Greater Atlantic Financial Corp.'s stock soared Thursday on speculation that the struggling Reston, Va., thrift holding company could be on the block.
The $383 million-asset parent of Greater Atlantic Bank revealed in a Securities and Exchange Commission filing Wednesday that it had hired the New York investment banking firm Sandler O'Neill & Partners LP to help it evaluate "all strategic alternatives."
Though Greater Atlantic said in the filing that one alternative could be to remain independent, investors appeared to be betting on a sale. In late trading Thursday the stock was up nearly 15%, to $5.63, and volume was roughly 15 times its daily average.
Greater Atlantic officials did not return repeated phone calls requesting comment.
The company has lost money in four of its last five fiscal years, including $1.6 million in fiscal 2005, which ended Sept. 30. Its problems can be traced largely to a decline in mortgage originations and a failed derivatives strategy.
In fiscal 2005, Greater Atlantic originated one-third as many mortgages as it did two years earlier. It said in an SEC filing in December that it was considering shutting down or selling its mortgage lending unit.
Moreover, Greater Atlantic has yet to recover from its losses sustained from derivatives contracts it started buying in 2000 to hedge against possible interest rate increases. That strategy backfired when interest rates started to fall.
David G. Danielson, the president of Danielson & Associates, an investment banking and consulting firm in Rockville, Md., said Greater Atlantic would not be particularly appealing to experienced acquirers because it has had financial troubles and has little penetration in its markets. (Its six branches are scattered throughout six counties in northern Virginia and Maryland.)
But he added that Greater Atlantic might draw interest from smaller banks seeking a foothold in the Washington suburbs.
"You might see one or two banks that haven't done deals try to buy it," Mr. Danielson said.
Or private equity groups could try as an alternative to chartering a bank.
"It's small enough that some private equity groups might see it as a quicker way to get a charter, rather than going through the whole rigmarole of a de novo," Mr. Danielson said.
