BB&T Corp.s pending deal for F&M National Corp. in Winchester, Va., has intensified acquisition speculation surrounding the largest bank company left in the state, First Virginia Banks Inc.
In the last four years the states largest banking companies Signet Banking Corp., Crestar Financial Corp., and Central Fidelity Banks Inc. have been sold to out-of-state rivals. But through all the consolidation, $9.5 billion-asset First Virginia, of Falls Church, has remained steadfastly independent.
Now, though, any banking company looking to gain a sizable presence in Virginia, one of the fastest-growing states, must look at First Virginia, industry observers say. After First Virginia and $4 billion-asset F&M, the next-largest bank company in the state, First Community Bancshares in Bluefield, has assets of just $1.1 billion.
First Virginia is a very interesting bank, now that its all thats left, said Arnold Danielson, chairman of Danielson & Associates Inc., a Rockville, Md., consulting firm. Im sure theres a lot of thinking going on there about the future.
Richard F. Bowman, First Virginias chief financial officer, said the 52-year-old company is not interested in selling. It is mulling an advertising campaign aimed at customers who might not want to bank with the larger BB&T, he said.
Indeed, much of First Virginias recent growth has been fueled by runoff that resulted from previous mergers, Mr. Bowman said.
In 1997 it was the fourth-largest bank holding company in the state, and one of eight with more than $1 billion of assets. Since then, however, six companies have sold to corporations such as BB&T and Wachovia Corp., both of Winston-Salem, N.C., and SunTrust Banks Inc. of Atlanta.
Bruce Whitehurst, deputy executive vice president of the Virginia Bankers Association, said BB&Ts $1.2 billion deal for F&M, which was announced last month and is expected to close in the second quarter, is yet another example of the trend toward the barbell effect lots of big banks, lots of little banks, but few in between.
And the in-between institutions, such as First Virginia, are often viewed as acquisition candidates, because they are too big to act like community banks and too small to offer big-bank discounts on pricing.
When youre at $9 billion of assets, you just cant cater to your customers as smaller banks do, Mr. Danielson said. If First Virginia was only competing against Bank of America and First Union, they might be able to position themselves as a hometown bank, but theyve got to go up against SunTrust, BB&T, and Wachovia, who are not thought of as exceptionally large.
Bert Ely, an Alexandria consultant, said First Virginia is too big to be a community bank. Instead, its kind of in the middle, he said. My sense is that banks in the middle are not going to remain independent for long. I cant tell you when First Virginia is going to sell, or to whom, but I do think it will happen.
Not everyone is ready to write off First Virginia, though.
Rosalind Looby, an analyst at Credit Suisse First Boston in New York, said the company has always marched to the beat of its own drummer.
First Virginias priorities have always been safety, profitability, and growth, in that order, Ms. Looby said. Selling out is not on that list.
Probably nothing illustrates First Virginias independent streak better than its continued heavy involvement in both direct and indirect automobile lending, two lines of business many banking companies are exiting.
Michael Granger, an analyst at J.P. Morgan Chase & Co., said auto loans make up about half of First Virginias $6.34 billion loan portfolio, and its losses in auto lending are extraordinarily low.
Mr. Bowman said First Virginia has prospered in the volatile and fiercely competitive car loan market because its restricts its lending largely to borrowers with A-1 credit, a practice it follows in its commercial lending as well.
That sometimes implies that we may miss some opportunities when things are hot, but we look very good when the economy begins to slow, kind of like now, he said.
Mr. Granger said that caution has kept First Virginia on a very even keel. It reported net per-share earnings of $3.01 for last year, just a penny more than in 1999.
They dont ebb and flow with the profitability of the industry the way other banks do, he said. They are very steady.
Still, while Mr. Granger called a sale unlikely, he refused to rule one out. Perennial merger speculation surrounding the company has probably kept its stock price which was $46.25 at midday Thursday high over the years, he said.
I can remember having this same conversation 10 years ago, he said. If you had asked me then if First Virginia would be around now, I would have said no. 
