Executives at Summit Financial Group Inc. in Moorefield, W.Va., view the company’s deal for the troubled Greater Atlantic Financial Corp. as an inexpensive way to scoop up low-cost deposits and strengthen its Virginia branch network.
The $1.2 billion-asset Summit announced late Thursday that it had agreed to acquire the $287 million-asset Greater Atlantic, of Reston, Va., for $4.60 per share, or roughly $13.9 million.
Summit, which entered Virginia in 1999 when it started Shenandoah Valley National Bank in Winchester, has six branches in the state. Buying Greater Atlantic would give it five more Virginia branches and one in Rockville, Md. (Greater Atlantic also has a branch in Pasadena, Md., but is selling it to Bay-Vanguard Federal Savings Bank in Baltimore for $4.3 million in a separate deal.)
Greater Atlantic has lost money in five of its past six fiscal years, mostly because of a failed derivatives strategy and problems in its defunct mortgage lending unit. Its stock was delisted from the Nasdaq exchange in February after its shareholder equity fell below the $10 million minimum.
H. Charles Maddy 3rd, Summit’s chief executive officer, said he is confident his management team can work through the seller’s issues and get value from the deal. “Their troubles have really not been a function of location or markets, they’ve been a function of structure, and maybe not having the right people in the right places,” Mr. Maddy said Friday.
Greater Atlantic executives would not be retained, Mr. Maddy said.
Robert S. Tissue, Summit’s chief financial officer, said that buying Greater Atlantic would provide his company with $160 million of core deposits at a premium of less than 5%. Greater Atlantic’s stock price rose 85% on news of the deal, to close at $4.70.
Steve Moss, an analyst at Janney Montgomery Scott LLC, called the deal a good one for Summit because its assets in faster-growing markets would increase. Buying Greater Atlantic could dilute Summit’s earnings in the near term, but “there’s definitely a lot of cost savings to be had,” Mr. Moss said. “In the long run … [Summit] should benefit from this.”
