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Two banks that are majority-owned by Piedmont Community Bank Holdings in Raleigh, N.C., have agreed to merge.
August 13 -
The more than $500 million that investors pumped into banks in the Tar Heel State has turned marginal players into consolidators, provided a way to absorb failures and instilled new discipline.
June 14 -
A shareholder group that includes a former ECB director has urged directors of the Engelhard, N.C., company to remove Dwight Utz as president and chief executive.
June 12 -
More than 20 banks in the state are still in the Treasury Department's program with limited options to get out. Selling could be the best solution, industry observers say.
March 29
Dwight Utz had been evaluating ways to grow ECB Bancorp (ECBE) and improve shareholder value; now he realizes that selling the Engelhard, N.C., company was the best option.
The $917 million-asset company announced Tuesday that it would sell to Crescent Financial Bancshares (CRFN) in Raleigh, N.C., in a $51.6 million all-stock deal, or roughly $17.75 a share. Utz will become the buyer's president and chairman of the combined bank. Priced at 78% of ECB's tangible book value, the companies are selling the deal — set to close early next year — on its near-term growth potential.
"It would have taken a very long time to get the shareholders to where we are today," Utz, ECB's president and chief executive, said in an interview Tuesday. "We would have had to complete a significant capital raise that would have been highly dilutive. … To get to a share price of almost $18 would have been a long haul."
The deal caps what has been a topsy-turvy 12 months for ECB. Last year, the company announced plans to raise $80 million in capital with help from a consortium of private equity funds. ECB planned to use part of the funds to buy several branches in North Carolina from Hampton Roads Bankshares (HMPR) in Norfolk, Va.
The infusion fell through in February because one of the planned investors was unable to get regulatory approval. The branch deal unraveled shortly thereafter.
In the meantime, Utz met Scott Custer, the chief executive of Crescent, which is substantially owned by Piedmont Community Bank Holdings, a
"We had two unsuccessful transactions and when our board was back in strategic planning discussions, we said we would look at opportunities that would continue to create shareholder value," Utz said. "Scott and I had created a dialog, and it was a discussion we decided that we wanted to move forward. That led us to where we are today."
Lee Burrows, the chief executive of Atlanta advisory firm Banks Street Partners, says he was not surprised by the announcement.
"After the unsuccessful [capital] raise, it is somewhat natural to see what the next best alternative is," says Burrows, who has ties to a number of North Carolina banks. ECB was "restricted in their growth. Their credit has held up better than most, but it was going to be a long way before they saw any asset growth."
During a conference call with investors Tuesday, Custer said the deal is a good fit for Crescent. There is little overlap in the companies' branches. Crescent also expects the acquisition to immediately enhance its earnings and tangible book value. Custer said both companies have strengths that can be leveraged across the combined company, such as ECB's agricultural lending operations.
"The banks complement each other so well as far as having similar business models and with respect to our balance sheets," Custer said in an interview after the call. "ECB has a great core deposit franchise and we have the ability to deploy those in more rapidly growing markets."
Custer, who oversaw Piedmont Community's creation, said the ECB deal completes the deployment of the $155 million the company raised in 2009 for acquisitions. The private-equity partners are committed to making more investments as Piedmont Community expands in North Carolina, South Carolina and Virginia.
The ECB deal still requires shareholder approval. In June, the Gibbs family, which owns 13% of ECB's common stock,
Utz said the deal was not motivated by the Gibbs family's pressure, though Utz and Custer plan to reach out to the family.
"We think this is a significant value proposition for our shareholders, but I just know what their reaction will be," Utz said. "Scott and I will be proactively reaching out to the Gibbs Estate. … That is on our schedule."
