Regional banking in Virginia is slowly making a comeback.

The state once was home to several midsize banks, including Sovran Financial, Crestar Financial, Signet Banking and First Virginia Banks, before larger institutions gobbled them up one by one in the 1990s and early 2000s. Other than Capital One, Virginia doesn’t have a single bank with more than $10 billion in assets.

That is set to change.

Union Bankshares in Richmond, Va., has agreed to buy Xenith Bankshares in a $701 million deal that will take it to nearly $12 billion in assets. The deal, announced Monday, comes just weeks after Townebank agreed to buy Paragon Commercial Bank in Raleigh, N.C., in a deal that will have the Suffolk company flirting with the $10 billion-asset mark.

Union had been pondering its size as it pursued Xenith, which is also based in Richmond. The objective is to use earnings from the Xenith deal to offset a reduction in interchange fees and higher compliance costs that will come with crossing a key regulatory threshold in 2019.

“Xenith is perfect for so many reasons, not just the strategic logic and the financial logic,” John Asbury, Union’s president and CEO, said during a conference call to discuss the acquisition. “The size of it — successfully vaulting us over $10 billion — was absolutely on our mind.”

Union plans to keep expanding after it buys Xenith, which has 21 branches and $920 million in deposits in Virginia’s growing Hampton Roads market. Xenith also provides Union with a toehold in northern Virginia, the state’s wealthiest and most populous market.

Xenith’s “scarcity value is unparalleled,” Asbury said.

It is hard to argue with Asbury's logic, said Austin Nicholas, an analyst at Stephens Inc.

"The deal makes sense on the map and it definitely increases Union’s scarcity value,” Nicholas said. “Union's franchise density in Virginia is unique. This makes them more unique."

Union could eventually look at Northern Virginia for future acquisitions, Asbury said, noting that his company’s operations there after buying Xenith would still be “light.” For now, Union will likely look to grow organically, largely by targeting commercial-and-industrial loans, he said.

“The highest priority for us is to ensure a successful integration of this merger,” Asbury said. “We need to make sure everything is ticking. … I think for 2018, that’s what it is going to be about.”

Union will also be spending time trying to determine how to position itself, given its expected heft.

“We’re having some debate right now with our marketing staff,” Asbury said. “Is this a community bank? Is it a regional bank? I think we are something more than a community bank given our size and capabilities. … I declare us a customer- and client-first regional bank.”

There is no guarantee Virginia will have a new set of midsize banks.

Situations can change quickly, especially when industry consolidation is involved. North Carolina, for instance, seemed poised to have a new crop of regional banks, but most of those institutions have agreed to sell themselves in recent months to out-of-state competitors.

The Mid-Atlantic, including Maryland, Pennsylvania and Virginia, has also been a hotbed of consolidation in recent months.

Asbury said in an interview that he had been entertaining a “romantic notion” of building a regional franchise. Billy Beale, Asbury's predecessor, introduced him to T. Gaylon Layfield III, Xenith's CEO, and the relationship grew from there.

“I felt Union had the platform for that ... and it did not take long for me to realize” Xenith was an obvious partner, Asbury said.

“As we got to know each other, I saw we had similar views of what might be possible on the Virginia scene,” Layfield said during the interview.

Union and Xenith have been involved in notable mergers in recent years.

Union bought StellarOne Financial in Charlottesville, Va., for $445 million in 2014. Less than a year has passed since Hampton Roads Bankshares in Virginia Beach bought Xenith in a deal where Xenith’s name and CEO remained in place and the headquarters moved to Richmond.

Employee retention will be an important component of the deal, which is Union's first M&A deal since Asbury became CEO in January. Union had a number of defections after it bought StellarOne, and Blair Brantley, an analyst at Brean Capital, pressed Asbury during Monday's conference call to discuss efforts to keep high-performing lenders from jumping ship.

Asbury declined to discuss specific retention efforts, though Layfield will stay at Union long enough to help with integration.

“We clearly have a strategy in place to ensure this is an attractive place for those folks to remain,” Asbury said. “I will personally be very heavily involved in terms of this onboarding and integration effort.”

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