Farmers bank gets 1st Va. offer

July 02, 1994|By Ross Hetrick and Liz Atwood | Ross Hetrick and Liz Atwood,Sun Staff Writers

Farmers National Bancorp. of Annapolis, the holding company for the dominant and oldest bank in Anne Arundel County, is slated to be sold to First Virginia Bank in a stock and cash deal valued at $151.9 million.

"They are a very sound bank, with good lending principles," said Richard F. Bowman, chief financial officer of First Virginia. "We viewed that market as highly desirable."

A $7.2 billion regional bank based in Falls Church, First Virginia already has 37 branches in Maryland. It will be acquiring a bank that has 32 percent of the banking market in Anne Arundel County, according to John W. Coffey, a banking analyst for Robinson Humphrey Co. Inc., an Atlanta-based stockbrokerage.

"It looks to us like a perfect fit," he said, noting that First Virginia has no branches in that area.

First Virginia is "one of the highest-quality banks in the Southeast, if not in the United States," Mr. Coffey said. The bank is also known for its emphasis on consumer lending, which could result in consumer lending being substantially boosted at Farmers, he said. Consumer loans now make up only 8.5 percent of Farmers' loan portfolio.

"It looks like a tremendous revenue opportunity there," Mr. Coffey said.

He also said the price being paid for Farmers National is fair and does not expect it to cause dilution of First Virginia stock. The price is 2.03 times the estimated book value -- which is the bank's assets minus liabilities and intangible assets.

Mr. Bowman of First Virginia said banks in the first quarter of the year sold for an average price of 1.75 times book value. But this includes smaller banks and troubled institutions, he said. For banks costing more than $100 million and of "superior quality," the prices were in the range of 2 to 2.25 times book value, Mr. Bowman said.

"Certainly Farmers National would be in this category," he said.

Mr. Bowman said the acquisition is scheduled to be completed by the end of the year.

Farmers National, which has $709 million in assets, is the holding company for three banks -- Farmers National Bank of Maryland, which has 15 offices in Annapolis and Anne Arundel County; Atlantic National Bank, which has four offices in Ocean City and Salisbury; and Caroline County Bank, which has one office in Greensboro.

Neither Farmers National Chairman Charles L. Schelberg nor President and Chief Executive Officer John M. Suit II were available for comment yesterday.

Norma K. Behlke, an assistant vice president and executive secretary to Mr. Suit, explained that First Virginia made an offer -- the bank couldn't refuse.

"We didn't go looking for an offer," she said. "But we have a fiduciary responsibility to the shareholders."

First Virginia was not the only suitor for Farmers National. Crestar Financial Corp., a Richmond-based regional bank, was also in the running, Mr. Bowman said.

Robert F. Norfleet, executive vice president and senior credit officer for Crestar, said the bank holding company does not comment on its acquisition efforts.

Farmers National was founded in 1805 with assets of $51,856. Its first president, John Muir, fought in the Revolutionary War.

The bank, which has managed to survive panics, recessions and the Depression without its depositors' losing money, has held a special place in the minds of many Annapolis residents.

Annapolis Mayor Alfred A. Hopkins remembers getting a mortgage loan from Farmers in 1950, when he was a 25-year-old produce manager at a local A&P store.

"They trusted me when no one else would," Mr. Hopkins said. "This is why I've always done all my banking there."

Under the agreement, which is still subject to a due diligence review and approval by Farmers National stockholders, the 1,400 shareholders will be offered 1.5 shares of First Virginia Stock for each of the 2.7 million outstanding shares of Farmers National.

For those who do not want stock, First Virginia will pay $58.53 for each share, up to 30 percent of the outstanding stock.

First Virginia stock yesterday closed at $37.75, up 87.5 cents. Farmers National, which is thinly traded in the over-the-counter market, has been trading between $36 and $37.50 a share in the last week. At these prices, shareholders would receive $56.625 worth of First Virginia stock for one share of Farmers National stock -- or 51 percent above Farmers' highest recent stock price.

Mr. Bowman of First Virginia said Farmers National will retain its board of directors for its three banks, under the company's policy of retaining locally based operations.

The name will also be kept for at least four years, though First Virginia's red "V" logo will be added to the bank's signs.

However, Farmers National will drop its national banking charter -- along with the word National from its name -- in keeping with First Virginia's policy of operating only state-chartered banks.

Farmers National has been a nationally chartered bank since 1865, when the National Banking Act was passed, creating the )) country's national banking system.

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