Richmond’s First Market Bank, Union Bankshares of Caroline to merge

First Market Bank is hooking up with a bigger state bank, creating the largest Virginia-based financial institution.

First Market Bank, mostly owned by Ukrop's Super Markets Inc., said yesterday that it plans to join Union Bankshares Corp. in Bowling Green in a deal valued at $105 million.

The combined publicly traded firm will be called Union First Market Bankshares Corp. The headquarters will move to downtown Richmond, home base for First Market.

"This is dramatic that First Market and Union Bankshares will be one," said Kent Engelke, chief economic strategist at Capitol Securities Management in Richmond.

"The merger cements Union Bankshares as the predominant [Virginia] bank in Richmond and the strongest bank franchise in Virginia," Engelke said.

Union Bankshares has been trying to expand in the Richmond area because it is one of the strongest bank markets in Virginia and in the country, he said.

The merger will create the fifth-largest bank in the Richmond area and sixth-largest in Virginia by deposit, according to SNL Financial in Charlottesville.

The combined bank will have 97 branches and assets of more than $3.9 billion.

The top four in the Richmond area are out-of-state banks: Bank of America Corp. of Charlotte, N.C.; Wells Fargo & Co. of San Francisco, which has purchased Wachovia; BB&T Corp. of Winston-Salem, N.C.; and SunTrust Banks Inc. of Atlanta.

"This is a merger that doesn't just bring these banks together," said James E. Ukrop, chairman of First Market and of Ukrop's Super Markets. "It brings together the spirit of community banking."

The deal is expected to close by the end of the year, pending regulatory and shareholder approval.

"Turmoil in the financial markets show the necessity for strong, safe local banks," said G. William Beale, president and chief executive officer of Union Bankshares.

Beale will be CEO of the combined company. David J. Fairchild, chief executive officer of First Market, will become president of the holding company and president and CEO of the First Market division.

The board of the bank-holding company will be expanded to include Ukrop, Fairchild and Steven A. Markel, vice chairman at specialty insurer Markel Corp.

First Market, a privately held company whose other owners are the Ukrop family and Markel Corp., operates 40 branches, mostly in Ukrop's stores and mostly in the Richmond area. It has about $1.3 billion in assets.

Under terms of the agreement, shareholders of First Market will receive 6.7 million shares of Union common stock, or a 33 percent ownership stake in the holding company.

"We think of it [the merger] as a real opportunity," Ukrop said. "It is definitely not an exit strategy. I am having too much fun. I don't ever want to retire."

First Market opened in 1997 inside Ukrop's grocery stores.

"We saw it as an opportunity to expand our business opportunities," Ukrop said. "It was a nice fit in our grocery stores. Because everyone else was renting space to banks, we saw a good opportunity to have an equity position in a bank."

First Market Bank will become the fourth operating subsidiary of the bank-holding company. Union Bankshares' current subsidiaries are Union Bank and Trust Co., Northern Neck State Bank and Rappahannock National Bank.

The current Union Bankshares' operations center in Caroline County will serve the holding company and its four subsidiaries.

Beale said he did not know how the merger would affect employment levels. However, attrition and retirement will reduce the current levels, he said.

Union Bankshares employs 670 people, including 93 at its mortgage operations. First Market employs 370 people.

Back-office operations will be combined where feasible, Beale said. By realizing savings equal to about 9 percent of the combined expense base, the merger is expected to add to earnings in 2010.

"We are not a big bank, but we are a strong bank," said Fairchild at a news conference about the merger in the recently opened Miller & Rhoads Hilton Garden Inn.

"Today, we are seizing an opportunity to join a family of strong local banks."

The combined bank will offer a full array of financial services to families and small and midsize businesses -- "the backbone for our nation's financial recovery," Fairchild said.

Contact Carol Hazard at (804) 775-8023 or .