Most Virginia savings and loan executives east and north of Roanoke probably never heard of Blue Ridge Savings and Loan Association until last month.
After all, a $12 million S&L on the Blue Ridge Parkway in rural Floyd County (population 11,000) south of Roanoke, wouldn't ordinarily attract much attention within industry circles.
In fact, an employe in the Virginia Savings and Loan League's office in Richmond this week insisted there was no Blue Ridge Savings and Loan until a careful examination of the membership roster proved otherwise.
However, some Virginia state-chartered S&Ls apparently think Blue Ridge has a mousetrap worth studying and have indicated considerable interest in recent weeks.
While many Virginia S&Ls are busy seeking mergers or buyers for some of their assets in the face of further industry declines, Blue Ridge quietly took advantage of a new state law in April by applying for permission to convert to a bank.
Although there is no indication that there will be broad defection of Virginia S&Ls to banking, several officials from institutions in the state have contacted Blue Ridge to discuss the matter, says Vice President Peter Kesler.
The decision to switch is an outgrowth of prudent planning and not a desperate attempt to escape the flow of red ink that has covered most of the industry, Kesler indicated. In fact, Blue Ridge's profits increased 31 percent last year.
"We were the only savings and loan in this part of the state that was profitable last year," Kesler volunteered. "We are very fortunate in that we have remained in a profitable position over the last four years."
Blue Ridge has a distinct advantage over older S&Ls, having been in business only four years. As a result, it hasn't built up a portfolio of low-interest mortgage loans, creating a drag on earnings in a high interest-rate cycle.
So, why does the only S&L in Floyd want to convert and to compete with the town's only commercial bank?
"We feel that our community can be better served by another commercial bank, considering the regulations governing an S&L," Kesler explained.
Besides, he added, in the long run, Blue Ridge officials think "it's better for us to convert rather than waiting for the legislature and legislation to catch up."
Even though Blue Ridge has remained profitable, officials of the S&L maintain that, like other associations, it is hamstrung by regulations that prevent it from competing directly with the much bigger Bank of Floyd, which has about $50 million in assets.
For example, Blue Ridge, which is a state-chartered S&L, isn't allowed to make variable-rate commercial loans, Kesler pointed out. What's more, he noted, the state didn't authorize adjustable-rate mortgage loans until well after the Federal Home Loan Bank Board had given that option to federally chartered S&Ls.
However, the legislature gave a much broader option to state-chartered S&Ls this year when it enacted legislation that includes a provision for conversions.
And given that option, Blue Ridge elected to try its hand at banking by asking the State Corporation Commission for permission to convert.
"We feel that the regulations at this time are more favorable to commercial banks, and we feel that we should convert while we're healthy rather than waiting," Kesler said.
Although Kesler has been "contacted informally" by other S&Ls in the state, he cautions that many wouldn't qualify for conversion because of their extensive branch networks. And unlike Virginia bank holding companies, individual banks are prohibited from establishing branches outside their immediate market areas.
"The way we interpret the regulations, we wouldn't violate the ban against branching because we don't have but one office," Kesler said.
However, he added, that "wouldn't necessarily preclude other S&Ls" from applying for permission to convert.
Although there are no signs yet that federally chartered S&Ls want to cross over to commercial banking, the thought might occur to some that doing so might not be a bad idea.
In any event, the thought apparently never occurred to the bank board, which regulates federally chartered S&Ls.
Such a request "might require bank board approval," said a spokesman for the agency. "That's never happened before, but an S&L would have to drop its federal charter" if it wanted to convert, he added.
"How simple or complex that would be, we aren't certain," the spokesman remarked.