Charleston, W.Va.-based City Holding Co. plans to acquire Staunton-based Community Financial Corp. in a stock deal worth $26.1 million.
The transaction would mark City’s second acquisition of a Shenandoah Valley bank in recent months. The company recently completed its acquisition of Virginia Savings Bank, based in Front Royal.
Community operates nine branches along the I-81 corridor and two branches in Virginia Beach.
Under the terms of the agreement, Community shareholders will receive 0.1753 shares of City common stock for each share of Community common stock.
Based upon the closing price of City’s common stock on July 27, the total value of common shares issued is estimated at $26.1 million, or $6 per Community share.
“City has admired the Community franchise for some time,” Charles R. (Skip) Hageboeck, the president & CEO of City, said in a statement. “Community has a solid retail deposit franchise, operates in markets with higher growth rates than City’s core markets, and has established itself as a significant commercial lender in both the Staunton and Virginia Beach markets.”
Norman C. (Butch) Smiley III, president & CEO of Community, noted his bank had operated independently for nearly 85 years. “However, the challenges facing small community banks and the lack of significant economic growth since 2008, in addition to increasingly stringent regulatory oversight and expense, led Community to consider partnering with a larger community bank which shares our commitment to customers and to local communities,” he said in a statement. “City is a highly respected, profitable and well-run community bank.”
The financial institutions anticipate the deal to be completed in the first quarter of 2013, pending regulatory approvals, the approval of Community shareholders, and the completion of other closing conditions. The directors of Community have agreed to vote their shares in favor of the merger.
City, which has $2.8 billion in assets, has 73 locations throughout West Virginia, Kentucky, Virginia and Ohio. The company reported second-quarter net income of $7.4 million., or 50 cents per diluted share. Income for the fiscal year ended March 31.
Community recorded net income of $1.8 million, 24 cents per diluted common share, compared to net income of $1.5 million, 18 cents per dilute common share for previous fiscal year. The company had assets of $503.9 million on March 31.
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