On May 9, the StellarOne name will fade into history as the Charlottesville-based bank completes a merger with Richmond-based Union First Market Bank.
Although the two banks officially became one entity in January, May will bring the transaction full circle, as the StellarOne brand is retired, said Union First Market spokesman Bill Cimino.
On that weekend, “We’ll close down the StellarOne branches, upgrade the computers on the back end and we’ll bring them over to Union,” Cimino said. “Everyone will be ready to go on [May 12].”
In June, Union First Market acquired StellarOne in a deal valued at $445.1 million. Leaders of both banks said the merger will help facilitate a return to pre-recession levels of profitability.
The StellarOne-Union merger creates Virginia’s sixth largest bank in terms of deposit market share. As of September, the combined company had assets of $7.1 billion, deposits of $5.7 billion and loans of $5.3 billion.
“Both of these banks have had other experience with mergers, so … aside from the occasional glitch, I would suspect that it would be very smooth,” said Bill Sihler, a professor at the University of Virginia’s Darden Graduate School of Business Administration.
With consumers and regulators still smarting from recession-era financial meltdowns, Sihler said, all banks are subject to elevated regulation and scrutiny. And for smaller institutions, the regulatory burden sometimes becomes too much to handle.
“Smaller banks are being pushed, to some degree, out of their niche,” Sihler said.
Greg Waller, an assistant professor of finance at Virginia Commonwealth University, agreed, and added that more bank mergers are likely on the horizon.
“It is inevitable that we will see continuing consolidation in the banking industry. Given the costs and complexity of regulatory reporting requirements, it is almost impossible for smaller banks to remain independent,” Waller said in an email.
However, Lindsay Burton, founder and owner of Kayo Advisory, a Charlottesville-based financial consulting company, said the merger “is a good outcome for the local business community.”
“Generally any transaction that provides small businesses with more choices to meet their lending and banking needs is a good thing,” Burton said in an email. “This is not a situation where a merger eliminates a competitor. StellarOne has been active in this region for a long time, and this transaction ensures they will remain a strong, active player in this market.”
“With the newly strengthened StellarOne-Union First and the existing Virginia National Bank, there are now two strong, attractive community banks serving this area,” Burton said.
Waller said customers will see other benefits.
“In fact, retail customers will have access to a larger network of branches which should be beneficial to them,” Waller said. “On the commercial side, clients may have more of a ‘big bank’ feel, which could mean less flexibility in lending requirements [and] terms but the combined bank will have the capability to write larger loans.”
StellarOne and Union First Market trace their respective histories to the early 1900s. Later this month, Union plans to ask shareholders to approve a corporate name change to Union Bank & Trust as a nod to the bank’s legacy, the Richmond Times-Dispatch reported.
Other changes are coming. Cimino said Union’s online banking access will use a higher level of security authentication. The merger also will close two Charlottesville area bank branches.
The Union bank at Seminole Trail and Rio Road will fold into the StellarOne location at 2021 Seminole Trail. The StellarOne branch at 300 Preston Ave. will fold into the Union branch on East Market Street. The Charlottesville area locations are among 10 StellarOne and three Union branches statewide that are set to close.
In the meantime, Cimino said, they’ve been working hard behind the scenes to make the changeover as smooth as possible for customers.
“What we’ve been working on — and the big thing for consumers — is, ‘How does this change their products?’” Cimino said. “We’ve mapped every StellarOne product and then matched it with a comparable Union product. StellarOne had a lot of similar products, so we were able to match them up pretty well.”