Greater Atlantic Financial Corp. Agrees to Merge with Summit Financial Group, Inc., and Greater Atlantic Bank Agrees to Sell its
April 12 2007 - 9:00PM
PR Newswire (US)
Completion of Merger Conditioned on Pasadena Branch Office Sale
RESTON, Va., April 12 /PRNewswire-FirstCall/ -- Greater Atlantic
Financial Corp. ("GAFC") (Pink Sheets: GAFC.PK), the holding
company for Greater Atlantic Bank ("GAB"), announced today that it
and Summit Financial Group, Inc. ("Summit") (NASDAQ:SMMF) have
entered into a definitive agreement for GAFC to merge with and into
Summit and that GAB and Bay-Vanguard Federal Savings Bank
("Bay-Vanguard"), the wholly-owned subsidiary of BV Financial, Inc.
(OTC:BVFL.OB) (BULLETIN BOARD: BVFL.OB) , have entered into a
definitive agreement for Bay-Vanguard to purchase GAB's branch
office in Pasadena, Maryland. Under the terms of the merger
agreement, Summit will pay $4.60 per share in cash and stock for
the outstanding common stock of GAFC, subject to adjustment based
on GAFC's shareholders' equity at the end of the month in which the
sale of the Pasadena branch office is completed. If, at that
month-end, GAFC's shareholders' equity, as adjusted in accordance
with the terms of the merger agreement, is less than $6.7 million,
then the total aggregate value of the merger consideration will be
decreased dollar-for-dollar. If GAFC's month-end adjusted
shareholders' equity exceeds $6.7 million, then the aggregate value
of the merger consideration will be increased dollar-for-dollar,
but only to the extent that the amount in excess of $6.7 million is
attributable to the sale of the Pasadena branch office, net of all
taxes, if any, GAFC would be required to pay. As discussed below,
GAB has entered into a definitive agreement with Bay-Vanguard to
sell its Pasadena, Maryland branch office for a deposit premium of
8.5%. At March 31, 2007, the deposits at the Pasadena branch office
were approximately $50.9 million, resulting in a present deposit
premium of $4.3 million. The aggregate value of the final merger
consideration will be determined before proxy solicitation
materials are sent to GAFC's shareholders for purposes of
soliciting their vote on the transaction. The final merger
consideration will be paid 70% in the form of Summit common stock
and 30% in cash. The exchange ratio for determining the number of
shares of Summit common stock to be issued for each share of GAFC
common stock will be based on the average closing price of Summit's
common stock for the twenty (20) trading days before the closing
date of the transaction ("Summit's Average Closing Stock Price"),
subject to a "collar" which ranges from $17.82 per share to $24.10
per share. If Summit's Average Closing Stock Price falls within
this range, then GAFC shareholders will receive shares of Summit's
common stock based on an exchange ratio equal to 70% of the final
per share merger consideration divided by Summit's Average Closing
Stock Price. However, if Summit's Average Closing Stock Price is
less than $17.82 per share, the exchange ratio will equal 70% of
the final per share merger consideration divided by $17.82; and if
Summit's Average Closing Stock Price is more than $24.10 per share,
then the exchange ratio will equal 70% of the final per share
merger consideration divided by $24.10. Solely for purposes of
illustration, the following is a computation of the aggregate value
of the merger consideration if GAFC's adjusted shareholders' equity
at the end of the month in which the Pasadena branch sale occurs is
equal to $11.0 million (assuming GAFC's adjusted shareholders'
equity without consideration of the Pasadena branch sale is $6.7
million, plus an assumed Pasadena branch sale deposit premium of
$4.3 million). The aggregate value of the final merger
consideration would be approximately $18.2 million ($4.60 per share
multiplied by GAFC's present outstanding common shares of
approximately 3,024,000, plus the $4.3 million Pasadena branch
deposit premium), or $6.03 per GAFC common share outstanding,
representing approximately 1.66 times book value. Accordingly, at
this price, GAFC's shareholders would receive $1.81 in cash plus
0.2013 shares (assuming Summit's Average Closing Stock Price equals
$20.96, its closing price on April 11, 2007) of Summit common stock
for each share of Greater Atlantic common stock owned.
Alternatively, and solely for purposes of illustration, the
following is a computation of the aggregate value of the merger
consideration if GAFC's adjusted shareholders' equity at the end of
the month in which the Pasadena branch sale occurs is equal to
$10.5 million (assuming GAFC's adjusted shareholders' equity
without consideration of the Pasadena branch sale is $6.2 million,
plus an assumed Pasadena branch sale deposit premium of $4.3
million). The aggregate value of the final merger consideration
would be approximately $17.7 million ($4.60 per share multiplied by
GAFC's present outstanding common shares of approximately
3,024,000, less $500,000 representing the difference between $6.7
million and $6.2 million, plus the $4.3 million Pasadena branch
deposit premium), or $5.86 per GAFC common share outstanding,
representing approximately 1.69 times book value. Accordingly, at
this price, GAFC's shareholders would receive $1.76 in cash plus
0.1956 shares (assuming Summit's Average Closing Stock Price equals
$20.96, its closing price on April 11, 2007) of Summit common stock
for each share of Greater Atlantic common stock owned. The
preceding two examples are subject to numerous assumptions and
uncertainties, including, without limitation, the level of GAFC's
future shareholders' equity and the aggregate consideration to be
realized on the sale of the Pasadena branch office. There can be no
guarantee that a GAFC shareholder will receive either of such
values in the merger. In addition to the receipt of GAFC
shareholder approval and customary regulatory approvals, and other
customary closing conditions, the completion of the merger is
conditioned on GAB having core deposits (generally all deposits
except municipal, wholesale and brokered deposits) of at least
$144.0 million as of closing. At March 31, 2007, GAB's core
deposits were approximately $208.8 million, of which approximately
$50.9 million were attributable to the Pasadena branch office.
Summit and GAFC have each completed their due diligence. The merger
is expected to be completed in the fourth calendar quarter of 2007,
subject to regulatory and shareholder approvals. Immediately
following the merger, GAB intends to merge with and into Summit
Community Bank. GAB will sell its leased branch office located at
8070 Ritchie Highway, Pasadena, Maryland, to Bay-Vanguard. Under
the agreement, Bay-Vanguard will pay an 8.5% premium on the balance
of deposits assumed at closing. At March 31, 2007, the deposits at
the Pasadena branch office on which the deposit premium would apply
totaled approximately $50.9 million. Bay-Vanguard will also
purchase the branch office's fixed assets. Bay-Vanguard will not
acquire any loans as part of the transaction. The purchase is
expected to be completed during the third calendar quarter of 2007,
subject to regulatory approval. Muldoon Murphy & Aguggia LLP
served as legal counsel to GAFC with respect to both transactions.
Sandler O'Neill & Partners, L.P acted as financial advisor to
GAFC. About the Companies Greater Atlantic Financial Corp. conducts
its business operations through its wholly-owned subsidiary,
Greater Atlantic Bank. GAB offers traditional banking services to
customers through six branches located in Rockville and Pasadena,
Maryland, and Front Royal, New Market, Reston and South Riding,
Virginia. Summit Financial Group, Inc., a financial holding company
with total assets of $1.2 billion headquartered in Moorefield, West
Virginia, operates fifteen banking locations through its two
wholly-owned community banks: Summit Community Bank, headquartered
in Moorefield, West Virginia; and Shenandoah Valley National Bank,
headquartered in Winchester, Virginia. SFG also operates Summit
Insurance Services, LLC. in Moorefield, West Virginia. BV
Financial, Inc. is the parent company of Bay-Vanguard Federal
Savings Bank. Bay-Vanguard is headquartered in Baltimore, Maryland,
with three other banking offices in the Baltimore metropolitan
area. Bay-Vanguard is a full- service, community-oriented financial
institution dedicated to serving the financial service needs of
consumers and businesses within its market area. Private Securities
Litigation Reform Act Safe Harbor Statement This press release
contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts,
but statements based on GAFC's current expectations regarding its
business strategies and their intended results and its future
performance. Forward- looking statements are preceded by terms such
as "expects," "believes," "anticipates," "intends" and similar
expressions. Forward-looking statements are not guarantees of
future performance. Numerous risks and uncertainties could cause or
contribute to GAFC's actual results, performance and achievements
to be materially different from those expressed or implied by the
forward-looking statements. Factors that may cause or contribute to
these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes
in monetary and fiscal policies of the federal government, that
would have a material adverse effect on GAFC's financial condition
or results of operations, or both; legislative and regulatory
changes that would have a material adverse effect on GAFC's
financial condition or results of operations, or both; the failure
to obtain required shareholder and regulatory approvals; the
failure to complete the sale of the Pasadena branch office; and
other factors disclosed periodically in GAFC's filings with the
Securities and Exchange Commission (the "SEC"). Because of the
risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether
included in this report or made elsewhere from time to time by GAFC
or on its behalf. GAFC assumes no obligation to update any
forward-looking statements. Other Information Summit Financial
Group, Inc. will file a registration statement containing a
prospectus-proxy statement that will be sent to shareholders of
Greater Atlantic Financial Corp., and other relevant documents
concerning the proposed merger, with the SEC. WE URGE SHAREHOLDERS
TO READ THE PROSPECTUS-PROXY STATEMENT TO BE SENT TO THEM, AND ANY
OTHER RELEVANT DOCUMENTS FILED BY SFG AND GAFC WITH THE SEC,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors are able
to obtain these documents free of charge at the SEC's web site
(http://www.sec.gov/). In addition, documents that Summit Financial
Group, Inc. files with the SEC are available free of charge from
SFG, 300 North Main Street, P.O. Box 179, Moorefield, West Virginia
26836. Documents that Greater Atlantic Financial Corp. files with
the SEC are available free of charge from GAFC, 10700 Parkridge
Boulevard, Suite P50, Reston, Virginia 20191. The directors,
executive officers, and certain other members of management of GAFC
may be deemed to be soliciting proxies in favor of the proposed
merger from the shareholders of GAFC. For information about these
directors, executive officers, and other members of management,
shareholders should refer to the most recent proxy statement that
GAFC has filed with the SEC, which is available on the SEC's web
site or at GAFC's address set forth in the preceding paragraph.
DATASOURCE: Greater Atlantic Financial Corp. CONTACT: Carroll E.
Amos, President and Chief Executive Officer of Greater Atlantic
Financial Corp., +1-703-391-1300
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