Union Bankshares Corp. has another $59 million worth of capital to work with as it looks to expand its growing business.
The Bowling Green-based bank announced last week it was raising the capital through the sale of additional shares of common stock. About 4.7 million shares were sold last week, and the transactions close today.
The bank allowed the underwriters to buy an additional 15 percent of the new shares issued to cover over-allotments, so that could lead to another roughly $9 million raised and 700,000 common stock shares sold.
CEO William Beale said the capital raise was "very much an offensive move" for Union Bankshares. It could allow the acquisition of additional Virginia banks, possibly to include ones taken over by the FDIC.
The FDIC has taken over 92 failed banks in the U.S. so far this year, but none has been in Virginia. Beale said he'd "be surprised" if no banks in the state fail.
Beale also noted that the bank has started to see economic improvements in Virginia, and he expects those to continue into 2010. Having the additional capital will allow Union Bankshares--the parent of Union Bank & Trust--to expand its business.
The capital could also let Union Bankshares redeem the $59 million it borrowed from the U.S. Treasury Capital Purchase Program in December. Beale said the bank will decide whether to apply to redeem the loan by the end of the year. The bank must pay a 5 percent annual dividend on the preferred shares, and had paid about $1.5 million to the government through June 30.
Beale noted that having the government loan on the bank's books has its drawbacks--including the cost of satisfying the reporting requirements and the inability to set compensation levels independently.
Most of the new common stock shares were sold to institutional investors such as mutual funds. About 20 percent went to individual investors.
Union Bankshares, which trades on the Nasdaq under the symbol UBSH, had about 13 million common stock shares outstanding before the capital raise. The new shares sold expanded that total by more than a third.
As a result, existing shareholders suffered a hit to their earnings per share. The new shares were sold at $13.25 each. The stock closed at $16.21 Sept. 4, the last trading day before the capital raising plan was announced. The lower price reflects the dilution to shareholders.
But Beale thinks the new capital will allow the bank to make up that reduction in earnings per share quickly. He also thinks Union's takeover of First Market Bank, which is expected to close in November, will boost earnings per share.
The First Market Bank deal is an all-stock transaction through which about 7.5 million shares of Union Bankshares' common stock will be issued to the owners of FMB. As a result of that transaction and this month's capital raise, the number of Union Bankshares common shares on the market will have roughly doubled.
First Market Bank and Union Bank & Trust will be merged in February, Beale said, and rebranded under one name. The plan is to call it Union First Market Bank, but that could change. There will likely be some branch closures where the two banks overlap, but those decisions haven't been made yet.
Many of First Market Bank's branches are located inside Ukrop's Super Markets stores. Rumors have circulated that Ukrop's could be for sale. Beale said the First Market leases would convey to the new owner if a sale occurs. The terms of the leases offer the bank options to remain in those locations for about 25 years.
Bill Freehling: 540/374-5405
Email: bfreehling@freelancestar.com