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Virginia's Parkway Acquisition to buy North Carolina's Great State Bank

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Virginia's Parkway Acquisition to buy North Carolina's Great State Bank

Floyd, Va.-based Parkway Acquisition Corp is acquiring Great State Bank of Wilkesboro, N.C., and merging it into Skyline National Bank.

Each Great State common share will be exchanged for 1.21 Parkway common shares. Based on the buyer's 10-day volume-weighted average closing price of $12.29 per share as of Feb. 28, the deal is valued at $14.87 per share, or $14.5 million in aggregate.

SNL calculates the deal value to be 116.2% of book and tangible book and 31.2x earnings, on an aggregate basis. It is also 10.14% of assets and 11.31% of deposits. The premium to tangible book is 2.18% of core deposits.

For comparison, SNL valuations for bank and thrift targets in the Southeast between March 1, 2017, and March 1, 2018, averaged 159.83% of book, 168.86% of tangible book and had a median of 24.63x last-12-months earnings, on an aggregate basis.

Parkway expects the transaction to be immediately accretive to estimated earnings, before one-time costs. Tangible book value dilution of approximately 4.5% is projected to be earned back in three years. Cost saves are pegged at 25% of Great State's operating expenses, according to an investor presentation about the deal dated March 5.

Great State had $138.7 million in assets at the end of 2017; Independence, Va.-based Skyline had $547.5 million. The resulting entity will have $687 million in assets, $522 million in loans and $613 million in deposits. In North Carolina, Parkway will enter Watauga County with one branch, to be ranked ninth with a 2.39% share of approximately $1.01 billion in total market deposits, and enter Wilkes County with one branch, to be ranked fifth with 11.05% share of approximately $771.77 million in total market deposits. It will also enter Yadkin County with one branch, where it will rank eighth with a 1.97% share of approximately $453.76 million in total market deposits.

The deal, still subject to regulatory and shareholder approvals, is expected to close in the third quarter. Two of Great State's board members are expected to join the boards of Parkway and Skyline. Great State President and CEO Charles Greg Edwards will stay on as North Carolina regional president. Executive Vice President and Chief Credit Officer Ronald Pearson will be a senior credit officer for North Carolina. And CFO Larry Farthing intends to retire but will remain at least through the merger date.

Raymond James & Associates Inc. served as Parkway's financial adviser and provided a fairness opinion. Williams Mullen was the acquirer's legal counsel. For Great State, it was Performance Trust Capital Partners LLC and Ward and Smith PA.

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