From his perch atop First Virginia Banks Inc., Barry J. Fitzpatrick has seen competitor after competitor swallowed up by out-of-state companies.
More than a year of such activity has left First Virginia as the last of the large holding companies based in the state.
In the eyes of many observers, it is also a prime takeover target.
But Mr. Fitzpatrick is content to wait it out, communicating to anyone who cares to listen that he is in no rush to sell.
The company has flatly rebuffed all overtures and is focused on building what First Virginia executives describe as a long-term player.
"For 40 years we have sold First Virginia to investors as a long-term hold," said Mr. Fitzpatrick, who serves as chairman, chief executive officer, and president. "We're still doing that."
In charting an independent course, First Virginia is representative, indeed emblematic, of scores of small and midsize regional banks hoping to do the same.
First Virginia's go-it-alone strategy calls for controlled growth, quality assets, and occasional acquisitions.
Over the years, First Virginia has stuck with businesses it knows, primarily automobile dealer finance, indirect auto lending, and real estate. It has refused to make heavy investments in investment banking and retail brokerage, though these areas have attracted its peers.
"We're comfortable being a little behind the curve," Mr. Fitzpatrick said. "We like to wait and let others try things out."
That attitude means the company often frustrates analysts with a relatively low return on equity-12.51% annualized at June 30, compared with an average of 14.72% for commercial banks.
Earnings-per-share growth has also languished, at about 4% annually. Competitive pricing has also eroded margins in its auto finance business, and declining interest rates have squeezed mortgage revenues.
"They are kind of treading water right now," said David West, an analyst with Davenport & Co. "Their loan losses are always superior to the industry's and they have very definitely maintained excellent asset quality. Their big struggle, in my eyes, is getting some earnings momentum."
William R. Katz, an analyst at Merrill Lynch, said First Virginia should diversify its business mix to improve performance.
"About 80% of their revenue comes from spread banking, and there is pressure building in that business," Mr. Katz said. "To sustain superior returns over time, they'll need to improve their business mix."
To Mr. Fitzpatrick, the complaints about return on equity are a particular sore point.
Returns are solid, he said, pointing to the company's return on assets of 1.40%. Its low ROE reflects an abundance of capital, which there is no reason to change, Mr. Fitzpatrick added.
"Safety and soundness is first, earnings are second," he said. "The reason we do that is we've come to grips with what the banking industry is- cyclical. If you expect 10% EPS growth every year, you don't have an understanding of the cyclical nature of this business."
Chief financial officer Richard F. Bowman said the company is leveraging its $1 billion of capital through a stock buyback program. The company also has been buying bank branches put up for sale by competitors.
In addition, it is hoping to acquire smaller banks in Virginia and nearby states.
However, Mr. Bowman said, First Virginia is not going to negotiate "some silly acquisition" just to reduce capital.
In the meantime, the company is strengthening its product offerings, rolling out title and dental insurance to capture more of those markets. It has restructured and added salespeople for its trust and asset management lines. It has opened branches in supermarkets and Wal-Mart Superstores.
All of these efforts are aimed at boosting fee income, which now amounts to about 15% of total revenues.
"The more the better," Mr. Fitzpatrick said.
But First Virginia will not buy or build investment banking, its chief executive said. Companies making such acquisitions are generally "not doing a very effective job of managing the margins," he added.
Meanwhile, First Virginia thrives in the margin game. It is "a margin business," Mr. Fitzpatrick said. "We don't make any apologies for that."
Through 15 subsidiary banks-10 in Virginia, three in Maryland, and two in Tennessee-First Virginia has 389 branches and serves 87% of the market in its home state and 73% of Maryland's.
The extensive branch network combines with First Virginia's strict pricing standards to produce a dependable stream of low-cost deposits.
The bank uses the cheap funds to bankroll indirect auto and home equity loans. First Virginia's net interest margin routinely outshines those of many larger competitors. In the second quarter the margin was 5.16%, better than the 4.10% commercial banks averaged.
A big part of the company's strategy relies on expanding into new states via automobile finance, a First Virginia specialty.
The company plans to open an auto dealer loan origination office in Atlanta before yearend.
Through a newly created subsidiary of its lead bank, First Virginia offers a range of auto-related financial services, from inventory financing to insurance coverage, as well as indirect consumer loans generated at dealerships. At midyear the auto finance business totaled about $2.5 billion, or about 42% of the bank's total loan portfolio.
First Virginia has a reputation of being lean and clean. Its efficiency ratio of 56.4% ranks in the top tier nationally, and nonperforming assets at 0.34% of outstanding loans put it right in line with peers at midyear.
Yet the takeover speculation won't go way.
Winston-Salem, N.C.-based BB&T Corp. has strongly hinted it would like to make a deal. Some analysts see First Virginia folding nicely into Wachovia Corp. of Winston-Salem or SunTrust Banks Inc. of Atlanta.
In a report earlier this year, Robinson-Humphrey Co. securities analyst John W. Coffey pointed out that in 1997 First Virginia lowered the age from 62 to 58 for triggering Mr. Fitzpatrick's supplemental compensation plan in the event of a sale.
But the 58-year-old Mr. Fitzpatrick said making a deal with another banking company is unlikely in the near term.
"We make good money," he said. "We don't have problems to solve."