One Valley is the largest home-owned bank in West Virginia. At near $3.5 billion of assets, it has come a long way since the 1970s, when, as one of the two largest banks in the state, it was a $450 million institution with 11% capital in a unit banking state. West Virginia was very late in changing its branching laws (a change brought about by then state banking commissioner Phyllis Arnold, who is now One Valley's presiden0. In 1982, when the law was revised, former CEO Robert Baronner and senior management visited several banks and reviewed growth models.

"We visited Bank One and John G. McCoy and liked their style," says J. Holmes Morrison, now One Valley's chairman and CEO. "It fit us better in West Virginia to build a network of bank affiliates which allows for diverse cultures." Valley then set out to build a regional bank holding company with local affiliates, or a supercommunity bank.

In the mid-1980s alone One Valley acquired four banks in the $100 million-to-$200 million-asset range for cash (since capital was so abundant). Since that time One Valley has had 15 acquisitions, with two major transactions in the 1990s. "Our strategy from the start was to concentrate on growth markets along major highways and main cities," says Morrison. As a result, One Valley's franchise is particularly strong in the eastern panhandle of West Virginia, a bedroom community, and in the Morgantown-Clarksburg-Fairmount area, another fast-growing market, as well as in the capital city market of Charleston.

"We really believe in the supercommunity banking concept for West Virginia. With Huntington Bancshares and Bank One coming in, we are witnessing major consolidation. Bank One is now consolidating its 18 banks in our market, and Huntington has already done so along with the state's fourth-largest bank, United Bancshares. This provides us with a great opportunity to gain business utilizing the supercommunity banking strategy," Morrison said.

One Valley implemented super-community banking not only in its structure but also in its-culture, committed to relationship orientation and employee retention through teamwork and quality programs.

The company started a quality process in 1991, when Morrison became CEO by hiring 3M, the largest quality initiator in the world. "The process is ongoing; as far as we're concerned, it never ends," said Morrison.

"We needed to find out where we stand with our customers. We conducted a major survey to develop a baseline measure of where we were in customer satisfaction and retention. Having obtained the baseline we are now beginning to monitor our relationship positioning continually through mystery shopping and surveys." says Morrison.

"How do you maintain the quality process in a highly decentralized environment?" I asked.

"There is a very fine line between giving autonomy to your affiliate banks and at the same time working together to exceed customer expectations," says Morrison. For example, One Valley's quality team has developed a menu of standard products statewide, a tool often used by supercomunity banks to bridge the gap between efficiency (standardization) and autonomy (each bank selects its own product line from the standardized product shelf).

Another part of the answer to the delicate balance between centralization and decentralization lies in compensation. "Our compensation system is built around earnings per share. We are committed to increasing EPS 8% to 12% each year, and have achieved a .five-year historical rate of 13% We make this corporate goal 50% of each affiliate CEO's compensation. This is the nut we all must cover to access the bonus. We must hit that first. Then individual goals yield individual bonuses."

One Valley has grown into a successful supercommunity bank and by design and by exceeding customer expectations, not by happenstance.

Its trading range at 11 P/E ratio, ROA of 1.37%, EPS growth of almost 13% from second quarter 1993, are the result of a deliberate and effective implementation process of the supercommunity banking strategy.

Profitability is directly linked to excellent asset quality at One Valley, with net chargeoffs at 0.12% annualized, and total non-performing loans at 0.57%. Using Bank One as the original model, the One Valley team built a strong supercommunity bank in their market.

"We are still at the size where we can make the SCB concept work for us," says Morrison, "while Bank One is so big it has no choice but to centralize."

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