OUTLET: INSIDE BUSINESS
By Jared Council
jared.council@insidebiz.com
Officials at TowneBank aren’t exactly sure how they plan to make their debut in the Richmond market – either building from scratch or acquiring an existing bank.
But one sure thing is that they’re going, President and Chief Banking Officer Morgan Davis said, especially since they hired former StellarOne executive Pat Collins as president of Richmond operations.
“We’re pregnant,” Davis said about expanding in Richmond. “We just don’t know if we’re going to have a boy, a girl, triplets or quintuplets.”
The due date could be later this year or early next year.
An acquisition is more expensive than building anew, Davis said, but would give the bank an existing customer base on which to grow. Starting new branches, by comparison, would require the bank to build deposits from scratch.
“If you start de novo, you’re going to lose money for a while,” Davis said. “If you affiliate with someone, you’re going to make money immediately.”
Davis said the likely route will be a combination of both, to assume another bank and build branches in areas it wants to have a presence.
The bank is also eyeing Raleigh, but has not named a division president for that market. TowneBank has insurance and mortgage operations in both state capitals.
The logic for the moves stems from the fact that there’s limited room for growth in the Hampton Roads market, Morgan said. The bank is approaching $5 billion in assets and wants to grow assets at a rate of at least 10 percent a year, or $500 million.
“We’re a $20 billion market,” he said, “Getting $500 million in growth is a pretty tall order. If you look at how much our market has grown, you’ll see that by and large we have not grown $500 million as a region.”
Davis said the bank is after double-digit deposit growth to help increase earnings for its investors. “If you’re not growing, you’re dying,” he said.
In Richmond, even a sliver of market share will make that goal more feasible compared to sitting still in Hampton Roads. He said the market has about $30 billion in deposits, so 5 percent of the market share would give them about $1.5 billion in assets.
“If we didn’t think we could be at $1 billion in a few years, we wouldn’t go there,” he said. “The same is true for Raleigh.”
Davis said to cover an area like Richmond, he anticipates needing eight to 12 branches.
While TowneBank has no banking presence in Richmond or Raleigh, bringing one there would enhance its other offerings in those markets.
“Most community banks don’t have insurance, investment, mortgage, property management, title – they don’t have those kinds of operations as part of their family,” he said, noting that TowneBank does. “So we have an opportunity for people already in the market who have three products to sell, the same sales force now can open doors for 10 products.”
He later said, “We hope to have all of our services in Richmond by the end of this year or early next year. And the same thing is true for Raleigh.”
