The deal between City Holding Co. and Virginia Savings Bancorp Inc. is a rarity nowadays — a banking company buying all of the assets and deposits of a healthy seller.

Just don't get too excited.

City Holding of Cross Lanes, W.Va.'s agreement to pay $13.4 million to acquire Virginia Savings of Front Royal, Va., could be the first in a wave of deals for smaller banks, one analyst said. But two factors — the low price and the close geographical connection of the buyer and target — probably mean such deals will remain novelties for the foreseeable future.

"It's a one-off," said Christopher Marinac, an analyst with FIG Partners LLC. "It's a $13 million deal, so it's hard to get overly excited about it."

Ultimately, the deal may prove to signal slightly more deal activity through the first quarter, "but not a massive shift," Marinac said. "We could be going from nothing to something."

City Holding, which has $2.7 billion of assets, on Monday said it had reached an agreement to acquire $130 million-asset Virginia Savings for cash, stock or a combination of the two. The deal still requires approval from regulators and from the shareholders of Virginia Savings. The deal is expected to close in the first quarter.

At about 120% of Virginia Savings' tangible book value, and a deposit premium of about 2%, City Holding is paying only a modest premium for the target.

"Both of those numbers are a far cry from what we used to see in this industry five, six, seven years ago," Marinac said. "The new norm is that, unless there are big credit-related issues that are hanging, a modest premium is fair, but paying any more than 125% of book is hard to justify."

The deal would give City Holding, one of the largest banking companies based in West Virginia, its entree into Virginia. It now operates 57 branches in West Virginia, eight in Kentucky and three in Ohio.

Virginia Savings runs five branches in northern Virginia, and City Holding said in a press release that seven of its own branches are located in the Eastern Panhandle of West Virginia, near those Virginia Savings Bank offices.

"We have been interested in expanding into Virginia for several years and believe that the acquisition of VSB is a perfect first step for us," City Holding President and Chief Executive Charles R. "Skip" Hageboeck said in a press release. "This is a high-growth region."

Hageboeck, who's been CEO since 2005, and City National Chief Financial Officer David L. Bumgarner did not returns calls seeking comment.

City Holding has been cautious on the M&A front, with its last deal coming in 2005 when it acquired the $333 million-asset Classic Bank in Ashland, Ky. City Holding has not participated in deals for failed banks with the Federal Deposit Insurance Corp., in spite of its strong capital position. Its total risk-based capital ratio was 13.06% as of June 30. In an interview in 2008 with American Banker, Hageboeck said his company was being "picky" about acquisitions, even as it looked to expand into adjacent markets.

"We haven't set our sights on doubling the size of the bank by any means or stretch of the imagination," Hageboeck said at the time.

City Holding is known for its conservative, bottom line-focused management skills, Marinac said.

"City has been a very astute operator," Marinac said. "They are looking at how they can make money for their shareholders."

City Holding received financial advice on the deal from Janney Montgomery Scott LLC and legal counsel from the Charleston law firm Jackson Kelly PLLC. Scott & Stringfellow and the law firm LeClairRyan PC advised Virginia Savings.

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