Union Bankshares Corp. President and CEO John Asbury wants Union to become a statewide independent bank in Virginia, and the key to that strategy is a new foothold in the wealthy counties south of Washington, D.C., he said.
Union's announced acquisition of Reston, Va.-based Access National Corp. is the "last piece of the Union jigsaw puzzle in Virginia," Asbury said during a conference call.
Union has branches scattered across the state and existing networks in other Virginia metro areas such as Richmond and the densely populated southeastern coast. But Access National's 15-branch Northern Virginia network would bring Union into four of the 10 highest-earning counties in the country, a region where the 2019 projected household median income is $102,260, according to a Union slide deck.
The pro forma bank's deposit market share would leap into the 10 largest in the area, with only national banks such as PNC Financial Services Group Inc. and multistate, midsize depositories like United Bankshares Inc. ahead of it.
The deal positions Union "to go head to head with these guys," Asbury said, referring to giants such as Bank of America Corp., BB&T Corp. and Wells Fargo & Co., the top three banks in Virginia by market share. The state's banking landscape has been dominated by larger franchises for years, with larger banks acquiring their way into the state's best markets. In 1998, SunTrust Banks Inc. acquired Crestar Financial Corp., which Asbury called Virginia's last statewide independent bank.
"There's been nothing like this since the days of Crestar," Asbury said of Union's new footprint. "[We want] to recreate something that was lost 20 years ago."
Union expects the transaction to be 3% accretive to EPS in 2019 and 5% accretive in 2020. The bank's tangible book value dilution will take 2.8 years to earn back under the crossover method; it is "inside of four years" under the EPS method, CFO Robert Gorman said.
Still, Union shares sold off during morning trading following the deal's announcement, appearing to mesh with a wider trend of investor skepticism about pricey bank deals in 2018. The Access National deal value is 243% the target's tangible book value, while the industry median price-to-tangible common equity ratio has been 186.6% over the past five years.
The bank's stock was down about 2.49% to $37.97 per share as of 10:42 a.m. ET on Oct. 5.