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Banking Regulators Clears Merger of Virginia, US Bank Holding Companies Cardinal Bankshares, Grayson.

M2 EQUITYBITES-May 10, 2016-Banking Regulators Clears Merger of Virginia, US Bank Holding Companies Cardinal Bankshares, Grayson


10 May 2016 - US banking regulators The Virginia Bureau of Financial Institutions, the board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency all have approved the applications filed for the combination of Virginia, US-based bank holding company Cardinal Bankshares Corp. (OTC: CDBK) and Grayson Bankshares, Inc. (OTC: GSON), the banks said.

Special shareholder meetings are set for 24 May and 26 May for Grayson and Cardinal, respectively, and management and boards of both organizations have been holding informational sessions in their communities to discuss the combination.

The deal is worth around USD 30m.

Under the terms of the agreement, both companies will merge with and into Parkway Acquisition Corp., a new bank holding company formed for the purpose of effecting the combination. Both Cardinal and Grayson shareholders will receive shares of stock in the newly formed company.

Based upon the approximate equity contributions of Cardinal and Grayson to the newly formed company, Cardinal shareholders will receive approximately 40% of the newly issued shares and Grayson shareholders will receive approximately 60% of the newly issued shares.

Cardinal shareholders will receive 1.30 shares of Parkway common stock for each share of Cardinal common stock. Grayson shareholders will receive 1.76 shares of Parkway common stock for each share of Grayson common stock.

The subsidiary banks of Bank of Floyd and Grayson National Bank will combine to form one national bank regulated by the Office of the Comptroller of the Currency.

The combined organization will have 17 full-service banking offices, assets of over USD 600m, deposits of over USD 500m and shareholders' equity of over USD 50m.

It will be governed by a board of directors comprised of each of the current directors of Cardinal and Grayson.

Current Grayson chairman of the board, Thomas M. Jackson, Jr., will serve as chairman of the board of the company and its subsidiary bank, and current Cardinal chairman, John Paul Houston, will serve as vice chairman of the company and subsidiary bank.

Allan Funk, currently president and CEO of Grayson, and Blake Edwards, currently CFO of Grayson, will serve in the same capacities with the new company. Both Bank of Floyd and Grayson executives will make up the balance of the management team.

Cardinal Bankshares is a bank holding company headquartered in Floyd, Virginia, and is the parent company for Bank of Floyd.

Bank of Floyd is a community bank that serves the Roanoke and New River Valleys, as well as Floyd and Carroll Counties operating seven locations in Floyd, Hillsville, Roanoke, Salem, Christiansburg, Fairlawn and Willis. Bank of Floyd had USD 259m in assets as of December 31, 2015.

Grayson National Bank is a regional community bank committed to providing truly superior customer service.

Founded in 1900, Grayson National Bank maintains local ownership, local leadership and long-standing dedication to offering a full range of business and personal financial services in Grayson, Carroll, Wythe, Montgomery, city of Galax, and Alleghany County, NC.

In connection with the transaction, Raymond James and Associates, Inc. is acting as financial advisor and has provided a fairness opinion to Grayson, and Williams Mullen provided legal advice to Grayson. Gentry Locke served as legal advisor to Cardinal, and Banks Street Partners, LLC rendered a fairness opinion to Cardinal.

In addition, CCG Consulting Group acted as a strategic advisor to Cardinal.

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Publication:M2 EquityBites (EQB)
Date:May 10, 2016
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