Michael R. Brenan says that when he arrived, MainStreet BankGroup was a ship in desperate need of a captain.
Earnings were sagging, and its banks were literally running aground. The lead bank had become notorious for a $5.5 million trust department fraud scandal.
"The directors were at a crossroads," recalled Mr. Brenan, formerly the president of Banc One Corp.'s Youngstown, Ohio, bank. "They had to ask themselves what they wanted this company to be. I think selling was clearly an option, and probably a pretty large option."
Instead of selling, the board hired Mr. Brenan as president and chief executive officer. In the three years since, MainStreet's stock has jumped nearly 300% and return on equity has doubled, thanks in large part to the ensuing reorganization.
"Piedmont has gone from a mediocre performer to a high performer," said Vernon C. Plack, an analyst with Scott & Stringfellow Inc., Richmond. "The company has finally reached a size where it is receiving more attention from analysts."
And that put the company in a position to grow.
"We want to build a franchise from Baltimore down to Virginia and into the Carolinas," Mr. Brenan said. "We have been told there has never been a Virginia institution that has acquired a North Carolina institution; we wouldn't mind being the first."
MainStreet has already boosted its assets to $1.5 billion, from $795 million in 1994, largely through three acquisitions. It bought its way past its rural southwest Virginia base into the Richmond and Washington markets.
The company has two Virginia deals pending. It announced in July that it would buy $86 million-asset Tyson's Financial Corp., McLean and in October that it would buy $75 million-asset Regency Financial Shares of Richmond.
Mr. Brenan, 45, said he put 30,000 miles on his car this year driving through the Middle Atlantic states courting community bank presidents who might consider selling.
"I have found that acquiring banks is really about developing relationships," Mr. Brenan said. "The key is to get yourself in a position where if a CEO decides it is time to do something, the first person he calls is you."
But before he could take to the road, he said, he and the management team he brought with him had to clean house.
In 1994 MainStreet, then called Piedmont BankGroup, was a loose confederation of six banks led by Piedmont Trust Bank in Martinsville. The company had such a poor reputation among bankers in the area that James E. Adams, now MainStreet's executive vice president and chief financial officer, said he almost hung up when Mr. Brenan first called to recruit him.
Mr. Adams, a former chief financial officer of Dominion Bankshares, a Roanoke, Va., company acquired by First Union Corp. in 1992, was working as a community bank consultant at the time.
"I had no respect for the company," Mr. Adams said. "It had great potential, but it had been badly mismanaged, in my opinion. I saw no reason to tie my future to it unless there were going to be some dramatic changes."
Dramatic changes were just what Mr. Brenan had in mind.
Under his leadership, MainStreet cut costs by taking over the individual banks' back-office operations, such as data processing, and reduced its work force by 10% in 1995.
"Most of what was done was common-sense stuff," Mr. Plack said. "But give him credit-talking about it is one thing but executing is another."
"We said, 'Either we do this or lose our right to remain independent,'" Mr. Brenan said. "If we couldn't perform better, we had to get someone else's stock in our shareholders' hands."
Once they began to see the results, the shareholders supported what the newcomers were trying to achieve.
"Many of our shareholders are local people," said R. Bruce Valley, president of the Piedmont Bank affiliate, who has been with the company since 1977.
"When they saw their stock rising, all the rest of what was going on took a back seat."
"It was a great opportunity," said Larry A. Heaton, president of Bank of Ferrum, MainStreet's Rocky Mount, Va., subsidiary. "When the back-room stuff went away, my focus became gathering deposits and making loans."
After the reorganization, it was time to hit the road.
Piedmont became MainStreet in January 1996 and in three months later it announced it would buy First National Bank of Clifton Forge, Va. A month later it moved beyond its rural base for the first time, announcing it would buy $97 million-asset Hanover Bank in Richmond.
"We recognized the need to get into better markets," Mr. Brenan said. "If we wanted to grow, that is where we had to be." His goal, he said, is $3 billion to $5 billion of assets within two years.
The revitalization of the holding company has made acquisitions viable, Mr. Adams said.
"When we first called on banks, there wasn't much interest in joining the organization," he said. "Now those same companies are calling us."
Mr. Brenan said he and MainStreet can offer targets "the best of both worlds." The acquired bank keeps its charter, board, and management but gets access to money for loans as well as a trust department and products that smaller banks often can't offer on their own.
Also, MainStreet will assume the paperwork burden, which many presidents are loath to handle, Mr. Brenan said. "When I tell them we will do their compliance work for them, they say, 'Hallelujah!'"
MainStreet's small-town banking philosophy has a place in the big city, Mr. Brenan said.
"We still need to keep decision-making close to the customer," he said. "That is the key. Not everyone wants to do their banking through an ATM or over the phone."
In fact, he said he would rather compete with the large out-of-town institutions that have increasingly moved in on big cities.
"We have the toughest time competing with other community banks," he said. "They know the market as well as we know the market. It is much tougher when the decision-maker is in town."
But MainStreet's move into bigger markets has moved it on to some acquisition radar screens.
Mr. Brenan joked that its stock price jumps every time a bank is acquired in Virginia, which has become a hot takeover territory.
"We have reached a point where we have to question everything we do," Mr. Brenan said. "We have got to make sure that every action we take grows the company for the shareholders."
But if MainStreet can keep performing, he wants it to remain independent, he said. And he wants to stay in charge.
"When I left Banc One, it was to be captain of my own ship," Mr. Brenan said. "It really is a lot more fun. I have had more fun in the last three and a half years than I have had my entire career."