After seeing just one bank M&A deal announcement in 2020, North Carolina saw two deals in the span of a week in 2021.
The activity in the Tar Heel State comes at a time when bank mergers nationwide have picked up after slowing down in 2020 partly because of the economic uncertainty stemming from the COVID-19 pandemic. One of the recent deals in North Carolina has the potential to create the state's biggest community bank, which includes institutions with less than $10 billion in assets.
On June 1, Southern Pines, N.C.-based First Bancorp, parent company of North Carolina's second-largest community bank First Bank, announced that it would acquire Dunn, N.C.-based Select Bancorp Inc., parent of the state's sixth-largest community bank. Once the deal closes, the combined company will have just shy of $10 billion in assets, which would make it the state's largest bank below that threshold.
With a deal value of $314.3 million, First Bancorp's acquisition is the largest bank deal announcement with a North Carolina target since May 2017 when Memphis, Tenn.-based First Horizon Corp. announced it would acquire Charlotte-based Capital Bank Financial Corp. for $2.19 billion.
The first 2021 deal in North Carolina came on May 27 when Blairsville, Ga.-based United Community Banks Inc. announced its intention to acquire Cornelius-based Aquesta Financial Holdings Inc., holding company of the state's 14th-largest community bank by assets, for $129.2 million.
This is United Community's second North Carolina bank acquisition in four years.
Overall, the state's community banks lagged the broader industry during the first quarter in four of the six major banking metrics examined by S&P Global Market Intelligence. The state's median return on average equity was 7.15%, compared to 10.68% for the nation as a whole. Similarly, the median net interest margin among North Carolina's community banks was 3.30%, 6 basis points lower than the national metric.
However, both loan growth and deposit growth outpaced the national median at 8.0% and 29.0%, respectively, versus 6.8% and 22.1% for the entire U.S.
Wilmington-based Live Oak Banking Co., currently North Carolina's largest community bank by assets, beat the state median in five of the six financial metrics examined for the first quarter. Live Oak only came up short in credit quality, as its 2.06% nonperforming assets ratio was significantly higher than the state community bank median of 0.57% as of March 31.
Incorporated in 2008, Live Oak has a model that differs from many other community banks. The company has only one bank branch and lends mostly to small businesses across the U.S. At the end of March, Live Oak reported $1.45 billion in Paycheck Protection Program loans, which helped push its total loans higher by 71.3% year over year.
Forty-two bank branches were closed in North Carolina in the first quarter, while only 10 were opened. Truist Financial Corp. led the industry with 24 branch closures in the state last quarter, while Wells Fargo & Co. closed 11. Over the last 12 months to March 31, 128 North Carolina bank branches were closed and 51 opened.
To view a spreadsheet containing first-quarter 2021 financial information for North Carolina community banks, click here.