First Virginia in $160M Deal To Fill Home-State Market Gap

In a move that would make it the dominant bank in southwest Virginia, First Virginia Banks Inc. said it has agreed to acquire Premier Bankshares for $160.4 million of stock.

Premier, which is based in Bluefield, Va., has $744 million of assets and $650 million of deposits. The deal would push Falls Church-based First Virginia into first place in deposit market share in five counties in the southwestern corner of the state, between Roanoke and Bristol.

First Virginia chairman and CEO Barry J. Fitzpatrick said the deal would fill in a significant gap for his company. "We have a small presence in southwest Virginia, a larger presence in Roanoke, and a larger presence around Bristol," he noted. Premier's entire franchise lies between the two cities, "making it a natural market acquisition," he said.

Analysts said the price, 2.1 times book value, is reasonable.

"It's an in-market deal for First Virginia that makes a lot of strategic sense," said John Coffey of Robinson-Humphrey Co. "It could pull them out of an earnings growth rut."

First Virginia, which has $8.2 billion of assets, earned $28.6 million in the quarter ended Sept. 30, a 2.3% decline from the same period of 1995.

As many as eight branch closings could result from the deal, First Virginia said. It now has 276 offices in Virginia; Premier has 36.

First Virginia said it would need fewer employees after the merger is completed but said it expects no layoffs. Instead, it said it would count on attrition to reduce the payroll. First Virginia has 5,000 employees. Premier has 350.

Thomas F. Theurkauf, an analyst at Keefe, Bruyette & Woods Inc., said he was not sure the deal makes sense, given the economic sluggishness of southwest Virginia. "The only sort of fly in the ointment is, by going into southwest Virginia, they're going to be bulking up in a rather slow-growth part of the state," he said. "It raises questions. Why would you want to go there?"

But Mr. Fitzpatrick responded that, though the region is not a "super- growth area," the deal would enable First Virginia to steal market share, bolstering profitability.

One asset Premier brings to the table is a top management with close community ties. First Virginia plans to keep Premier's three most senior executives in key roles and to put Premier's board members on the boards of its local banks. Premier CEO James R. Wheeling is to be named president of First Virginia's Roanoke bank, assuming the merger closes as scheduled by mid-1997.

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