Investor group buys, recapitalizes North Carolina bank

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An investor group has bought Sound Bank in Morehead City, N.C.

The $366 million-asset Sound said in a press release Tuesday that it had completed a $100 million recapitalization that involved a private placement with funds tied to Patriot Financial Partners, FJ Capital Management and T. Rowe Price Associates.

As part of the recapitalization, West Town Bancorp in North Riverside, Ill., sold its majority stake in Sound to the group for $28.1 million, or 168% of the bank’s tangible common equity. West Town still owns about 4.9% of Sound’s voting common stock and holds a 9.9% equity interest.

The new owners plan to rebrand Sound as Dogwood State Bank and to enter the North Carolina markets of Raleigh and Charlotte later this year.

Sound also has a new leadership team made up of bankers who once planned to open a de novo bank in North Carolina.

Steven Jones is the new CEO, while Scott Custer is executive chairman. David Therit is the bank’s chief financial officer and Natasha Austin is chief administrative officer.

Two West Town directors will remain on Sound’s board.

“We believe that the bank is uniquely positioned to take advantage of significant dislocation in our markets created by the recent wave of North Carolina community bank acquisitions,” Jones said in the release.

“We have assembled a very experienced senior management team and board … who have successfully executed this type of growth plan in the past,” Jones added.

West Town, which bought Sound in August 2017 for $22.9 million, said it will recognize a $6.5 million pretax gain from the sale. The gain, along with the elimination of certain intangible assets, should increase West Town’s tangible book value per share by $4.28.

In connection to the recapitalization, Sound issued a warrant to West Town with a five-year exercise period that lets the company buy up to 99,900 shares of nonvoting common stock at $10 each.

“The recapitalization represents the successful monetization of our investment in Sound Bank with an over 20% return on investment in just over one and half years,” Eric Bergevin, West Town’s president and CEO, said in a separate release.

“We continue to remain committed to the Sound Bank franchise and will support its growth in North Carolina through our ongoing ownership and board representation,” Bergevin added.

Sandler O’Neill and Skadden, Arps, Slate, Meagher & Flom advised Sound on the private placement. Nelson Mullins Riley & Scarborough advised Sandler. Wyrick Robbins Yates & Ponton advised West Town; Raymond James issued a fairness opinion.

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