First Market Bank is literally one of a kind: It is the only U.S. bank majority-owned by a grocery company, Ukrop’s Super Markets Inc. in Richmond, Va.

The 27-store chain was established in 1937 and does things the old-fashioned way, as does First Market. For instance, branch employees pitch in to bag groceries and carry them to customers’ cars.

Last year readers of Richmond magazine voted First Market best in service, ahead of Virginia Credit Union and SunTrust. The publication’s article on the rankings cited the A+ Rewards Program, in which local schoolteachers get checking, coffee, and things gratis at the supermarket/bank.

Since its founding in November 1997, First Market’s deposits have grown to $510 million and its assets to more than $560 million. That exceeds by more than fivefold the original three-year target. Its loan portfolio is diverse: $65 million in retail, $43 million in private banking, $46 million in commercial, $38 million in small-business, and $82 million in used-car-dealer financing. The 170-emloyee bank was profitable after 15 months, said John M. Presley, its president and chief executive officer.

“Having the bankers bag groceries — well, that’s just another way to get to know our customers,” said Robert S. Ukrop, 53, president and CEO of the supermarket chain, which has branches in most of the 27 Richmond stores. “We’ve had our own bank employees go to work for the grocery store and vice versa. At the end of the day, most of our grocery customers don’t refer to the bank as First Market. They call it the Ukrop’s Bank.”

First Market has signed up 10% of Ukrop’s customers. James E. Ukrop, 63, Robert’s brother and chairman of both Ukrop’s and the bank, said, “Clearly we have a lot of work still here in Richmond left to do both in terms of penetrating our own customer base as well as in pursing commercial customers.”

The idea of owning a bank came from the brothers’ minority partner, National Commerce Bancorp, which operates 128 of its own branches in other grocery stores and has a subsidiary, National Commerce Bank Services, that helps financial institutions get into the grocery store branch business. Since 1987 the unit has worked with more than 300 institutions, including SunTrust, Wells Fargo, and U.S. Bancorp.

Initially, Ukrop’s asked the Richmond area’s five major banks — Central Fidelity (now Wachovia), NationsBank (now Bank of America), Signet (now First Union), Crestar (now SunTrust), and First Virginia — to submit proposals that probably would have resulted in a traditional bank-supermarket “rental” arrangement.

Memphis-based National Commerce, however, was aggressive in pursuing Ukrop’s business.

“It was manna from heaven,” said James Ukrop. “Somebody coming in and giving you the opportunity to own half of a bank.”

National Commerce says it would have preferred to do a traditional deal with Ukrop’s.

“If we had been able to lease space and own 100% of the bank, we would have done that,” said Chris Holmes, president of National Commerce Bank Services. “But you have to remember that we had no presence” in the Richmond market, “so we had the chance to own almost 50% of a great bank and we took it.”

As for the Ukrop brothers, Robert said: “The bank was interested in being more than a bystander while also wanting to ensure that customers received the same quality of service and attention that they’re used to from the supermarket itself. We simply wanted to be able to participate in the bank’s success or failure.”

Ukrop’s has 51% ownership, thanks to its reputation and the client base it brought to the deal. “It was really the customer equity that we had built up,” said Robert Ukrop. His brother noted that most of the five Richmond banks have been bought since the start of First Market Bank. “We like to call ourselves the last locally owned and controlled bank,” he said.

Mr. Holmes said National Commerce is pleased with the alliance.

“I think Ukrop’s really understands its business very well — it understands customer loyalty very well — and it knew it could really bring something important to them through this new bank,” he said. “It’s a win-win for everybody because the customers are getting a new service from a provider they know and trust. And, of course, the bank helps Ukrop’s as a business, with its banking success really driving through to the bottom line.”

But First Market is still building. According to the Federal Deposit Insurance Corp., the bank’s return on equity as of Sept. 30 was an anemic 6.94% and its return on assets was 0.55%.

Most of First Market’s management had a connection with National Commerce. Mr. Presley had been chief financial officer of National Commerce Bank Services.

The Ukrop brothers like to point out that their bank is one of the most successful in the National Commerce network. We’ve grown more quickly than any other branch, said Robert Ukrop.

How does the savings bank attract new customers? It offers many of the same perks that other in-store branches do around the country — free checking, for instance. But it also has unusual programs, such as the one for teachers and another incentive offer where customers can get checks for up to $50 a month that they can spend at a Ukrop’s store. The grocery checks are based on the customer’s average daily balance in the bank and how much they spend monthly at the store.

Beyond that, though, are the intangibles that appear to flow naturally from the bank’s mission statement: “To excel in serving our customers and community efficiently and effectively while treating our customers and associates” — employees — “as we would want to be treated. We will achieve profitable growth and long-term financial success while promoting an atmosphere of mutual respect, honesty, and integrity.”

Some of the payoffs have been remarkable: A week after one customer’s groceries were taken to the car, that customer opened a new CD account with $100,000. A customer who got gardening assistance from a store/branch employee helped put the branch manager over the top in a one-month challenge to bring in $1 million of new business.

Not bad for a bank whose chairman complains he is “naive about banking.

“I just know that all businesses are built around people,” said James Ukrop.

Mr. Quinn is a freelance writer in Arlington, Va.



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