Summit Financial Group Inc.'s $13.9 million deal for the troubled Greater Atlantic Financial Corp. in Reston, Va., is off for now, but perhaps not for good.
Nearly a year after announcing it was buying Greater Atlantic, Summit announced late Wednesday that it has "exercised its right" to terminate the deal, since it did not close by March 31. The deal is the second deal the $1.4 billion-asset Moorefield, W.Va., company has scuttled since December.
Summit also said that the two companies are continuing their discussions, though "no assurances can be given that the negotiations will lead to the parties entering into a new agreement."
The companies did not say why the deal had fallen through, and calls from American Banker were not returned.
But Stephen M. Moss, an analyst with Janney Montgomery Scott LLC, speculated that Summit called the deal off because asset quality at Greater Atlantic's thrift subsidiary, Greater Atlantic Bank, continued to deteriorate in the first quarter.
For the fourth quarter, Greater Atlantic reported that its nonperforming loan ratio jumped to 1.64% of total loans, from 0.24% a year earlier. It also reported a net loss of $649,000 for the quarter.
Greater Atlantic has not reported its first-quarter earnings, but Mr. Moss said he suspects additional loan troubles emerged in the last three months.
The deal was actually terminated on April 4, and the fact that nothing was announced until five days later suggests that the companies were in "serious negotiations" and "trying to complete a new deal with a new structure," he said.
Mr. Moss speculated that Summit "might sense some obligations to complete the deal to avoid any potential litigation."
Initially, Summit agreed to pay $4.60 a share for Greater Atlantic, but if a new deal is struck, the price is likely to be lower.
Greater Atlantic's shares dropped 51% on Thursday, to $2.18, while Summit's shares increased 5.4%, to $14.25.
Several other merger or acquisition agreements between banking and thrift companies have fallen through of late, largely as a result of mounting loan problems.
At least 14 other deals have been terminated in the last six months, including Summit's $52.5 million deal for Commonwealth Savingshares Corp., a Delaware corporation, and its $324 million-asset SouthBank in Huntsville, Ala. Mr. Moss said that deal did not make sense for Summit, because the two companies were in "disparate" locations.
