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First National to acquire Prince George-based community bank

Strasburg-based First National has entered into a definitive merger agreement to acquire Prince George-based Touchstone Bankshares in an all-stock transaction worth approximately $47 million, First National announced Tuesday.

The parent companies’ merger combines community banks First Bank and Touchstone Bank to create a bank with expected total assets of about $2.1 billion, $1.5 billion in loans and $1.8 billion in deposits. The resulting company is expected to be the ninth largest Virginia community bank by deposits.

The combined company will have 30 branch offices across Virginia and two branches in North Carolina.

“We are thrilled to have found a partner with an equally long history of serving and supporting local customers and businesses in their communities,” First National President and CEO Scott Harvard said in a statement. “Combining our companies will help ensure that we continue to be part of the fabric of the communities we serve. … We are incredibly excited about this opportunity to expand our Richmond metro presence with the addition of seven branches in the market, and we look forward to welcoming the entire Touchstone team into the First Bank family.”

In the metro Richmond area, where it’s expected to have eight branches, the combined company’s deposits are expected to exceed $350 million.

According to the terms of the agreement, Touchstone shareholders will receive 0.8122 shares of First National stock for each share of Touchstone stock. Based on First National’s closing stock price of $17.55 on March 22, the deal’s approximate aggregate value is $47 million, or $14.25 per share of Touchstone stock.

“First National is a like-minded partner that shares our culture of supporting our communities by focusing on building meaningful relationships and personalized service to their customers,” Touchstone President and CEO James Black said in a statement. “We are enthusiastic about the opportunity to partner with First National in a transaction that we believe offers significant opportunities to our clients, communities, employees and shareholders.”

The companies’ boards of directors have unanimously approved the merger agreement. The transaction is expected to close in the fourth quarter, subject to shareholder and regulatory approvals.

First National and First Bank will appoint three Touchstone directors to join the existing nine directors on each board. Black will join First Bank as an executive vice president and south region president.

Founded in 1906 as Bank of Dinwiddie, Touchstone currently has 12 branches across the metro Richmond area, south Central Virginia and northern North Carolina. As of Dec. 31, 2023, Touchstone reported total assets of $658.7 million, gross loans of $508.8 million and total deposits of $542.2 million.

First National is the holding company of First Bank, which opened in 1907. The company has 20 bank branches throughout the Shenandoah Valley, Central Virginia and the Roanoke Valley, as well as a customer service center in a retirement community and a loan production office. First Bank also operates First Bank Wealth Management and owns First Bank Financial Services, which invests in investment service and title insurance providers.

Atlantic Union names new Hampton Roads president

Richmond-based Atlantic Union Bank has named Lisa Morgan its new Hampton Roads market president, the Richmond-based bank announced Monday.

Morgan will also continue to hold the role of wealth relationship director with the bank’s wealth consulting group, a position she has held since she joined Atlantic Union Bank in 2021. Morgan will be the first female market president in the bank’s history.

Morgan succeeds Andy Hodge, who will continue to serve as the bank’s group president of middle market and corporate banking. As market president, Morgan will serve as regional liaison to partners in the Hampton Roads region, covering Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Poquoson, Suffolk, Virginia Beach and Williamsburg.

“Lisa is the kind of banker you want on your side because she genuinely loves working with and learning about the people she serves,” Dave Ring, executive vice president of wholesale banking and wealth management, said in a statement. “She’s passionate about her work and wants to know each customer’s story so she can better help them achieve their financial goals.”

Before joining Atlantic Union Bank, Morgan spent three years with Wells Fargo Private Bank. She was a senior vice president and wealth adviser, according to her LinkedIn profile. Before that, Morgan worked with PNC’s Private Bank Hawthorn, providing family wealth management, for seven years.

Morgan holds a bachelor’s degree in merchandising from Ohio State University.

Atlantic Union Bank has 109 branches and 123 ATMs throughout Virginia and in parts of Maryland and North Carolina.

Atlantic Union Bankshares, the bank’s holding company, is set to acquire Danville-based American National Bankshares, the holding company of American National Bank and Trust. The company received the last regulatory approval needed for the merger in February, and the deal is set to close on April 1. The merger is expected to create a bank with total assets of $24.2 billion as of Dec. 31, 2023, $18.5 billion in deposits and gross loans of $16.5 billion.

Fed’s Fifth District economy stays the course

Economic activity in the Federal Reserve’s Fifth District was little changed in recent weeks, according to the latest edition of the Federal Reserve’s Beige Book, released March 6.

Published eight times per year, the Beige Book is based on anecdotal information about economic conditions gathered from the nation’s 12 Federal Reserve Banks. It is compiled from reports by bank and branch directors, as well as information gathered from business contacts, economists, market experts and other sources. The March release is an update from the Fed’s Jan. 17 report.

Here’s what the most recent Beige Book edition revealed about the direction the economy is taking:

Employment in the Fifth District grew at a moderate pace in the most recent reporting period, according to the Fed. Firms reported that skilled and trades workers, like engravers and aluminum welders, were more difficult to find than other workers, like advertising firm employees.

Price growth was largely unchanged from the January Beige Book report; year-over-year price growth remained moderately elevated. Prices received by nonmanufacturers grew about 4%, while the growth in prices received by manufacturers remained about 2.5%. Sources in both sectors expected price growth to moderate over the next six months.

Manufacturing activity in the Fifth District softened in recent weeks because of uncertain business conditions. One coffee manufacturer reported that difficulties getting freight through the Red Sea was increasing its production times and future costs. Several firms reported difficulty securing financing, and most contacts cited a shortage of qualified labor as a major issue.

Fifth District ports reported good underlying demand despite disruptions in the Panama and Suez canals that affected shipping schedules. Ports saw a slightly lower volume of loaded imports but an increase in consumer goods imports. Loaded export volumes were unchanged. Spot rates increased sharply as carriers tried to offset the higher costs resulting from longer transit times. The ports reported no stack congestion.

Some trucking freight volumes in the region declined because of winter weather, but underlying trucking demand was good, according to the Fed. In the less-than-truckload segment, companies reported increased demand in the consumer segment resulting from retailers restocking inventory. In the truckload segment, customers pushed to decrease their shipping costs, and rates fell. Although truck drivers were easier to find this period, mechanic and some office positions remained hard to fill.

Retailers in the Fifth District saw a slight decline in sales and customer foot traffic in the most recent cycle. Some firms attributed the decline to bad weather conditions, while a few home improvement and building supply retailers cited a slow real estate market and higher borrowing costs to finance home improvements. Hotel and restaurant respondents also reported a slight slowdown, although hotel revenues in the Northern Virginia market were up as hotels had steady occupancy rates and were able to increase room rates.

Residential real estate activity improved slightly, as pent-up demand remained. Firms reported an increase in listings and buyer activity, but said buyers were tentative because of high mortgage rates. Days on the market increased slightly but were still below historic averages. Construction costs started to moderate, although the market was constrained by difficulty finding land and receiving permitting.

The commercial real estate market activity improved slightly in the most recent reporting period. Firms upgraded their office space and moved away from central business districts, and landlords offered concessions or incentives to potential tenants instead of raising rents. Suburban retail space remained limited, with low vacancy rates and increased rental rates. New construction, especially for office and multifamily projects, was constrained by rising building costs and a lack of available financing.

Loan demand softened modestly, reported Fifth District financial institutions, because of higher interest rates and continued economic uncertainty. Deposit balances began to decline modestly, and competition for deposits remained high. Loan delinquency rates have started showing modest increases, mainly in unsecured personal and auto portfolios.

Overall, nonfinancial service providers in the region saw stable demand and revenues. Wages and the labor market stabilized some, becoming less challenging for nonfinancial firms.

Roanoke/New River Valley Big Deal: Banking on Roanoke

When Roanoke County economic development officials pitched Wells Fargo on expanding its customer support center operation in the county, they emphasized how well they’d taken care of the nation’s fourth-largest bank previously and how they would continue to do so.

The pitch worked. Now the bank’s $87 million expansion will be the largest commercial office investment in the county’s history, making the San Francisco-based banking company the county’s largest employer, surpassing the local public school system, which has around 2,500 employees.

“One of the things that I emphasized was, ‘We really took good care of you before you said you wanted to grow, and we will continue to take great care of you as you expand, and here’s how we can demonstrate that,’” says Roanoke County Administrator Richard Caywood, citing past efforts such as transportation improvements to serve the company and neighboring businesses.

The expansion will modernize the bank’s 436,685-square-foot customer support center on Plantation Road, allowing room for about 1,100 jobs to be added to the bank’s local workforce of more than 1,650 current employees over the next four years. (As of early February, Wells Fargo had not released information about when hiring would begin.) Construction will commence in March and will be conducted in three phases, to be completed by the end of 2025.

John Hull, executive director of the Roanoke Regional Partnership, says the regional economic development organi-
zation worked collaboratively with Roanoke County and the Virginia Economic Development Partnership to land the project.

Roanoke was identified through a site consultant and stands as the largest office capital investment project and the most substantial single project in Virginia for 2023, Hull says, tied only with Amazon.com’s project in Virginia Beach. (See related story, Page 23).

“It’s encouraging to see an office project of this size, this number of jobs [and] its level of investment,” he adds, “particularly in the post-pandemic environment, where there’s a lot of question about the future course of office tenancy.”

Caywood says the Wells Fargo announcement was crucial for Roanoke County because the banking customer support center on Plantation Road was already the largest site where county residents went to work every day. The site was originally operated by Dominion Bankshares, which was acquired in 1993 by First Union, which in turn was later bought by Wachovia and Wells Fargo.

“There’s a lot of changes in the national banking industry with a lot of consolidation, so it was critical for us to keep that [center], and the only way to do that was through that expansion and reinvestment occurring,” he says.

Brian Corde of Atlas Insight, the site selection consultant for the project, predicts in a blog post on the Roanoke Regional Partnership’s website that the Roanoke market will continue to be appealing for talent attraction. He says the region will continue to see growth, adding that it has “great outdoor activity, great weather and a stable political environment, a reasonable one … [and] a good tax structure. Most importantly, you have places where people can actually live for reasonable amounts of money.”

Based on an economic impact analysis, Hull projects the Wells Fargo expansion will have a $322 million annual economic impact once the project is fully operational in 2025, with positive effects on housing demand and the health care and restaurant industries. The infusion of jobs will have a ripple effect throughout the local economy, he adds.

“When you think of what a household spends and how they spend their money, every one of those consumer sectors will be impacted in a positive way,” Hull says.

The expansion also helps the region not just by adding 1,100 jobs but by retaining Wells Fargo’s 1,650 existing staff members, Caywood says. “It’s a big deal for us,” he says. “There’s nothing but universal excitement about this project in the community.” 

Atlantic Union acquisition of American National approved

Richmond-based Atlantic Union Bank’s parent company announced Monday that the Federal Reserve’s Board of Governors has approved its acquisition of Danville-based American National Bankshares, holding company of American National Bank and Trust. The Fed’s signoff was the last regulatory approval needed for the merger — announced in July 2023 — to close on April 1, according to Atlantic Union CEO John C. Asbury.

Before the Fed’s board issued its decision Friday, American National shareholders and the Virginia State Corporation Commission’s Bureau of Financial Institutions gave their approvals of the proposed acquisition.

“We are pleased to have received all of the regulatory and shareholder approvals necessary to close the merger, and we plan to close the transaction on April 1, 2024, subject to the satisfaction of customary closing conditions,” Asbury said in a statement Monday.

The impending merger, which is expected to create a bank with total assets of $24.2 billion as of Dec. 31, 2023, $18.5 billion in deposits and gross loans of $16.5 billion, was initially expected to be completed during the first quarter of 2024, so the April 1 closing date represents a slight delay.

American National, which was founded in 1909, has 26 branches in Virginia and North Carolina and is Virginia’s ninth largest bank. It had $3.1 billion in assets as of June 30, 2023. Atlantic Union is the largest community bank headquartered in Virginia, with 109 branches, $20.6 billion in assets and $15.7 billion in deposits as of June 30, 2023. (McLean-based Capital One Financial is the largest bank headquartered in Virginia, with $36.8 billion in 2023 net revenue and $478.5 billion in total assets as of Dec. 31, 2023.)

Asbury said in an interview Monday with Virginia Business that the banks had the legal opportunity to close the deal 15 days after the Fed’s approval, in mid-March, but that it was preferable to close on the first of the month, and the closing date in April will not delay the planned systems conversion over Memorial Day weekend.

In July 2023, Asbury said that there was some overlap of the two banks’ branch locations in the Roanoke and Rocky Mount areas, which could lead to consolidation. “It makes no sense to have two branches operating. There will be some degree of [staffing] impact,” Asbury said, but, aside from those “pretty limited” examples of overlapping branches, “we certainly are not interested in limiting convenience” and closing more branches. He also said that there were no plans to close American National’s Danville headquarters, where Haley expects to maintain an office.

The Federal Reserve’s decision echoed Asbury’s comments, noting that Atlantic Union represented to the central bank’s board that “branch closings and consolidations may occur in connection with the proposed transaction. AUB [Atlantic Union Bank] asserts that any closures and consolidations would be due to geographic overlap between branches … [and] any consolidations should not have a significant effect on the services that customers of the consolidating branches currently receive.” The decision concludes that the combined bank would be stable and continue to face competitors in its markets.

Asbury said Monday that he expects to close seven branches total, including American National’s office in Christiansburg, which is within line of sight of Atlantic Union’s branch. In Rocky Mount, Atlantic Union’s downtown branch office will close, but the combined bank will keep American National’s Rocky Mount branch open because it is more active. A drive-through teller office at the shuttered downtown location will stay open, Asbury said. Other branches that are being consolidated are in West Salem, Cave Spring, Lynchburg, Danville and Greensboro, North Carolina.

He added that 70% of American National’s employees have been offered jobs in the combined bank, and the remaining 30% will be prioritized for jobs that arise in coming months. American National’s headquarters office in Danville will remain open, and Jeff Haley, American National’s president, CEO and chairman, will be based there as he serves as a consultant for the next two years, Asbury said.

“We see Danville as a very good clustering of talent,” he added Monday. “So we will have people based in Danville in roles that we might otherwise hire in Richmond.”

Also of note in the deal, Asbury said, was the fact that the American National was healthy at the time the acquisition was announced. In the spring 2023, Silicon Valley Bank, Signature Bank and First Republic Bank all suddenly collapsed, causing U.S. federal bank regulators and global regulators to take action to prevent the same from happening to other banks. The two Virginia banks’ July 2023 announcement was the first higher-profile regional bank merger following the crisis that didn’t involve a distressed institution, Asbury said Monday.

This is Atlantic Union’s third bank acquisition during Asbury’s tenure, which began in 2016. Asbury said Monday that he’s “always having conversations” with smaller regional banks “who could potentially be partners,” although it’s often over a long period.

“In the case of American National, I view this as having been a five-year conversation,” he said. “Do I think there may be more opportunities in the future? I would say yes … but it is not our highest priority.”

This story has been corrected since publication.

Capital One to buy Discover in $35.3B deal

UPDATED 8:35 P.M. Feb. 19

McLean-based Capital One Financial is buying Discover Financial Services for $35.3 billion in an all-stock deal that marks Capital One’s largest ever acquisition, the two credit card giants announced Monday evening.

Under the terms of the acquisition agreement, Discover shareholders will receive 1.0192 Capital One shares for each share of Discover, representing a premium of 26.6% based on a Feb. 16 closing price of $110.49 for Discover shares.

The transaction is expected to close in late 2024 or early 2025, according to a news release. At close, Capital One shareholders will own about 60% of the combined company, and Discover shareholders will hold the remaining approximately 40%. Upon closing, three Discover board members will join Capital One’s board.

“From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology. Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies,” said Capital One Chairman, CEO and founder Richard Fairbank in a statement. “Through this combination, we’re creating a company that is exceptionally well-positioned to create significant value for consumers, small businesses, merchants and shareholders as technology continues to transform the payments and banking marketplace.”

“The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company,” said Discover President and CEO Michael Rhodes in a statement. “This agreement underscores the strength of our business and is a testament to the hard work of Discover employees. We look forward to a bright future as part of the Capital One family and to providing expanded opportunities for our loyal customers.”

Ahead of the official announcement, news of the deal had been reported earlier Monday by Bloomberg and The Wall Street Journal. Illinois-based Discover has a market value of about $27.6 billion. Capital One has a market capitalization of about $52.2 billion. It reported $34.25 billion in 2022 revenue.

In August 2023, Roger Hochschild stepped down as Discover’s CEO and from its board, following the company’s July 2023 disclosure of a regulatory review of misclassified credit card accounts and pause of share buybacks. John Owen, a member of the board of directors, served as interim CEO until Discover appointed Rhodes as its CEO and a board member in December 2023.

In November 2023, Discover announced it was exploring the sale of its Discover Student Loans portfolio and would stop accepting new loan applications on Feb. 1, 2024.

The credit card network and issuer, which was No. 273 on the 2023 Fortune 500, had a revenue of $15.2 billion for fiscal 2022, according to Fortune, putting it below American Express — almost $55.63 billion, according to Fortune — as well as Visa ($29 billion) and Mastercard ($22 billion).

Discover reported a net income of $4.39 billion in 2022 and reported a net income of $388 million for the fourth quarter of 2023, down from the $1.025 billion it reported in the fourth quarter of 2022.

Capital One ranked No. 106 on Fortune magazine’s 2023 Fortune 1000 list and No. 386 on its 2023 Global 500 list.

CEO Hunt leaving Va. Credit Union League

Carrie Hunt is leaving at the end of the month as president and CEO of the Virginia Credit Union League, and Chief Operating Officer Karima Freeman will serve as interim head of the trade association, VACUL announced Tuesday.

Hunt, a seasoned political lobbyist, is leaving to become chief advocacy officer of America’s Credit Unions, a new national trade association formed through the merger of the Credit Union National Association and the National Association of Federally-Insured Credit Unions (NAFCU). She starts in that role March 1, according to a VACUL news release from December 2023.

Freeman, who has been with VACUL for 23 years, manages membership services and works with credit unions on dues, as well as overseeing accounting, human resources and IT functions for the league.

“Karima is a proven leader with decades-long relationships within the Virginia credit union system and a deep knowledge of the league’s operations,” NextMark Credit Union CEO Joe Thomas, VACUL board chairman, said in a statement.

Karima Freeman

“Each of us at the league is committed to the success of Virginia’s credit unions,” Freeman said. “I’m proud of what we accomplish through the support and engagement of our member credit unions.”

The league is the Virginia trade association for credit unions and includes 102 member-owned, not-for-profit credit unions headquartered in the commonwealth among its membership. VACUL offers training and operation resources for members, as well as lobbying the state legislature and other governmental bodies on behalf of the industry.

Hunt, a William & Mary law graduate, joined VACUL in 2021, and before that, was executive vice president of government affairs and general counsel for NAFCU, managing its legislative, political, regulatory, compliance and research divisions. In 2019 and 2020, she was named to The Hill’s top Washington, D.C.,  lobbyists list.

Chartway Credit Union names chief retail officer

Melissa Cade has been promoted to chief retail officer at Chartway Credit Union, Chartway announced Monday.

Cade has been with the Virginia Beach-based credit union for 24 years, many spent working with branches. In her new role, she will oversee the strategy and leadership of branch and member care teams and continue to spearhead Chartway’s multicultural initiatives, according to a news release from Chartway.

“I’m incredibly excited to take on this new challenge and continue contributing to Chartway‘s growth and success,” Cade said in a statement. “I look forward to further enhancing our member experiences and services in alignment with Chartway‘s mission to unlock the potential of individuals and families so they can thrive.”

Before her new role, Cade served as senior vice president of product and innovation, senior vice president of member solutions services, vice president of alternative channels, regional president of branches, call center manager, call center director and director of retail.

“Melissa’s leadership, innovative approach to product development and commitment to our multicultural community have been invaluable to Chartway,” Chartway President and CEO Brian Schools said in a statement. “We are excited to see her leadership continue to evolve in this new role.”

Cade has a bachelor of science in business administration from Columbia College Chicago, a master’s degree in information systems from the University of Phoenix and a professional certificate in product management from the Kellogg School of Management at Northwestern University. She is also an active member of the African-American Credit Union Coalition and the executive sponsor of Chartway’s African American resource group.

Chartway has more 225,000 members, with branches in Utah, Texas and Virginia.

Slowly bot surely

From health care to real estate and law, artificial intelligence is becoming an increasingly bigger part of many industries, with executives rolling out new tools and updating policies. Like other businesses, banks and credit unions too have been exploring this electronic frontier, although they’re pairing technological progress with caution.

Even if you’re new to the topic, you probably have heard of ChatGPT, the trailblazing generative AI chatbot launched by OpenAI in November 2022. It was a big deal, gathering more than 100 million monthly users just two months after launch, but ChatGPT is just the tip of the iceberg. Artificial intelligence has been developing in many forms for decades.

When it comes to technology in use or under consideration at financial institutions, most AI tools are focused on behind-the-scenes work.

With the notable exception of Bank of America’s Erica — an AI-powered virtual assistant launched in 2018 that helps customers find banking information via voice and text — financial institutions’ new tools are not personalized but can make customer service faster and more efficient, detect malware reliably and prequalify customers for loans, among other tasks.

While the possibilities for AI seem endless, banks and credit unions have to balance that sense of adventure with the weighty responsibility of keeping their customers’ sensitive financial and personal information secure.

Separating wheat from chaff

Fairfax-based Apple Federal Credit Union is a member of Curql Collective, a capital fund through which credit unions invest in fintech companies developing AI tools, says the credit union’s chief information officer, John Wyatt. Photo by Will Schermerhorn

Fairfax-based Apple Federal Credit Union, which had more than $4.3 billion in assets and 242,473 members at the end of 2023, is among the top 10 largest credit unions based in Virginia, and it’s also an early AI adopter among credit unions, with several applications currently in place and others in the wings.

John Wyatt, the credit union’s chief information officer, says Apple FCU uses a tool called Zest AI that provides more information on loan seekers than the traditional FICO credit scoring model. It opens doors to borrowers who may have previously had a difficult time getting approved for a loan through no fault of their own.

“We’re looking for … that hidden prime borrower that may not have the credit history that you would need to have a high FICO score,” he says. “What we’re trying to do is qualify more members for loans.”

Another product, CrowdStrike Falcon, helps the credit union examine behavioral indicators to bolster cybersecurity. “It can detect, isolate and respond to threats in real time,” Wyatt explains, as opposed to traditional malware-detection programs, which can take up to three or four months to detect a pattern. By that time, bad actors could have done their damage and moved on to new targets.

Apple FCU is a member of the Curql Collective, a technology capital fund that connects fintech companies creating AI-powered tools with credit unions for investment. In turn, Apple and other members decide which new tools would be appropriate for their organizations. In the past year, with more AI-driven products and entrepreneurs available, Curql (pronounced “circle”) provides a helpful filter for what’s worthwhile and what isn’t, Wyatt says.

“We get first look at vendors that have products that meet the needs of credit unions, and we go to conferences where they actually bring people in to talk about their products. We evaluate them, and we can vote on them and … fund them or not,” he says. “You kind of see what’s coming down the pipeline.”

Wyatt also attended a December 2023 AI innovation conference at which some of the bigger players like Microsoft and Midjourney rolled out new tools and updates. “Things are changing every three, four days,” Wyatt says. “You kind of have to stay ahead of it, and the hype around it is way beyond the peak of inflated expectations.”

In Virginia Beach, Chartway Federal Credit Union has two AI-powered projects underway that are set to go live in March, says Rob Keatts, Chartway’s executive vice president and chief strategy officer. One is Experian’s custom credit score program powered by AI. The other is a customer- facing telephone banking system that will use a “conversational AI bot” that will allow customers to “call in and just check your balance or move money between your own accounts,” Keatts explains. “And for whatever reason, it is extremely popular with people.”

Interestingly, the demographic breakdown of phone banking shows it is most popular among Chartway’s members over age 50 and its youngest members, in their 20s, Keatts notes. Gen Xers and millennials tend to prefer mobile banking, according to statistics pulled by Chartway’s analytics consultants in late 2022.

Last year, Chartway started Chartway Ventures, a credit union-backed venture capital fund to invest in fintech startups, similar to Curql. It helps Keatts learn more about what tools are under development, as well as what is worth investing in — since part of a credit union’s charter is managing its customers’ money responsibly.

“Being a member-owned cooperative credit union, it’s truly our members’ money,” Keatts says. “We really do look to see [if] we’re going to put out x amount for this product, what are we getting back? And then, from a cybersecurity standpoint, everything goes through our standard security checks before we go live. We do a deep dive into the background of the organization we’re partnering with. We don’t put any sensitive information into a public large-language model like a ChatGPT.”

Keatts also learns about new tools and gets recommendations through relationships with other credit unions and attending events where fintech startups present their products.

Both Wyatt and Keatts note that the size of their financial institutions — sitting in the top 10 largest credit unions based in Virginia — allows them to invest in and explore AI tools more easily than smaller credit unions or smaller banks can.

Big banks, bigger investments

On the leading edge of AI use in the finance sector, however, are the nation’s largest banks, among them McLean-based Capital One Financial and Bank of America. Unlike Apple and Chartway, these banking giants build their own tech in-house in addition to collaborating with third parties.

Capital One’s mobile app and fraud detection tools, among other products, use AI and machine learning, and the bank has created a framework to “manage and mitigate risks associated with AI,” its chief scientist and head of enterprise AI, Prem Natarajan, said during congressional testimony in November 2023. “We have a wide range of tools for managing risk relating to AI, including model risk management, credit risk, strategic risk, third-party risk, data management [and] compliance risk.”

Beyond tools in use by the bank, Capital One has invested in broader educational efforts, including its internal Tech College, which provides training to its employees on machine learning-based systems and products.

Meanwhile, as of July 2023 more than 38 million Bank of America customers engaged with virtual assistant Erica to manage their bank accounts through 1.5 billion interactions — making requests like “Replace my credit card,” or “What’s my FICO score?”

In Virginia, 27% of Bank of America clients used Erica as of October 2023, up from 22% a year earlier. In September 2023, using the same proprietary AI and machine- learning capabilities as Erica, Bank of America launched an AI chat function for corporate and commercial clients to manage their finances on its CashPro platform.

Like the credit unions, Bank of America is focused on security of its customers’ sensitive information when developing new products.

“Our approach has never been to … chase the shiny objects,” says Nikki Katz, Bank of America’s Los Angeles-based head of digital. “We’re always looking at it from the perspective of, ‘How does this translate to client benefit?’”

Digital banking is in more demand than ever, as during the pandemic, many banks and credit unions customers moved to online, phone or mobile banking options.

Tom Durkin, global product head of CashPro in Global Transaction Services at Bank of America, says expectations for digital banking “really hit the business community a lot harder, as they had to adapt and leverage some of these capabilities. I think those things factored into expectations … coming off the pandemic, in terms of accessibility to information and the ability to get access.”

Although Bank of America was the first bank to launch a virtual assistant, back in 2018 — an eon ago in technological terms — innovations related to Erica are still going forward even as customer usage increases, Katz notes.

“There’s definitely climbing interest in this space, and we’re continuing to see new applications, whether it’s helping our clients stay on top of their cash flow or changes to their recurring charges,” she says. “As there’s more investment in the space, we’re going to examine opportunities to evolve and improve that client experience and our associate experience with it.”

Virginia Credit Union, Member One announce merger

Chesterfield County-based Virginia Credit Union and Roanoke-based Member One Federal Credit Union announced plans to merge Thursday, a deal that would create the state’s third largest credit union, with a combined $6.7 billion in assets and 500,000 members.

VACU is currently the fourth largest Virginia-based credit union, with $5.18 billion in assets, according to the National Credit Union Administration, behind Newport News-based Langley Federal’s $5.29 billion in assets. With the addition of Member One’s $1.64 billion in assets, VACU will have a stronger hold on third place. The state’s two largest credit unions are Navy Federal Credit Union, with $168 billion, and Pentagon Federal Credit Union, with $35 billion in assets.

Under the agreement, Chris Shockley, president and CEO of Virginia Credit Union, would remain president and CEO of the combined organization. Frank Carter, president and CEO of Member One, would remain an executive until he retires. The combined credit union would employ about 1,100 people at about 37 branches. The credit unions said in Thursday’s announcement that no one would lose their job, and no branch locations would close in the merger.

Both boards of directors voted in favor of the merger, and after federal regulatory approval and an affirmative vote by Member One’s members, the credit unions anticipate the merger will be finalized around the middle of this year, with system integrations extending into 2025.

Shockley

After the merger is complete, Virginia Credit Union would not change its name, but Member One would become Member One, a division of Virginia Credit Union, or something similar.

“This partnership represents the heart of the credit union industry’s cooperative mindset,”  Shockley said in a statement. “Fundamentally, credit unions came into existence when people saw an opportunity to band together and pool their financial resources in order to provide access to financial products and services to people who needed them.”

Virginia Credit Union has 320,000 members and Member One has about 150,000 members.

“When I first sat down with Chris and we started to share our visions for our respective credit unions, everything about partnering together felt right,” Carter said in a statement. “From the onset, both of our boards of directors have focused on ensuring that together we’d continue to provide the best member, employee and community value.”