The unusual ownership structure that links four Virginia community banks has helped them strike a deal to buy branches from First Union Corp.
This month the banks-First National Exchange Bank in Roanoke, Blue Ridge Bank in Floyd, Patriot Bank in Fredericksburg, and Shenandoah National Bank in Staunton-announced they would buy 10 branches for an undisclosed price. First Union got seven of the branches when it bought Signet Banking Corp. in December and is also selling the other three to adjust to that purchase.
The community banks share the same management, which made it easy to put together a combined bid. The four are part of a 10-bank organization dubbed an "upside-down holding company" by Worth Harris Carter Jr., chairman of each of the banks.
Mr. Carter is the founder and lead shareholder of all 10, controlling them from a single holding company based in Bassett, Va. But unlike a typical multibank company, the banks own the holding company, and not vice versa.
Here's how it works: Each bank has its own stock, which is traded independently of the others. Each also owns a piece of Mortgage Company of Virginia, the holding company. That company in turn owns Bank Services of Virginia, which handles the back-office operations for all 10 banks.
"If you picture a flow chart for a normal holding company and flip it upside down, that's us," Mr. Carter explained. He added that the structure is a way to reap the benefits of size while providing localized service.
"We can easily offer different rates to different markets, because our banks have different names," he said. If the banks were combined under a traditional holding company, the company would have $1.5 billion of assets and 650 employees, and would rank as Virginia's fifth-largest banking company.
Mr. Carter started his first bank, First National Bank of Rocky Mount, in 1974. He opened two in 1976, another in 1982, and a fifth in 1985. Between 1995 and 1996, three of the institutions were split into eight, leaving him in charge of 10 banks.
Two senior executives of small Virginia banks said the structure has left Mr. Carter's banks in no better position to compete. Indeed one of the bankers said the only real beneficiary is Mr. Carter himself, who could sell one or more of the banks and still have a family business to pass along.
"This is one heck of a retirement plan," said this banker, who asked not to be identified.
