The North Carolina banking market rose above its Southeast neighbors for decades in large part because its financial institutions tended to be the buyer in a consolidating marketplace.
As recently as 2009, N.C.-based banks represented the top-five in terms of N.C. deposits, as well as 13 of the top 15 banks.
Times have changed.
By the end of the year, it is likely that only four of the top-10 banks in N.C. – in terms of deposits – will be based within the state. They are Bank of America Corp. of Charlotte, BB&T Corp. of Winston-Salem, First Citizens Bank and Trust Co. or Raleigh, and First Bancorp of Southern Pines.
Since October 2008, North Carolina has lost, or is about to lose, the following banks: Wachovia Corp., of Winston-Salem, then Charlotte; RBC Bank, of Rocky Mount, then Raleigh; Yadkin, of Elkin then Raleigh; CommunityOne, of Asheboro then Charlotte; NewBridge, of Lexington, then Greensboro; Capital Bank of Raleigh; BNC, of Thomasville, then High Point; Southern Community of Winston-Salem; Park Sterling of Charlotte; Bank of Granite Corp. of Granite Falls; Paragon of Raleigh; High Point Bank & Trust Co.; ASB of Asheville; Carolina Bank of Greensboro; and Bank of the Carolinas Corp. of Mocksville.
The tipping point was reached with Thursday’s announcement that Capital Bank Financial Corp. of Charlotte has agreed to be sold for $2.2 billion to First Horizon National Corp. of Memphis.
Capital’s potential sale represents the finale evolutionary step of private-equity firm North American Financial Holdings Inc.’s initial buying spree before going public through its purchase of Capital Bank of Raleigh.
Capital, based initially in Miami before moving to Charlotte in 2016, entered the Triad in 2012 through buying a struggling Southern Community Financial Corp. of Winston-Salem and its 22 branches for $52.5 million.
Capital Bank is eighth in N.C. deposits market share, according to 2016 Federal Deposit Insurance Corp. data.
The Capital deal represents the latest in a whirlwind of deals proposed in an industry environment in which super-community and regional banks are finding willing out-of-state buyers.
Just in the past year, F.N.B. Corp. of Pittsburgh spent $1.4 billion to buy Yadkin Financial Corp. of Raleigh, which has just completed a $456 million purchase of NewBridge Bancorp of Greensboro.
There’s the pending $1.9 billion sale of BNC Bancorp of High Point to Pinnacle Financial Partners Inc. of Nashville, Tenn.
Just in the past week: Park Sterling Corp. of Charlotte agreed to be sold to South State Corp. of Columbia, S.C., for $690.8 million; and Paragon Commercial Corp. of Raleigh agreed to be acquired by TowneBank of Hampton Roads, Va., for $323.7 million.
That doesn’t include Monday’s announcement that First Bancorp plans to spend $175 million to buy ASB Bancorp Inc. of Asheville.
There are three main drivers - not necessarily in any particular order - of recent acquisition activity of N.C. banks, said Peter Gwaltney, president and chief executive of N.C. Bankers Association.
"Desire for out-of-state banks to be or expand their presence in North Carolina because it is a highly desirable banking market," Gwaltney said.
"Acquiring banks have strong currency as a result of rising bank stock values, perhaps exacerbated by the Trump effect on bank stocks and equity markets in general."
Chris Marinac, managing principal with FIG Partners in Atlanta, said he believes the trend of N.C. community-bank deals is based primarily on the anticipated easing of federal banking regulations and tax reform boost that banks may get under the Trump administration, especially if the corporate tax rate is cut from 35 percent to 15 percent.
That scenario, in many instances, has bolstered the share prices and/or market capitalization of potential buyers and sellers since November.
Thus, North Carolina – the ninth largest state by population – has or will have a major regional bank presence from financial institutions based in Pittsburgh (F.N.B. Corp.), Nashville, Tenn., (Pinnacle Financial Partners), Memphis (First Horizon), Columbia, S.C. (South State Corp.), and Hampton Roads, Va. (TowneBank).
Gwaltney also said "regulatory burden and risk has increased the cost and complexity of banking.
"Banks of all sizes are seeking scale to shoulder the burden."
Tony Plath, a finance professor at UNC Charlotte, Plath said Capital and Park Sterling represent another example of "the continuing evolution of the banking industry away from traditional community banks, and a continuing trend where the original private-equity fueled consolidators of struggling community banks from the Great Recession execute their exit plans to sell themselves at a premium into large, regional southeastern banks."
Bank of the Carolinas, Bank of Granite, BNC, Capital, CommunityOne, NewBridge, Park Sterling, Southern Community and Yadkin all had private-equity group take significant ownership stakes between 2009 and 2012.
For example, one of BNC’s co-largest shareholders, New York private-equity firm Aquiline Capital Partners LLC, invested at least $46.8 million directly and participated in a $72.5 million capital offering in June 2012 along with 19 other new and existing investors.
Since 2009, BNC has made bank purchases and acquisitions in the four major N.C. and three major S.C. urban areas.
Regarding Yadkin, Lightyear Capital LLC and Stone Point Capital LLC each owned 7.2 percent of its shares, while Basswood Capital Management LLC owned 9.1 percent of NewBridge.
NewBridge had a three-bank buying spree after securing $56 million in new private-equity capital in November 2012. Yadkin gained $45 million in private-equity capital in October 2012.
Officials with F.N.B., Pinnacle, First Horizon, South State and TowneBank also said their deals would help create a formidable Southeast regional bank competitor.
However, most out-of-state banks that bought North Carolina-based banks have struggled to gain or maintain market share and deposits beyond what they initially acquired, based on a review of annual N.C. deposits data from the FDIC.
Over the past 12 years, those banks include: Wells Fargo & Co. (San Francisco); SunTrust Banks Inc. (Atlanta); PNC Financial Services Group Inc. (Pittsburgh); Fifth Third Bancorp (Cincinnati); Pacific Western Bancorp (Los Angeles); Capital Bank (Miami, now Charlotte); Bank of the Ozarks Inc. (Little Rock, Ark.); and First Horizon National Corp. (Memphis).
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