The company that emerges from the planned merger of Virginia Financial Group Inc. and FNB Corp. would be the largest in the state, but its designated top executive has no intention of stopping the growth there.
Top growth priorities, he said, are new markets in and beyond Virginia.
"We certainly have good markets … and we don't want to turn our backs on any of those," said O.R. Barham Jr., the president and chief executive officer of $1.6 billion-asset Virginia Financial in Culpeper. "But I think the future for us is in new markets."
The companies said that the post-merger company would have 67 branches, all in the state; more than $3 billion of assets; and roughly $2.6 billion of deposits.
Mr. Barham, who is to be the new company's president and CEO, said that the merger offers avenues for expansion that neither company had by itself.
Virginia Financial has been looking to increase its presence in Richmond, where it has a single loan production office. The merger "gives us an opportunity to discuss possible mergers and acquisitions with banks in" Richmond, he said, "… which before may not have been possible on a stand-alone basis."
Among the new markets that Mr. Barham said the new company would consider are the Virginia Beach area and North Carolina. He said he would avoid the Northern Virginia market, which he considers overly expensive to enter.
The companies have billed the deal, which was announced late Thursday, as a merger of equals. However, the proposed transaction is taking the form of an acquisition, with Virginia Financial buying the $1.5 billion-asset FNB of Christiansburg, Va., for roughly $240 million in stock, or about $32.43 per share.
The post-merger company is to have a 24-member board of directors with equal representation from both companies. The deal's terms call for Virginia Financial's two banking subsidiaries and FNB Corp.'s single subsidiary to be consolidated into one state-chartered bank.
Though FNB's markets are in the slower-growing southern part of the state, its branches come with a solid base of core deposits, said Mark Muth, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp.
FNB has "a reputation of having arguably the best deposit franchise in the state," Mr. Muth said. "And when you have a great deposit franchise, you can be an extremely profitable franchise whether or not you're growing at some blistering rate that you see up in Northern Virginia."
Mr. Barham said he plans to use FNB's deposit base to fund loans in higher-growth markets in the state.
Megan Malanga, an analyst at Stifel, Nicolaus & Co. Inc., predicted a smooth integration of the two companies.
"The managements know one another pretty well; they've got pretty complementary balance sheets," she said. "Culturally, I really think it makes the right sense."
Litz H. Van Dyke, Virginia Financial's chief operating officer, spent more than 10 years at FNB before assuming his current post in 2004, Mr. Barham said.
The two companies' branch networks have minimal overlap, but "there is enough back-office and duplicative things there that they can get good cost savings to make it immediately accretive to earnings," Mr. Muth said.
The deal is expected to yield about $9.4 million of annual savings, predominantly from back-office consolidation. Mr. Barham said Virginia Financial would close its operations center but would not specify how many jobs would be lost.
The deal is expected to close in the fourth quarter.
