Franklin Federal’s headquarters will soon become TowneBank of Richmond’s. Photo by Michael Schwartz.
Three years after going public and shifting away from a throwback model of banking, Franklin Federal Savings Bank is taking another big leap.
The 80-year-old Richmond bank and its parent company will be absorbed into Hampton Roads-based TowneBank in a $275 million acquisition announced Tuesday. Franklin Federal shareholders will receive 1.4 shares of TowneBank stock for each Franklin share they own.
It’s the third M&A deal announced this year involving a Richmond bank and the fourth in the last 12 months, further illustrating that the trend of consolidation in the banking industry overall may be picking up in the local market.
“Everybody is going through the M&A dance right now,” said Rick Wheeler, CEO of Franklin Federal and its Franklin Financial Corp. holding company. “I think it’s the sign of the times.”
Wheeler, who will retire from the bank upon the deal’s closing later this year, said Richmond is on the banking world’s radar. That’s also been evident as a steady stream of out-of-town banks has looked to break into Richmond in the last several years either through expansion or acquisition.
“We had a lot of people calling on us saying Richmond is a hot market,” Wheeler said.
The consolidation in the banking industry is being fueled by a variety of factors. The margins banks can make between money earned through loans and paid out on deposits have continued to stay tight since the recession. Banks also point to rising regulatory costs as a burden, particularly for smaller institutions. Some argue that banks below a certain size may have trouble surviving going forward.
“Scale becomes important, and everybody is analyzing that,” Wheeler said.
Rick Wheeler
There’s also a generational shift occurring at some banks in which their top brass are reaching retirement age.
Such was the case for Franklin Federal, where Wheeler said three of the bank’s four top executives, including himself, are at least 65 years old and approaching retirement.
Joining the TowneBank fold allows Franklin Federal, now a $1 billion bank, to avoid the process of finding new leadership and helps it fast forward its efforts to shed its past as a mutual savings bank.
The bank was founded in 1933 as Federal Savings and Loan of Sandston. It took its current name after it moved to Franklin Street downtown in 1941. That brand will be phased out to make way for the TowneBank of Richmond brand.
As a mutual savings bank, Franklin Federal didn’t offer checking accounts, it didn’t have ATMs, and it still used passbooks for deposits.
It operated that way until early 2011, when it changed models to have a more modern bank holding company structure and went public with $138 million IPO.
It has since worked to modernize by adding checking accounts, but never made the investment in ATMs.
It furthered the modernization effort and kindled its relationship with TowneBank two years ago when the two sides formed a joint mortgage lending venture. It allowed Franklin Federal to refer home mortgage borrowers to TowneBank’s larger residential loan operation, and the banks split the profit.
The venture also gave TowneBank more of a taste for the Richmond market, which it liked enough to eventually start serious discussions about a deal with Franklin Federal earlier this year.
TowneBank CEO Bob Aston said entering the market through acquisition allows the bank a bigger launching pad than starting here from scratch.
“It’s a great opportunity for us and for them,” Aston said. “They obviously get to join up with us and pick up a lot of new products and services. We get the benefit of having a ready-made branch system and nice main office, and a good group of people.”
The deal helps the $4.8 billion Suffolk-based bank keep pace with recent acquisitions made by some of its larger Virginia rivals. That includes Union Bankshares’ acquisition in January of StellarOne Bank to create the largest community bank in the state. Towne and Union have consistently rivaled one another in size over the years. Adding Franklin’s $1 billion in assets will boost TowneBank’s size to $5.9 billion.
TowneBank currently has locations in about 15 cities, including Virginia Beach. Photo by Michael Schwartz.
Its push into the market marks TowneBank’s first attempt effort to open full-service bank branches outside of Hampton Roads. It has previously expanded elsewhere with its residential real estate brokerage and insurance operations. The bank’s mortgage operations have been in Richmond since it acquired Innsbrook-based Benchmark Mortgage in late 2011.
Veteran local banker Pat Collins, who was recently hired by TowneBank as it considered its move into the market, will serve as president and CEO of the combined Richmond operations.
Collins will come out of the gate with an immediate foothold here by taking on Franklin Federal’s eight Richmond branches. Among them is the Franklin Federal headquarters at 4501 Cox Road in Innsbrook that will serve as TowneBank of Richmond’s home base.
Aston said TowneBank will retain the eight Franklin locations and will do some upgrades to the branches, including installing ATMs.
“We may well add some additional locations to that over the next two or three years,” said Aston, who founded TowneBank in 1999.
Aston said he expects the majority of Franklin Federal’s 100 employees to come over to TowneBank.
Bob Aston
“We don’t have any overlap with them in Richmond, so we obviously need everyone in the branch system and the lending staff,” he said. “It’s just a question of working with each individual employee to see what skills they bring to the table and how we might fit them into a role with us.”
Wheeler, who has been Franklin Federal’s CEO since 1998, will retire and take on an advisory role and a seat on the TowneBank board.
He said he’ll look to stay engaged, but only as he’s needed.
“I don’t want to get in (Collins’) way,” he said. “I’m going to help him when he needs it and stay out of his way when he doesn’t.”
He’ll also look to enjoy retirement.
“At first I’m just going to retire and see what it’s like not having the responsibility to sign a 10K or 10Q,” he said.
Franklin Federal’s headquarters will soon become TowneBank of Richmond’s. Photo by Michael Schwartz.
Three years after going public and shifting away from a throwback model of banking, Franklin Federal Savings Bank is taking another big leap.
The 80-year-old Richmond bank and its parent company will be absorbed into Hampton Roads-based TowneBank in a $275 million acquisition announced Tuesday. Franklin Federal shareholders will receive 1.4 shares of TowneBank stock for each Franklin share they own.
It’s the third M&A deal announced this year involving a Richmond bank and the fourth in the last 12 months, further illustrating that the trend of consolidation in the banking industry overall may be picking up in the local market.
“Everybody is going through the M&A dance right now,” said Rick Wheeler, CEO of Franklin Federal and its Franklin Financial Corp. holding company. “I think it’s the sign of the times.”
Wheeler, who will retire from the bank upon the deal’s closing later this year, said Richmond is on the banking world’s radar. That’s also been evident as a steady stream of out-of-town banks has looked to break into Richmond in the last several years either through expansion or acquisition.
“We had a lot of people calling on us saying Richmond is a hot market,” Wheeler said.
The consolidation in the banking industry is being fueled by a variety of factors. The margins banks can make between money earned through loans and paid out on deposits have continued to stay tight since the recession. Banks also point to rising regulatory costs as a burden, particularly for smaller institutions. Some argue that banks below a certain size may have trouble surviving going forward.
“Scale becomes important, and everybody is analyzing that,” Wheeler said.
Rick Wheeler
There’s also a generational shift occurring at some banks in which their top brass are reaching retirement age.
Such was the case for Franklin Federal, where Wheeler said three of the bank’s four top executives, including himself, are at least 65 years old and approaching retirement.
Joining the TowneBank fold allows Franklin Federal, now a $1 billion bank, to avoid the process of finding new leadership and helps it fast forward its efforts to shed its past as a mutual savings bank.
The bank was founded in 1933 as Federal Savings and Loan of Sandston. It took its current name after it moved to Franklin Street downtown in 1941. That brand will be phased out to make way for the TowneBank of Richmond brand.
As a mutual savings bank, Franklin Federal didn’t offer checking accounts, it didn’t have ATMs, and it still used passbooks for deposits.
It operated that way until early 2011, when it changed models to have a more modern bank holding company structure and went public with $138 million IPO.
It has since worked to modernize by adding checking accounts, but never made the investment in ATMs.
It furthered the modernization effort and kindled its relationship with TowneBank two years ago when the two sides formed a joint mortgage lending venture. It allowed Franklin Federal to refer home mortgage borrowers to TowneBank’s larger residential loan operation, and the banks split the profit.
The venture also gave TowneBank more of a taste for the Richmond market, which it liked enough to eventually start serious discussions about a deal with Franklin Federal earlier this year.
TowneBank CEO Bob Aston said entering the market through acquisition allows the bank a bigger launching pad than starting here from scratch.
“It’s a great opportunity for us and for them,” Aston said. “They obviously get to join up with us and pick up a lot of new products and services. We get the benefit of having a ready-made branch system and nice main office, and a good group of people.”
The deal helps the $4.8 billion Suffolk-based bank keep pace with recent acquisitions made by some of its larger Virginia rivals. That includes Union Bankshares’ acquisition in January of StellarOne Bank to create the largest community bank in the state. Towne and Union have consistently rivaled one another in size over the years. Adding Franklin’s $1 billion in assets will boost TowneBank’s size to $5.9 billion.
TowneBank currently has locations in about 15 cities, including Virginia Beach. Photo by Michael Schwartz.
Its push into the market marks TowneBank’s first attempt effort to open full-service bank branches outside of Hampton Roads. It has previously expanded elsewhere with its residential real estate brokerage and insurance operations. The bank’s mortgage operations have been in Richmond since it acquired Innsbrook-based Benchmark Mortgage in late 2011.
Veteran local banker Pat Collins, who was recently hired by TowneBank as it considered its move into the market, will serve as president and CEO of the combined Richmond operations.
Collins will come out of the gate with an immediate foothold here by taking on Franklin Federal’s eight Richmond branches. Among them is the Franklin Federal headquarters at 4501 Cox Road in Innsbrook that will serve as TowneBank of Richmond’s home base.
Aston said TowneBank will retain the eight Franklin locations and will do some upgrades to the branches, including installing ATMs.
“We may well add some additional locations to that over the next two or three years,” said Aston, who founded TowneBank in 1999.
Aston said he expects the majority of Franklin Federal’s 100 employees to come over to TowneBank.
Bob Aston
“We don’t have any overlap with them in Richmond, so we obviously need everyone in the branch system and the lending staff,” he said. “It’s just a question of working with each individual employee to see what skills they bring to the table and how we might fit them into a role with us.”
Wheeler, who has been Franklin Federal’s CEO since 1998, will retire and take on an advisory role and a seat on the TowneBank board.
He said he’ll look to stay engaged, but only as he’s needed.
“I don’t want to get in (Collins’) way,” he said. “I’m going to help him when he needs it and stay out of his way when he doesn’t.”
He’ll also look to enjoy retirement.
“At first I’m just going to retire and see what it’s like not having the responsibility to sign a 10K or 10Q,” he said.