What community banks like so much about Northern Va.

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Northern Virginia is drawing more looks from growth-minded banks.

MVB Financial in Fairmont, W.Va., is the latest bank to announce plans for an aggressive push in the Washington area. The company wants to have $1 billion in assets in Northern Virginia in the next two to three years.

The market, which is home to about 6 million people, is one of the best in the country, said Larry Mazza, the $1.7 billion-asset company’s president and CEO. He pointed to Amazon’s decision to set up a major headquarters operation as proof of the area’s staying power.

“We know we’re not going to be Chase or Capital One and dominate the market, but we want to go in and get our share because there’s a lot to go after,” Mazza said.

MVB’s effort is the latest push by a smaller bank to steal business from bigger institutions. Bank of America, Capital One and Wells Fargo hold more than a third of the deposits around Washington.

MVB’s three branches in the area hold $187 million in deposits.

The Washington area has a median household income of $96,000 in 2016, according to Census Bureau data. Nationally, the median was $58,000.

Total deposits in the area have increased by 65% since 2008, totaling more than $256 billion in June, according to the most recent data from the Federal Deposit Insurance Corp.

At the same time, consolidation has reduced the number of banks in the market by 25% since the financial crisis, to 77 institutions at June 30. Seven of those banks, including MVB, are based in West Virginia.

These factors have also fueled a wave of investors looking to form new Washington-area banks, including MOXY Bank, VisionBank, Marathon International Bank and Trustar Bank.

MVB doesn’t have to look too far to find a blueprint for expansion in Northern Virginia.

United Bankshares in Charleston, W.Va., has focused heavily on the market in recent years. Ten of its last 11 acquisitions, including the April 2017 purchase of Cardinal Financial, have been around Washington.

The $19 billion-asset United has 36 branches and $2 billion in deposits in the Washington area, based on FDIC data.

“When the smoke cleared, they’re one of the banks standing tall,” Mazza said of United.

MVB, by watching United, has learned about the focus and resources required to expand around Washington. While keen to pursue organic growth, MVB is also open to acquisitions.

"If M&A comes about, we’re all for it,” Mazza said.

It could be costly for MVB to buy scale in Northern Virginia, where premiums have been creeping up in recent years.

Banks in Maryland and Virginia sold last year, on average, for 167% of tangible book value last year. The average premium was 153% in 2017, according to data compiled by Keefe, Bruyette & Woods. The higher premiums tend to go to banks with large operations in and around the nation's capital.

“A bank outside of the market trying to get in is going to have to pay a premium,” said Rick Adams, United’s president.

The biggest issue for aspiring buyers is a lack of potential sellers with more than $1 billion in assets, said Casey Whitman, an analyst at Sandler O'Neill. At the same time, there is a cluster of smaller banks that could become the next crop of targets.

Expanding in the market without acquisitions could be more challenging.

Organic growth “was easier” a few years ago, Adams said.

“We think M&A is the preferable way to go,” Adams added. “I think it would be much more difficult to go into a market like [Washington], which is highly competitive, and do it de novo.”

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