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Virginia community banks improve key metrics in Q2 but still lag some peers

Virginia's community banks posted year-over-year improvements in certain key performance metrics in the second quarter, but still lagged their Southeastern peers by some measures.

The median return on average equity for Virginia's banks and thrifts with less than $10 billion in assets was 8.35% in the second quarter, a 10-basis-point increase year over year, but still below the 9.31% median for all Southeastern community banks and 9.59% for all U.S. community banks. Meanwhile, the median net interest margin for the state was 3.91%, lower than the Southeast median of 3.96%, but higher than the U.S. median of 3.84%.

Virginia's nonperforming assets ratio improved by 12 basis points year over year to 0.74% as of June 30, lower than the Southeast median of 0.82%, but higher than the national median of 0.63%.

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Martinsville-based Carter Bank & Trust, Virginia's largest community bank with under $10 billion in assets, underperformed the state median in all six of the banking metrics examined.

However, the bank has enjoyed a spate of good news recently. In late March, Carter began trading on the Nasdaq and was added to the Russell 3000 index in June. On July 31, the Federal Deposit Insurance Corp. lifted an August 2016 consent order against the bank tied to its Bank Secrecy Act deficiencies.

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Bank M&A activity has been subdued in Virginia in 2019. Through August, only two whole-company or minority interest transactions had been announced with a Virginia-based target. Both 2018 and 2017 saw four deals announced, while there were 10 announced in 2016.

Most recently, on Aug. 13, Toano-based C&F Financial Corp. announced that it would acquire Montross-based Peoples Bankshares Inc. for $21.5 million.

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Virginia, like the rest of the U.S., is seeing more branch closures than openings as banking goes ever more digital. During the second quarter, 19 bank and thrift branches were closed in the state, while nine were opened. During the last 12 months to June 30, 96 Virginia branches were closed and 27 opened.

If the blockbuster merger between BB&T Corp. and SunTrust Banks Inc. is approved, the combined company is expected to be forced to exit several Virginia metro areas, including Virginia Beach, Martinsville, Roanoke and Charlottesville.

BB&T has also been an active closer in the state. The company closed 37 branches in Virginia in the 12 months to June 30, more than any other company, according to S&P Global Market Intelligence data.

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Click here for a spreadsheet containing results for all Virginia community banks in the second quarter of 2019.