Capital Bank Financial, a Miami company formed two years ago to buy distressed banks in the Southeast, has struck a deal to acquire Southern Community Financial (SCMF) in Winston-Salem, N.C., for $48.4 million.
Capital said in a news release Tuesday that it would pay roughly $2.88 per share for the $1.5 billion-asset Southern Community, which has 22 branches in North Carolina. The deal would create an $8.1 billion-asset company with roughly 165 branches stretching from southern Virginia to the Florida Keys.
Southern Community's shares soared on news of the deal. In heavy trading, the stock rose 35% on Tuesday, to $2.65. More than 450,00 shares traded hands, compared with three-month average volume of 20,000 shares.
"We are very excited to welcome our new Southern Community teammates to the Capital Bank family," Eugene Taylor, Capital's chairman and chief executive said in a news release. 'With Southern Community's attractive franchise and our strong access to capital, we will be well-positioned to help customers in all of the markets Southern Community has served so well."
Formerly known as North American Financial Holdings, the company changed its name late last year after it completed its acquisition of Capital Bank in Raleigh, N.C. Its deal for Southern Community would be its seventh since July 2010, when it took over three failed banks in Florida and South Carolina.
Capital is currently privately held, but it has filed a registration with the Securities and Exchange Commission to raise an additional $300 million in a public offering to go along with the roughly $900 million it has raised to date from private-equity investors.
The company said that it intends to use a mix of cash and newly issued stock to acquire Southern Community, with 60% of the total to be paid in stock. It also said that shareholders could receive an additional $1.30 per share in cash five years after the deal closes if the acquired Southern Community loan portfolio performs up to expectations.
Southern Community had been battered by losses on real estate loans in recent years, but it made a modest profit in 2011 as credit quality began to improve. The company earned $520,000 for the year, compared to a loss, of $25.7 million in 2010, and has now turned a profit in three straight quarters.
"This merger will make us stronger and more competitive, and that is rewarding for the many people who have been there for us during the good and challenging times," said F. Scott Bauer, Southern Community's president and CEO.
Capital said that two Southern Community directors, including founding director and chairman, Dr. William G. Ward, will join the boards of Capital Bank Financial and its subsidiary bank. The deal is expected to close in the second quarter.
Paul Davis, Editor, Community Banking, American Banker