HUNTINGTON — The number of community banks in West Virginia continues to shrink, but the larger banks buying out the smaller ones say consolidation is keeping community banking alive.
Such was the case last month when Summit Financial Group, a $2.3 billion company based in the Hardy County community of Moorefield, announced plans to acquire Cornerstone Financial Services and its wholly owned subsidiary, Cornerstone Bank of West Union.
West Union is the county seat of Doddridge County and is located along U.S. 50 between Parkersburg and Clarksburg. Doddridge County has only two banks, but its attractiveness to banks seeking to expand grew as the natural gas drilling and processing there did in the past decade.
There’s no set definition of what a community bank is. Usually they are considered to be smaller banks anchored to their community or communities, and they are smaller than what are considered regional or national banks.
Summit’s acquisition of Cornerstone continues a trend that has gone on for several years.
“It’s no secret that bank doesn’t have a lot of loans, and the deposits are the attraction,” Robert S. Tissue, executive vice president and chief financial officer of Summit, said in a phone interview after the announcement of the acquisition.
Tissue said the Cornerstone acquisition is the fourth for Summit in as many years. It bought a small Virginia bank in 2016, First Century Bank in southern West Virginia in 2017 and First Peoples Bank in Mullens last year.
Summit looks for what Tissue calls “sleeping deposits.” Cornerstone had more money in deposits than it could lend legally. Ten years ago, Cornerstone had about $49.3 million in deposits in its West Union office.
This year it had $113.99 million thanks to Marcellus shale gas drilling and construction of processing infrastructure in the county in the past decade. The other bank in Doddridge County, West Union Bank, saw its deposits grow from $46.2 million to $89.6 million in that same time.
The sleeping deposits in West Union and Cornerstone’s branch offices in Parkersburg, Salem and Pennsboro — all along or near U.S. 50 — can be used to augment the commercial loan activity in Charleston, where Summit has its largest loan office, Tissue said.
Some larger banks are not as active in commercial lending as they once were, so Summit is moving in to fill that void in the market, he said.
Lorraine L. Brisell, president of Cornerstone, said the acquisition will “dramatically” help Cornerstone’s existing customers.
“I see this as retaining and unifying the community banking structure in West Virginia,” she said.
Technology has brought change to the banking industry, and that has required banks to increase the percentage of their resources they allocate to technology, she said.
And there are the customers’ needs to consider, Brisell said. Consolidation in the industry may reduce the number of banking companies in the state, but it better serves the needs of West Virginians, she said. The number of community banks has fallen in the past decade or so, but the overall concept of community banking is prospering, she said.
“Our customers who have banked with us for generations have experienced changes in their financial needs. With this partnership they will not have to run to the regional banks in Clarksburg or Parkersburg,” she said.
“The size we are now, we’re very limited in our legal lending limit,” and that limits some of the bank’s corporate customers in their expansion plans, Brisell said.
“This expands those opportunities so, again, they are not going to large regional banks that are headquartered outside the state of West Virginia.”
Cornerstone had several suitors, Brisell said, but she had known Tissue and Summit CEO and President H. Charles Maddy III for several years.
Retaining the identity of a community bank as a bank that is more in touch with its community than a regional or national bank has been cited by other West Virginia-based banking companies that are in growth mode.
Last year Huntington-based Premier Financial Bancorp, the parent company of Premier Bank, acquired First Bank of Charleston. In the statement announcing the acquisition, Robert W. Walker, president and CEO of Premier, said, “Centrally located between our Ripley, Spencer and Madison markets, a Charleston-based retail presence will enable Premier Bank to compete head-to-head with the large out-of-state banking franchises that bought their way into the marketplace, bringing their out-of-state, centralized decision making banking models with them. Premier Bank’s community-oriented approach to banking is managed in geographic regions with divisional presidents making local lending decisions. …
“First Bank’s commercial customers will also benefit from Premier’s larger lending limits and cash management products, while retaining the quality customer service and prompt credit decisions for which community banks like First Bank and Premier are well-known.”