Union deal to create mega Va. bank

The Union First Market Bank headquarters in Richmond.

The Union First Market Bank headquarters in Richmond. (RBS photo)

The rankings of Virginia banks got a jolt Monday as Union First Market Bank announced a deal to acquire Christiansburg-based StellarOne Bank.

The deal will create the largest community bank in the state, with assets of more than $7 billion and more than 140 branches that cover Richmond, Fredericksburg and Charlottesville and extend west to Roanoke, Blacksburg and Staunton.

The acquisition is valued at about $445 million, the companies said Monday. It’s the third largest bank deal of the year nationwide, according to the Wall Street Journal.

Should the deal close as expected by early 2014, the combined institution would be the largest of its Virginia peers by far, leapfrogging TowneBank in Hampton Roads and Carter Bank & Trust.

Union CEO Billy Beale

Union CEO Billy Beale

“We declared we were in the process of building the next great Virginia bank,” Union chief executive Billy Beale said Monday, referring to its 2010 acquisition of the former First Market Bank. “This is the next step in that direction.”

Union and its parent company, Union First Market Bankshares, were the result of a merger with the former Richmond-based First Market Bank. That deal in 2010 put Union in the top five largest community banks in the state.

At $7 billion in assets, Union will be at a level that a Virginia community bank has not reached since 1980s and ’90s, in the days of Central Fidelity and Signet, before they were gobbled up by what are now Wells Fargo, Bank of America and other banking giants.

Union approached StellarOne about a deal, Beale said. The two began negotiating in mid-March, and talks picked up steam over the past six weeks.

The transaction comes as banks search for ways to get back to pre-recession levels of revenue and profitability and to increase their share prices.

“We were going to need scale to do that,” Beale said. “This creates that scale.”

StellarOne CEO Ed Barham

StellarOne CEO Ed Barham

StellarOne had been in the midst of a succession planning process after its chief executive announced that he would retire.

The bank also had been working an eastward expansion. It stepped quickly into Union’s backyard by opening three branches in Richmond over the past year. It also launched a location in Virginia Beach.

Monday’s deal came as a surprise to some in the Virginia banking scene. But the combination makes sense, said Rick Wheeler, president and chief executive of locally based Franklin Federal Savings Bank.

“They are two terrific franchises, and they are going to create a real powerhouse in Virginia,” Wheeler said.

Bankers have for years said that consolidation would pick among community banks, particularly as competition for creditworthy borrowers and cash-rich depositors has increased since the recession.

“Banks are fighting for good loans,” Wheeler said. “That’s probably one of the reasons there could be an increase in merger activity.”

Tom Tullidge, founder of Cary Street Partners and an investment banker who works community bank deals, said the Union/StellarOne deal could push other larger banks in the state to look at deals in an effort to keep pace.

“I wouldn’t be surprised if this doesn’t act as a catalyst,” Tullidge said.

Such deals are not without casualties. More than 10 branches of the combined banks will eventually be consolidated, Beale said. He would not share specific locations.

The combined companies will retain the Union name and keep its corporate headquarters in downtown Richmond, currently in the 12th floor of Three James Center. It will have a combined 1,766 employees. Some jobs will eventually be eliminated as duplicate positions are identified, Beale said.

The companies said they expect $28 million in cost savings from the deal.

Beale will be chief executive of the bank and its holding company once the deal closes. Union’s current management team will continue in place, the companies said Monday.

StellarOne president and chief executive O.R. “Ed” Barham Jr. will retire upon closing of the deal.

The boards of both companies have approved the acquisition. StellarOne shareholders will receive 0.97 shares of Union common stock for each of their StellarOne shares.

Union’s stock closed Monday at $19.76 per share, down 26 cents or 1.3 percent. StellarOne’s shares jumped by $2.69 each, up 16.6 percent to close at $18.90 per share.

Federal and state banking regulators still have to give the deal their blessing. That process is what might push the closing to early 2014, Beale said.

Union’s first quarter profit was $8.98 million. Its full-year profit in 2012 was $35.4 million. It had $4.05 billion in total assets as of March 31.

StellarOne’s total assets were $3.01 billion at the end of the first quarter. It reported $5.9 million in first quarter profit and a $22.1 million profit for all of 2012.

The Union First Market Bank headquarters in Richmond.

The Union First Market Bank headquarters in Richmond. (RBS photo)

The rankings of Virginia banks got a jolt Monday as Union First Market Bank announced a deal to acquire Christiansburg-based StellarOne Bank.

The deal will create the largest community bank in the state, with assets of more than $7 billion and more than 140 branches that cover Richmond, Fredericksburg and Charlottesville and extend west to Roanoke, Blacksburg and Staunton.

The acquisition is valued at about $445 million, the companies said Monday. It’s the third largest bank deal of the year nationwide, according to the Wall Street Journal.

Should the deal close as expected by early 2014, the combined institution would be the largest of its Virginia peers by far, leapfrogging TowneBank in Hampton Roads and Carter Bank & Trust.

Union CEO Billy Beale

Union CEO Billy Beale

“We declared we were in the process of building the next great Virginia bank,” Union chief executive Billy Beale said Monday, referring to its 2010 acquisition of the former First Market Bank. “This is the next step in that direction.”

Union and its parent company, Union First Market Bankshares, were the result of a merger with the former Richmond-based First Market Bank. That deal in 2010 put Union in the top five largest community banks in the state.

At $7 billion in assets, Union will be at a level that a Virginia community bank has not reached since 1980s and ’90s, in the days of Central Fidelity and Signet, before they were gobbled up by what are now Wells Fargo, Bank of America and other banking giants.

Union approached StellarOne about a deal, Beale said. The two began negotiating in mid-March, and talks picked up steam over the past six weeks.

The transaction comes as banks search for ways to get back to pre-recession levels of revenue and profitability and to increase their share prices.

“We were going to need scale to do that,” Beale said. “This creates that scale.”

StellarOne CEO Ed Barham

StellarOne CEO Ed Barham

StellarOne had been in the midst of a succession planning process after its chief executive announced that he would retire.

The bank also had been working an eastward expansion. It stepped quickly into Union’s backyard by opening three branches in Richmond over the past year. It also launched a location in Virginia Beach.

Monday’s deal came as a surprise to some in the Virginia banking scene. But the combination makes sense, said Rick Wheeler, president and chief executive of locally based Franklin Federal Savings Bank.

“They are two terrific franchises, and they are going to create a real powerhouse in Virginia,” Wheeler said.

Bankers have for years said that consolidation would pick among community banks, particularly as competition for creditworthy borrowers and cash-rich depositors has increased since the recession.

“Banks are fighting for good loans,” Wheeler said. “That’s probably one of the reasons there could be an increase in merger activity.”

Tom Tullidge, founder of Cary Street Partners and an investment banker who works community bank deals, said the Union/StellarOne deal could push other larger banks in the state to look at deals in an effort to keep pace.

“I wouldn’t be surprised if this doesn’t act as a catalyst,” Tullidge said.

Such deals are not without casualties. More than 10 branches of the combined banks will eventually be consolidated, Beale said. He would not share specific locations.

The combined companies will retain the Union name and keep its corporate headquarters in downtown Richmond, currently in the 12th floor of Three James Center. It will have a combined 1,766 employees. Some jobs will eventually be eliminated as duplicate positions are identified, Beale said.

The companies said they expect $28 million in cost savings from the deal.

Beale will be chief executive of the bank and its holding company once the deal closes. Union’s current management team will continue in place, the companies said Monday.

StellarOne president and chief executive O.R. “Ed” Barham Jr. will retire upon closing of the deal.

The boards of both companies have approved the acquisition. StellarOne shareholders will receive 0.97 shares of Union common stock for each of their StellarOne shares.

Union’s stock closed Monday at $19.76 per share, down 26 cents or 1.3 percent. StellarOne’s shares jumped by $2.69 each, up 16.6 percent to close at $18.90 per share.

Federal and state banking regulators still have to give the deal their blessing. That process is what might push the closing to early 2014, Beale said.

Union’s first quarter profit was $8.98 million. Its full-year profit in 2012 was $35.4 million. It had $4.05 billion in total assets as of March 31.

StellarOne’s total assets were $3.01 billion at the end of the first quarter. It reported $5.9 million in first quarter profit and a $22.1 million profit for all of 2012.

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