however, is what will happen at the end of June when a new federal law permits interstate branching. That change means out-of-state banks can fold their far-flung operations into their home-city headquarters, abolishing the need for a separate bank in Virginia or any other outside state.
First Union, for instance, instead of having seven regional headquarters, could consolidate at its corporate headquarters in Charlotte, N.C. It would take some high-level jobs away from Roanoke. Although its operation here is much smaller, First American Corp. might close its local headquarters when the law goes into effect.
Does it matter whether Roanoke or any similar city remains a headquarters for banks?
Yes, said Philip Sparks, Roanoke's municipal director of economic development.
A banking operation based here "is more sensitive to the needs of the community and [is] in a better position to meet those needs," Sparks said.
And though a bank can maintain its processing and support operations away from its headquarters, the presence in the community of high-income people in management positions is important to other businesses, particularly high-end retailers. Higher income jobs have a major impact on the community, Sparks said.
Banks, like other corporations, also tend to provide their greatest community support in their headquarters' towns. Companies support local cultural and civic organizations to a greater extent than they would otherwise, he said.
It's important, Sparks said, that the valley serve as the headquarters of as many business and manufacturing enterprises as possible.
Corporate offices of these banks, and potentially other companies, provide stability for the region, said John Stroud, president of the Roanoke Regional Chamber of Commerce . Stroud said he believes that the head offices have an economic impact on the valley that cannot be measured.
Any corporate office that opens in the valley shows industries considering locating here that the area is attractive for business, Stroud said.
Although Richmond remains what many would regard the headquarters of Virginia's banking industry, consider the influx over the past three years of of statewide bank bases to the Roanoke Valley:
First Union Corp. of Charlotte, N.C., was the first and largest of the recent headquarters moves. The company, the nation's sixth-largest banking corporation, entered the Roanoke Valley through its 1993 purchase of the former Dominion Bankshares Corp., which had been based in Roanoke.
Roanoke is the base for First Union's operations in Virginia, Maryland and Washington, D.C., as well as several systemwide functions, such as the credit-card customer service center. First Union has more than 2,000 employees in the Roanoke Valley.
National Commerce Bankcorp. of Memphis, Tenn., considers Roanoke County its regional headquarters from which it has a growing chain of supermarket branches. One of First Union's initial actions after the 1993 merger with Dominion was to jettison the branches Dominion had operated inside Kroger stores. They were picked up in July 1993 by NBC Bank, the Virginia subsidiary of National Commerce Bankcorp.
NBC now operates offices inside eight Kroger locations in Western Virginia and also is considering more traditional branches in the Roanoke Valley. Its Virginia headquarters is in at 3800 Electric Road S.W. in Roanoke County.
First American Corp. of Nashville, Tenn., came to the valley at the end of 1995 through a $77 million acquisition of the former Charter Federal Savings Bank. Its first act was to move the headquarters of its 14-branch Virginia operation from Charter Federal's headquarters in Bristol to 2706 Ogden Road S.W. in Roanoke County.
C.R. "Andy" McCullar, president of First American's Virginia bank, said Charter's former branches in Tennessee were folded into the bank in that state. He said it made no sense to keep the Virginia headquarters at Bristol without the Tennessee offices.
First Citizens BancShares Inc. of Raleigh, N.C., entered Virginia markets at the end of 1995 and now has 23 locations in Western and southern Virginia and eastern West Virginia, a region extending from Brunswick County, Va., west to Marlinton, W.Va.
Its headquarters for these branches is at 3959 Electric Road S.W., the Tanglewood West Building in Roanoke County.
In addition, two homegrown community banks - Salem Bank and Trust and Valley Bank - have their headquarters here. Multiple community banks abound in nearby communities.
And Richmond-based Crestar Bank and First Virginia Banks of Falls Church maintain regional operations in Roanoke. Charlotte-based NationsBank has a regional executive here, but Signet Bank runs its local operations directly from its Richmond base.
There's been some recent bank departures as well.
First Century Bank, based in Bluefield, W.Va., came to Roanoke in May 1991 through purchase of the deposits of the failed First Security Bank. But it gave up on Roanoke in November 1993 and moved its Virginia headquarters to Wytheville. It sold its single Roanoke branch to NationsBank.
"We weren't successful," said Jeffery Forlines, Virginia manager who is now based in Wytheville. But he said First Century was a special case. No matter how hard the staff worked, Forlines said, it couldn't escape the stigma of failed First Security in the Williamson Road neighborhood. Not only did that bank go under, he said, but there were constant reports at the time about various scandals involving fraudulent loans at First Security whose office First Century occupied.
The trigger for leaving, Forlines said, was a proposal from NationsBank to buy its sole Roanoke property. The shareholders' interest was best served, he explained, by recovering the cost of that investment. Since then, he said, First Century has consistently turned a profit beyond its projections.
First Century has plans to expand along Interstates 77 and 81, especially in the New River Valley. But Forlines said the bank does not foresee returning to Roanoke.
A larger change will come early next year when Central Fidelity Bank expects to merge its Southwestern and Western regions, encompassing the entire western half of the state. The union will produce what the bank calls its new Commonwealth Region.
The Southwestern Region has been based in Roanoke, but its regional president, Monty Plymale, and some other executives will move with the new headquarters to Lynchburg. Roanoke will instead be headquarters for an "area" with Roy Stallings as its president. The change will cost Roanoke some executive jobs and a corporate title. Plymale is preparing to move to Lynchburg, but he said the Commonwealth Region will actually have two headquarters. The Roanoke office, Plymale said, will manage 30 branches, commercial banking, trust, real estate finance, human resources and consumer loan administration.
The new region will cover half the state and handle a third of Central Fidelity's assets. Plymale said he is moving because Lynchburg is more centrally located in the expanded region.
Stallings brings to Roanoke experience in handling supermarkets branches, inside Farm Fresh and Rack & Sack stores in the Tidewater area. That will be helpful here because Central Fidelity's new branches in this region are inside Wal-Mart stores.
Rumors have surfaced several times in recent months that First Union plans to move its Virginia headquarters from Roanoke to Washington because, as the story goes, it wants to be in a larger city with more business. This report is hotly denied by Ben Jenkins, chairman of the company's Virginia bank.
Arnold G. Danielson, president of Danielson Associates Inc. of Rockville, Md., a bank consulting and analysis firm, doubts that the rumor is true.
But, Danielson said, if First Union buys Signet Bank, a published rumor in the industry, it may move from Roanoke to Richmond.
Jenkins said First Union first came to Roanoke because Dominion had its headquarters here and "had a great relationship with the whole community. We wanted to continue that relationship."
It stayed, he said, because the Roanoke Valley is "a great place to do business." Roanoke has a very stable work force, he said, with employees who are loyal and perform their jobs well.
Besides, he said, the cost of doing business here is low compared to other areas in terms of wages, rents and other operating costs. The price of homes and commercial real estate is less than in many other places, for instance, and First Union has established facilities like the operations center on Plantation Road.
Roanoke is also a favorable location when it comes to business travel, according to Jenkins. He goes often to Charlotte, Richmond and Washington - all about three hours away, he pointed out.
"Roanoke works very well" as a headquarters site, Jenkins said.
For First American Corp., Roanoke is at the northern tip of the Virginia market, which (except for Big Stone Gap) stretches along Interstate 81 from Marion.
On the other side of that geographic ledger, McCullar said, Roanoke is host to five First American branches. And McCullar lived here when he once worked for Dominion Bank. "I was delighted to get back," he said.
So Roanoke became its headquarters, but 50 of the Virginia bank's 150 employees remained behind at Bristol where the operations center stayed.
First Citizens chose Roanoke as its headquarters even though the first two valley branches won't open until March. They will be in the Winn-Dixie store under construction on U.S. 221 south and in a former First Union branch on Virginia 419 at Bernard Drive.
John R. Francis Jr., executive vice president for First Citizens' Virginia bank and another Dominion alumnus, said Roanoke was convenient to all of the West Virginia and in-state locations.
"When you look at the confluence of good roads - Interstate 81, U.S. 460 and U.S. 220 - the excellent airport and the planned interstate extensions, this is an obvious place to serve as an anchor for our growth plans," he said.
And Roanoke, Francis said, "provides an ideal launching pad for our new business efforts" to build a strong portfolio of commercial and consumer accounts.
"We also looked for a quality work force that had a lot of 'depth' in terms of banking experience," Francis said. "Roanoke gives us this, as well as a good quality of life for our associates."
Francis said Roanoke "is clearly the economic hub for this part of the state. It offers a diverse, stable economy." He said this is the key in a successful banking effort.
The valley also offers "steady economic growth," said James O. Beckner II, senior vice president of NBC Bank. Beckner, a Roanoke native and also previously employed by Dominion Bankshares, cited the number of new industries in this area, especially in southern Botetourt County as a sign of potential business for area banks.
He also remarked on "a good work force" and a good standard of living. "The mountains and the people are the best resources of the area," Beckner said.
The Roanoke Valley, he said, is the "centerpiece of Western Virginia where NBC intends to expand. "We would never move."
Crestar's Western Region extends north to Luray and Front Royal and west to Charlottesville. It goes south into far Southwest Virginia.
Within this area, said the bank's regional president F. Edward Harris, Roanoke is the largest metropolitan area. It is the region's financial, legal, retail and medical center. It is centrally located in the region and convenient to Richmond.
Yet Lynchburg was the headquarters until 1985 when Harris, who was then living here, became the regional executive and decided to stay in Roanoke. "It didn't make any sense to uproot and move to Lynchburg."
Roanoke's position with the company was consolidated through Crestar's 1989 merger with the former Colonial American National Bank. Harris said that gave Crestar a very strong presence in the Roanoke Valley, plus the headquarters building at South Jefferson Street and Franklin Road.
Like the other executives, Harris praised Roanoke's "good labor force."
Roanoke is a very attractive place for a headquarters because of "quality of life, said Valley Bank Executive Vice President A. Wayne Lewis. That's "why we all want to stay here."
But he said that applies to business as well in the form of a diverse and stable economy plus a low cost of doing business. At the same time, he added, legal and accounting services are available without going out of town.
Roanoke is large enough, Lewis said, that a community bank can get a satisfactory piece of the market. A bank the size of Valley Bank is satisfied with a smaller percentage of the community's banking business than a larger bank can be, yet can still turn a profit.
Clark Owen, president of Salem Bank and Trust, said the Roanoke Valley is a good place to do business because its diverse economy means "pretty full employment." As the magnet for its region, Owen said, a Roanoke Valley bank can draw customers from throughout Western Virginia.
Despite each bank's market-driven decisions about where to place state and regional headquarters, come the end of June, no bank will need a separate state headquarters for legal or regulatory reasons.
Danielson, the banking consultant, said the change may mean that all financial figures will be reported together, but the people situation probably won't change that much. "I can't see First Union making people changes."
Other outside observers agreed.
Charles O. Meiburg, professor of business administration at the Darden Graduate School of Business Administration at the University of Virginia, said he expects First Union and virtually all multi-state banks to collapse their operations into one.
His guess, Meiburg said, is that the Tennessee banks, NBC and First American, will give up their headquarters operations, but he pointed out they are small.
The real question is First Union, Meiburg said, and First Union appears committed to Roanoke, especially with systemwide facilities.
He expects First Union to maintain a Virginia management. And, he said, "Roanoke is in a good cost position" compared to the price of doing business in Washington or elsewhere.
Philip S. Corwin, banking specialist for Federal Legislative Associates in Washington, D.C., predicted consolidation of operations.
But he said he doubted that local hierarchies will be abolished. Banks need local boards, for instance, as a source of expertise about their local markets, Corwin said. Local ties are needed to attract local customers.
As to where the headquarters might be, Corwin advised looking "where the CEO wants to live." But he said Roanoke offers First Union a lot of inexpensive commercial office and operations space, trained personnel and "quality of life."
Although he has nothing to do with the decision, McCullar guesses that First American will fold the Virginia bank into the Tennessee operation because it makes sense economically. He did not know how many employees that might affect, but it could be only a handful.
NBC Bank's Beckner said the Memphis bank may consolidate financial operations, but he expects it to maintain a Virginia headquarters. The needs in Virginia differ from those in Tennessee, he said. "You can't eliminate the local bank," he said, because local decisions are made here. "We turn around loans in hours here."
NBC Bank is committed to the Roanoke Valley and to further expansion, Beckner said.
Jenkins said First Union may combine corporate entities, "but I'm sure we'll always operate a state bank." Virginia, Washington and Maryland, he said, constitute "a logical unit."
Any legal change in the status of the Virginia operation, Jenkins said, "will not have much impact from the day-to-day organizational standpoint.
LENGTH: Long : 283 lines ILLUSTRATION: PHOTO: DON PETERSEN/Staff. When Central Fidelity Bank movesby CNBits regional headquarters to Lynchburg, Monty Plymale (right), the
regional president, and some other executives will move with the new
headquarters. Roanoke will become headquarters for an "area" headed
by Roy Stallings (left). color.