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West Virginia-based Summit Financial Group buying Cornerstone Financial Services

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West Virginia-based Summit Financial Group buying Cornerstone Financial Services

Moorefield, W.Va.-based Summit Financial Group Inc. agreed to acquire West Union, W.Va.-based Cornerstone Financial Services Inc. and unit Cornerstone Bank Inc. in a stock-and-cash transaction.

Under the terms of the agreement, Summit Financial Group will acquire all the outstanding shares of Cornerstone Financial Services common stock in exchange for cash in the amount of $5,700.00 per share or 228 shares of Summit Financial Group common stock, resulting in an aggregate transaction value of about $28.5 million. Cornerstone Financial Services shareholders will have a right to receive cash, Summit Financial Group common stock or a combination of cash and common stock, subject to proration to result in 50% cash and 50% stock consideration in the aggregate.

The total merger consideration received by Cornerstone Financial Services shareholders is subject to an adjustment if the company's adjusted shareholders' equity as of the effective date of the merger deviates from the range mutually determined by the parties.

S&P Global Market Intelligence calculates the deal value to be 150.0% of common equity and tangible common equity and 26.7x earnings, on an aggregate basis. The deal value is also 16.80% of assets and 19.20% of deposits, and the tangible book premium-to-core deposits ratio is 8.19%.

Ratios are based on Cornerstone Financial Services' June 30 small parent equity and last-12-months net income of about $19.0 million and approximately $1.1 million, respectively.

S&P Global Market Intelligence valuations for bank and thrift targets in the Southeast region between Sept. 17, 2018, and Sept. 17, 2019, averaged 158.08% of book and 168.42% of tangible book and had a median of 17.32x last-12-months earnings, on an aggregate basis.

The deal is expected to close early in 2020. Following consummation of the merger, Cornerstone Bank will be consolidated with Summit Community Bank Inc., a subsidiary of Summit Financial Group. Lorraine Brisell, Cornerstone Financial Services' current president, will join Summit Financial Group as market president.

Cornerstone Financial Services reported about $170 million in assets as of June 30, according to a news release. Based on S&P Global Market Intelligence data, Summit Financial Group had about $2.30 billion in assets at the end of June.

With the completion of the deal, Summit Financial Group will enter Harrison County, W.Va., with one branch to be ranked No. 11 with a 0.98% share of approximately $1.48 billion in total market deposits and will enter Ritchie County, W.Va., with one branch to be ranked fourth with a 10.65% share of about $184.0 million in total market deposits. Additionally, the company will enter Wood County, W.Va., with one branch to be ranked No. 11 with a 0.02% share of roughly $1.65 billion in total market deposits and will enter Doddridge County, W.Va., with one branch to be ranked first with a 63.43% share of approximately $179.7 million in total market deposits, according to S&P Global Market Intelligence data.

Cornerstone Financial Services would pay Summit Financial Group a termination fee of about $1.3 million should the deal fall through under certain circumstances, according to a Form 8-K.

Cornerstone Financial Services was advised by D.A. Davidson & Co. and the law firm of Bowles Rice LLP. Summit Financial Group was represented by the law firm of Hunton Andrews Kurth LLP.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

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