Battered by defaults on real estate loans, FNB United Corp. of Asheboro, N.C. reported a loss of nearly $45 million in the first quarter and says that it is likely to fail if a previously announced recapitalization plan falls through.
In an earnings announcement Monday, the $1.9 billion-asset company said that it was designated "critically undercapitalized" on April 29, three days after it announced a complex transaction in which would receive a $310 million capital injection from private-equity firms and other investors and use a portion of the proceeds to buy another struggling bank, Bank of Granite Corp. in Granite Falls, N.C.
While two private equity groups, the Carlyle Group and Oak Hill Capital Partners, have agreed to invest $155 million, the deal hinges on their ability to raise the rest from other investors and that is not guaranteed, FNB United said in its quarterly report filed with the Securities and Exchange Commission.
"The company is working diligently to reach agreement with additional investors; however there are no assurances that the company will succeed," FNB United said. The company added that if it fails to meet its capital-raising targets, its bank subsidiary, CommunityOne Bank, is likely to be placed into receivership by the Federal Deposit Insurance Corp.
The $44.7 million FNB United lost in the first quarter was more than 10 times what it lost in the same period a year earlier. At March 31, nearly 20% of its assets were nonperforming, compared to 11.91% a year earlier.
Still, while credit-quality problems persist, one top Carlyle executive said he is confident that the recapitalization plan and subsequent acquisition of Bank of Granite will go through. In an interview with the Charlotte Observer, Jim Burr, a Carlyle managing director, said that the capital-raising plan is "going well" and that it has "garnered a lot of interest" from outside investors.
Burr did not say how long it would take to raise the remaining capital. FNB United has said that it expects to complete the deal for Bank of Granite in the third quarter.