For at least the third time in as many weeks, a regional merger is shaking up the banking ranks in Richmond and across the state.
Richmond-based Union Bank & Trust announced Monday it would acquire local peer Xenith Bank in an all-stock deal valued at $701 million.
The combination would create the largest community bank in the state with $11.86 billion in total assets. Union and Xenith most recently reported total assets of $8 billion and $3 billion, respectively.
Union CEO John Asbury, who will helm the combined banks, said the deal came together quickly last month after he met Xenith chief executive Gaylon Layfield earlier this year. Asbury took over as CEO at the start of the year, replacing longtime Union head Billy Beale.
“We both shared the same vision to recreate a great Virginia regional bank, like we have not seen since the 90s,” Asbury said of him and Layfield. “The only option to make that happen would be the combination of these two companies.”
Layfield, who will stay on only through a “transitional period” as executive vice chairman, said Monday that the post-election bump in bank stock prices helped make a deal with Union more attractive.
“While we were fiercely independent, we always were attentive to what we thought we had to do on behalf of our shareholders,” Layfield said. “The markets made a pretty big move post-election. Union’s currency was particularly strong.”
The deal will give Union its first significant branch presence in the Hampton Roads market, taking over a swath of locations Xenith absorbed through its merger last year with Bank of Hampton Roads, as well as Xenith’s operations in Northern Virginia, North Carolina and the Eastern Shore. Xenith has 42 branches.
That territory, combined with Union’s heavy presence in Central Virginia and the western part of the state, will give it a nearly unrivaled network among its Virginia-based peers of around 150 branches across the commonwealth.
Absorbing Xenith is a counterpunch of sorts that will get Union back atop the list of largest community banks based in Virginia. Last month, Hampton Roads-based TowneBank announced a deal to acquire Raleigh-based Paragon Commercial Bank, a transaction that when closed later this year will give Towne total assets of $9.7 billion and the label of largest community bank headquartered in the commonwealth.
Union will have to take a temporary back seat to Towne for about month, until its Xenith deal closes as expected early next year.
Adding Xenith into the fold also will leap-frog Union across the $10 billion asset threshold, a line with both symbolic and practical implications because of federal regulations for banks of that size.
Union said in filings Monday it has been planning for that designation for a few years and that it expects $11 million in costs related to crossing the threshold.
Monday’s announcement continues the roller coaster of bank M&A action that’s swept through Virginia the last two years – and has sped up in recent weeks.
Last month, Petersburg-based Virginia Commonwealth Bank and Kilmarnock-based Bank of Lancaster merged, creating an $800 million institution that is relocating its combined headquarters to Richmond’s West End.
On the same day TowneBank’s Paragon deal was announced, Charlotte-based Park Sterling bank agreed to be acquired by South Carolina giant South State Bank in a deal valued at $691 million. It will plant the South State Bank brand on the ground in Richmond for the first time, as it will be hung on Park Sterling’s seven local branches.
Earlier this month, the parent of Memphis-based First Tennessee Bank announced plans to acquire Charlotte-based Capital Bank in a transaction that will create a $40 billion Southeast banking behemoth. That deal will bring the Capital Bank brand to Richmond when it replaces the First Tennessee’s name on its West Broad Street outpost at Reynolds Crossing.
For Xenith, the Union deal is yet another branch in a family tree that splits off in many directions.
The company was founded in 2008 by Layfield and a group of investors as Xenith Corp., with hopes of opening as a new, independent bank. When the economy made getting a bank charter nearly impossible, Xenith pivoted and purchased the former SuffolkFirst Bank, largely for its state charter.
From that, Xenith Bank was born, and it grew both organically and through acquisitions over the years. In July 2011, Xenith acquired both the Richmond operations of Paragon Commercial Bank and the assets of the former Richmond-based Virginia Business Bank, which was the only local bank to fail in the wake of the recession.
In summer 2014, Xenith acquired Colonial Virginia Bank, a small institution based in Gloucester.
Last summer, it merged with Virginia Beach-based Bank of Hampton Roads, creating a $3 billion institution that kept its headquarters in Richmond.
Bank of Hampton Roads was founded in the late 80s and grew largely at a normal pace until just prior to and after the recession, when it took on Shore Bank on the Eastern Shore and Gateway Bank & Trust, the latter of which came with baggage that took years to overcome.
Gateway Bank grew out of Eastern North Carolina, in part via acquisition of the former Bank of Richmond.
For their end of this latest deal, Xenith shareholders will receive 0.9 shares of Union stock for each of their Xenith shares. The deal value is based on Union’s last closing price of $31.72 per share, and implies a value on Xenith’s stock of $29.67 per share. It closed Friday at $26.87 and closed Monday at $28.34, up 5.5 percent.
Union stock closed at $31.36, down 1.1 percent.
The banks expect $28 million in cost savings related to the combination and $33 million in merger- and integration-related costs.
Two Xenith representatives will get board seats at Union.
Union Bank will be the surviving brand used by the combined companies in Virginia and Maryland. Virginia and Maryland. The Xenith brand will be used in North Carolina, where another Union Bank already exists.
The deal has been approved by the board of directors of each company. Regulatory and shareholder approval is still needed, but is typically a formality.
Union hired Keefe, Bruyette and Woods as its investment bank for the deal and Troutman Sanders as its legal advisor. Sandler O’Neill is Xenith’s financial advisor and Hunton & Williams is its legal counsel.