Union First Market Bankshares Corp. will acquire Charlottesville-based StellarOne Corp. in a $445.1-million deal announced Monday.
The move will create the largest community bank in Virginia and the fifth-largest bank branch network in the state, company officials said. Union will retain its name and maintain its corporate headquarters in Richmond, officials said.
The acquisition is expected to help drive a return to the profitability seen before the recession, generate excess capital and position the bank competitively in major markets, company officials said.
Leaders of both banks said it's unclear how the deal will affect jobs but they acknowledged there will be an impact. Union First Market employs about 1,000 and StellarOne about 700 people statewide.
“I wish we could keep everyone on, but that would not allow us to do that accelerated return to profitability that really both organizations have been seeking,” said Union CEO G. William Beale. “We will do everything we can to take advantage of the normal employee turnover as a way to reduce the impact.”
The banks' combined total assets are $7.1 billion; deposits, $5.8 billion; and loans, $5.2 billion, based on financial results as of March 31, according to the announcement.
“The two companies are healthy companies,” said O.R. “Ed” Barham Jr., StellarOne’s president and CEO. “It’s not a merger of a strong company taking over a weak [company].”
Under the merger, the two banks “should be able to gain considerable economies, probably by eliminating duplicate functions," said Bill Sihler, a University of Virginia professor at the Darden Graduate School of Business Administration. " These are typically found by cutting the headquarters functions at the acquired bank, using only one [certified public accountant] and one-sourcing many functions.”
Union First Market 's current executive management, led by Beale, will form the core of the company’s leadership team, officials said. Barham in 2012 announced plans to retire at the end of this year.
“There’s a lot of competition in Charlottesville, and, generally speaking, university and college towns are very attractive to banks because of the affluence of those markets,” Barham said.
He said he does not expect the growth in the number of people banking online and on smartphones to trigger an industrywide decline in the number of bank branches.
“We’re trying to react to [digital changes] in terms of not so much by having fewer branches but by making them more efficient,” Barham said. “The days of having large lobbies and … people sitting at desks all day is really a thing of the past.”
Beale agreed, saying the combined company will be better able to support the cost of developing and implementing such services as mobile banking apps.
“Both banks weathered the financial storm well, and both banks were on their way to returning to the profitably that we had grown accustomed to in the early 2000s,” Beale said .
The acquisition, Beale added, “is a benefit to both sets of shareholders.”
The entities known today as StellarOne and Union First Market trace their respective histories to the early 1900s. StellarOne operates 56 branches, three locally, and Union, 90 branches and seven locally.
First National Bank of Christiansburg and Virginia Financial Group of Culpeper merged in 2008 to create StellarOne. Union Bank and Trust Co. and First Market Bank merged in 2010 to create Union First Market Bank.
“Customers shouldn’t notice any changes until the systems are integrated, which is scheduled to occur in May 2014,” said Bill Cimino, a Union First Market spokesman. “At that time, we’ll be under the Union First Market Bank brand and hopefully have new products to offer customers.”
In addition to Richmond and Charlottesville, the merged bank also would have a significant presence in Fredericksburg, Staunton, Harrisonburg, Roanoke and Blacksburg.
“There probably won't be many savings in the field because there is so little bricks-and-mortar overlap,” Sihler said.
Pending regulatory and shareholder approvals, the merger is expected to be final by Jan. 1.