Grayson Bankshares in Independence, Va., and Cardinal Bankshares in Floyd, Va., have agreed to merge to form a new holding company.
The new company will be called Parkway Acquisition Corp. Grayson's shareholders will own about 60% of Parkway; Cardinal's shareholders will own the rest. The merger is expected to close in the second quarter.
The $332 million-asset Grayson and the $263 million-asset Cardinal did not disclose any pricing for the merger. Parkway will select a name for the new bank after the deal closes. The bank, which will be regulated by the Office of the Comptroller of the Currency, will have 17 branches, more than $600 million in assets and more than $500 million in deposits.
The merger ends an ugly chapter in Cardinal's history that began in 2012, when a shareholder revolt led by investor Doug Schaller succeeded in ousting Leon Moore, the company's longtime chief executive. Several directors resigned, and Michael Larrowe, another Cardinal executive, was tapped to succeed Moore.
Allan Funk, Grayson's president and chief executive, will keep those posts at Parkway. Thomas Jackson Jr., Grayson's chairman, will have the same post at Parkway, while John Paul Houston, Cardinal's chairman, will become vice chairman.
Blake Edwards, Grayson's chief financial officer, will have that title at Parkway.
"We have been looking for ways to strategically advance our community bank mission while improving our bottom line," Houston said in a press release Sunday. "This combination improves our near-term and long-term financial performance for shareholders, and enhances our ability to offer the products and services our customers need. This also ensures that all of our customers — in both banks' footprints — have a locally-owned community bank for years to come."
"With our combined assets and cost-saving efficiencies, we believe our customers and shareholders will significantly benefit from this transaction," Jackson said. "The costs associated with new banking legislation have put an enormous strain on small banks, and by joining forces we believe we are well-positioned for improved operating results for years to come."
Raymond James & Associates and Williams Mullen advised Grayson. Gentry Locke advised Cardinal, while Banks Street Partners provided a fairness opinion. CCG Consulting Group was Cardinal's strategic adviser.
Paul Davis contributed to this report.