Less than a year after its founder and chief executive was forced to resign for approving questionable loans, Integrity Financial Corp. in Hickory, N.C., has decided to sell itself.
The buyer, FNB Corp. of Asheboro, N.C., said it agreed to pay $124 million in cash and stock for the $668 million-asset Integrity.
It would be the largest acquisition in FNB's 98-year history and make FNB one of North Carolina's 10 largest banks by deposit share. The deal was announced Monday.
It would also end a trying chapter for Integrity that began last October, when an internal audit discovered some risky loans in the portfolio that had been approved by R. Steven Aaron. An investigation by outside accountants found improper default-risk classification on nearly $4 million of loans.
Mr. Aaron resigned and was replaced as CEO by W. Alex Hall Jr., who had been the president of one of Integrity's two subsidiaries, Catawba Valley Bank and First Gaston Bank. Integrity, which lost nearly $1 million in last year's third quarter, quickly cleaned up its loan portfolio but then hired an investment bank to look over its strategic options.
Mr. Hall, who is still the president of Catawba Valley Bank, did not return phone calls. Mr. Miller said that after considering other options to improve shareholder value, Integrity decided selling would be best.
Stockholders seemed to agree. Integrity's stock shot up 9.25% Monday, closing at $21.84 in heavy trading. FNB fell 5%, to $19.90.
For the $905 million-asset FNB, which has grown largely through branch start-ups and small acquisitions, buying the 10-year-old Integrity would be transformational. It would add 17 branches, all in new markets in western North Carolina, and move it from 18th place to eighth place in deposit share in the state, according to Federal Deposit Insurance Corp. statistics.
FNB's chief executive, Michael C. Miller, said the deal is large by FNB's standards but "a step in the right direction.
"This increased footprint in a greater portion of North Carolina will have benefits to our shareholders and our customer base," he said.
This is the second acquisition deal FNB has announced in 2005. In May it announced it was buying the $151 million-asset United Financial Inc. of Graham, N.C., and its subsidiary Alamance Bank for $24.6 million. FNB would have 41 branches and $1.9 billion of assets after completing the Integrity and United deals.
The $124 million is about 1.8 times Integrity's book value. Sellers with assets of $250 million and $1 billion are fetching much more - about 2.22 times book - in deals announced this year, according to Highline Banking Data Services.
Mr. Miller said that the Integrity branch network is along busy interstates near most of the growth in the western North Carolina. He said FNB plans to add more branches in this market after fully integrating Integrity.
The deal is expected to close in the second quarter of 2006; Integrity plans to consolidate Catawba Valley and First Gaston Bank before that, and in about a year FNB plans to merge its First National Bank and Trust with the two banks it is acquiring. It has not been decided what the combined entity would be named.
FNB plans to change its name to FNB United Corp. after buying Integrity. There is another FNB Corp. in nearby Christiansburg, Va., and there is an FNB Financial Services Corp. in Greensboro, N.C.
"There are just too many FNBs, and we are just trying to make a modest distinction," Mr. Miller said.
