Oak Hill enters capitalization homestretch

Business
By Bill Walsh
Source: Fauquier Times-Democrat
TUESDAY, OCTOBER 21 2008

By Bill Walsh

Times-Democrat Staff Writer

With all the bad news associated with banks these days — failed, on bailout life-support, headed by CEOs who have never met a risk they wouldn't take or a salary they couldn't hike — it's a little bit of a shame, Al Henry said last week, that Oak Hill National Bank couldn't have opened its doors three or four weeks ago.

Customers, unhappy with the damaging reports about the corporate institutions, might have been lining up at the door of a new community bank, the bank director mused, before adding that "it would have been a real good boost, an energy pill," but probably insignificant in the long-range scheme of things.

Oak Hill will open its offices on the Warrenton By-pass and in Marshall in February.

There is a more immediate hurdle still to clear: About 300,000 shares remain unsold with a little less than a month remaining in the subscription process. That's $3 million worth of capitalization ($10 per share) that the bank principals need to get Oak Hill out of the acorn stage.

"Right now, we are planning on selling the stock," bank president and CEO Mike Ewing said when asked about a backup plan, just in case. "We have several large investors that we are talking to [this week], and we hope they will give us a final answer. We may be there sooner than we think, depending on what they do."

Regulatory agencies look askance at making return-on-investment promises, and Ewing and Henry choose their words carefully when discussing the potential benefits of ponying up the minimum $25,000 investment.

"There is a bank in Covington, Va., that started selling its stock for $10 a share in July 2001," Ewing said, explaining by example. "In August, 2001, the major employer there sold out, so everyone was worried about jobs. Then 9/11 hit."

Nevertheless, the bank reached its capitalization goal and opened in 2002.

In the ensuing years, "It went up to $20 a share, split, and it has been back up to $11 or $12 — and that's in Covington," Ewing said.

Which begs the question, Henry added: "A lot of things go into opening a new bank. Location is one of them. Do you believe Fauquier County is a good location? You'd probably have to say yes. How about the people who are going to be running the bank?"

All of the principals have been in banking in Fauquier County for years, he noted, and all have worked together before.

"Typically, what you would see is that it will take a couple of years before it will really take off, and after that, when you start to grow, you might have another capital raise, maybe in year four or so," Ewing said. "We would hope to sell that at $11 or $12 a share or something like that. That will increase the value to the existing shareholders."

But in the end, it's not all about the money, both men agreed.

"What's happening is people are starting to realize that community banks are going to be the ones that are going to start rebuilding and providing money out here in this economy," Henry said. "People are beginning to recognize that we are a different entity than the stock market, and recognizing that this money is here, in the community. Part of the plan is that we want our investors to...have a stake here, to deal here, to send their friends here, and if we do something wrong, tell us about it, be involved in bank," he said.

Oak Hill will be a player in every aspect of Fauquier County banking, Ewing said, and community banks in general are "very good at figuring out where the risks are, then finding ways to mitigate them."

Customers will come to Oak Hill for home-equity loans, second trusts, home-improvement loans, home additions, and loans for non-conforming properties, Henry said, and the bank will also offer home mortgages.

People are angry with banks for a multitude of sins, these days, primary among them the selling of mortgages on the secondary market. Run into trouble with your note, and it is virtually impossible to talk to a real, live person who has the power to help.

The simple mortgages — 30-year, fixed-rate notes given to borrowers with strong credit and deep roots in the community — will almost certainly be sold on the secondary market, Ewing said; it is not really feasible for banks to do otherwise.

"The arrangement that we are going to have is the servicing will not be sold," Ewing said. "You will be able to talk to someone about your loan."

Oak Hill lending officials will not be in a position to make amendment decisions about a troubled note, Ewing cautioned, but they can help track down someone who is.

Mostly, he said, those problems will be addressed on the front end, by "putting people in homes we think they can afford, homes they can afford to stay in."

Banks, Henry said, "have done some stupid things. We're not going to do anything stupid. We are not going to go outside the area and do loans in...Texas and Florida. We are going to stay locally, and we are going to do things that are financially prudent."

Ewing can be reached at (540) 222-8281.

Del.icio.us

You must be logged in to post a comment.