Though Flag Financial Corp. is based in Atlanta, the majority of its assets and branches are still in central and western Georgia, closer to its former home of LaGrange.
But once it completes its acquisition of the $673 million-asset First Capital Corp. of Norcross, Flag will be a much bigger player in its hometown.
Flag, which has assets of $840 million, announced late Thursday that it had agreed to buy First Capital for $135 million. It would be Flag's first acquisition since 1999, raise its branch count to 11 in the Atlanta area (it is now six), and more than double its deposit share the area.
Perhaps more important, Flag would gain a team of well-connected commercial lenders. Joseph W. Evans, its chairman and chief executive, said that would go a long way toward establishing Flag as a bank of choice for small-business owners and commercial developers.
Flag entered the Atlanta market three years ago when it bought six branches from the $1.2 billion-asset Encore Bank in Houston. It subsequently moved its headquarters to Atlanta after more than 70 years in LaGrange, near the Alabama border. The move to Atlanta coincided with the arrival of Mr. Evans, a longtime Atlanta-area banker who sold Century South Bank in Alpharetta to BB&T Corp. in 2001. Before he joined the company, it had concentrated on growing in smaller markets.
Flag had the branch network in place in Atlanta but did not have enough of the type of skilled lenders it needed to build its commercial loan portfolio there, Mr. Evans said. Buying First Capital will solve this problem, he said.
"They really have more business bankers than us, and we have more distribution outlets that need bankers to leverage them," he said. "And we caught them at the right time and decided to put a deal together."
The sale is to be completed in the fourth quarter. Flag would be one of just three community banks in the Atlanta area with more than $1 billion of assets.
With its higher lending limits, Mr. Evans said, Flag could easily compete with those banks for large small-business and middle-market loans that "are on the lower end of the regional banks' focus."
Another advantage to nearly doubling its size, he said, is that Flag could be more attractive to commercial lenders at regional banks who might want to return to community banking.
"I think our financial resources and technology will make us a target for talented regional bankers looking for a change," he said.
With the addition of the First Capital Bankers and the prospect of hiring more people away from large banks, Mr. Evans expects that most of Flag's growth in Atlanta will be organic. If it builds more branches, it will be to house more bankers and not an expansion for the sake of expansion, he said.
Flag has no other acquisitions planned and will make one down the road only if it can find a sizable bank with operations similar to its own, Mr. Evans said.
"We are very disciplined and very selective. Frankly, doing lots of small deals is just too mentally and physically exhausting," he said.
