Terminated bank acquisitions are rarely revived, but Summit Financial Group Inc. said it wanted the troubled Greater Atlantic Financial Corp. in Reston, Va., too much to let go.
The only holdup had been price.
Now the $1.5 billion-asset Summit, of Moorefield, W.Va., has a new deal to buy Greater Atlantic for $12.1 million in stock — a third less than it would have paid under the agreement it struck in April of last year and called off this April. Summit would gain five branches, mostly in attractive Virginia markets where it is eager to expand.
"Some folks would probably think anything is a bad deal today, particularly when you're paying stock," Robert Tissue, Summit's chief financial officer, said in an interview last week. "But it gets us into the markets that we want to be in."
Through last week, 13 bank acquisition deals had fallen through in 2008, versus two in the comparable period last year, according to data from SNL Financial LC.
Few are ever rekindled. Of 6,850 bank deals announced over the past 19 years, only 26 that were terminated later got done, the SNL data indicates.
Mr. Tissue said Summit never stopped negotiating to buy the $231 million-asset Greater Atlantic, even after calling off the initial deal.
He said Greater Atlantic's branches complement the 15 that Summit has, and buying them would be cheaper than trying to open new ones.
"The footprint matches up perfectly with where we are, the Shenandoah Valley and northern Virginia," Mr. Tissue said.
But Greater Atlantic's persistent loan troubles made it clear that a lower price was in order, he said. Summit would have paid $18.2 million in cash and stock under the initial deal.
Greater Atlantic has lost money for 11 of the past 12 quarters, including $5 million in the first quarter.
In April the Office of Thrift Supervision imposed a cease-and-desist order, requiring it to boost capital levels, restricting its lending, and prohibiting it from accepting brokered deposits.
As a result Summit hedged on the new deal, which is expected to close in the fourth quarter. Greater Atlantic needs to maintain certain capital, deposit, and chargeoff levels for the deal to be completed.
Bryce W. Rowe, an analyst at Robert W. Baird Inc., said that despite its ailing housing market, northern Virginia still has good population growth.
A bank entering the market might have an advantage, Mr. Rowe said. "It's probably a good time to do it, because you're facing other community banks that have had their challenges associated with the housing market."
But Greater Atlantic has been underperforming for years, Mr. Rowe said. Even when the mortgage market was hot, that part of its business merely masked its overall flaws, he said.
"If you peeled back the onion a little bit," he said, "the loan portfolio had its ups and downs, showing weaker credit metrics during a time in which the northern Virginia market was profitable and not experiencing credit issues."
