Kroll Bond Rating Agency Releases Comments on Union Bankshares Corporation and Xenith Bankshares, Inc. Merger

Kroll Bond Rating Agency (KBRA) comments on Union Bankshares Corporation and Xenith Bankshares, Inc. Merger.

The report makes the following key points:

• Union Bankshares Corporation UBSH ("Union"), based in Richmond, VA, and its subsidiary Union Bank & Trust, announced a definitive agreement to acquire Xenith Bankshares, Inc. XBKS ("Xenith") the holding company and parent of Xenith Bank.
• The deal, valued at $701.2 million in the aggregate, is expected to close in early January 2018 as an all stock transaction with minimal impact on regulatory capital ratios. The acquisition will add approximately $3.2 billion in assets to Union's balance sheet, with pro forma total assets of $11.9 billion based on financial data as of March 31, 2017.
• The acquisition of Xenith Bankshares, Inc. would strengthen Union's retail presence in Virginia's second most populous region, the Hampton Roads-Virginia Beach area while also adding a dedicated commercial and industrial team in Northern Virginia. Additionally, the acquisition would move Union into two new markets, the eastern shore of Maryland and eastern North Carolina, providing organic growth opportunities in these two areas.
• Xenith Bankshares, Inc. and its subsidiary appear to be of sound overall financial condition. Based on fourth quarter 2016 financials, KBRA's Subscription Rating Service (SRS) rated Xenith Bank B- on the financial strength rating scale.
• Of moderate concern are Xenith's relatively elevated level of nonperforming assets; however, KBRA notes the thorough due-diligence process conducted by Union as well as the significant credit mark on the portfolio as mitigating factors.
• In November of 2016, KBRA assigned a senior unsecured debt rating of BBB+, a subordinated debt rating of BBB, and a short-term debt rating of K2 to Union Bankshares Corporation. KBRA also assigned deposit and senior unsecured debt ratings of A-, a subordinated debt rating of BBB+, and short-term deposit and debt ratings of K2 to UBSH's subsidiary, Union Bank & Trust. The Outlook on all long-term ratings is Stable.
• In KBRA's view, this transaction appears neutral to the long-term ratings and is in line with management's stated strategy.

The ratings are based on KBRA's Global Bank and Bank Holding Company Rating Methodology published on February 19, 2016.

To view the report, please click here.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

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