Crescent State Bank is poised to roughly double in size, considerably raising its profile throughout the region, by acquiring East Carolina Bank.
Raleigh-based Crescent announced Tuesday that it has agreed to acquire ECB Bancorp, the corporate parent of East Carolina Bank, which has 25 branches scattered across the eastern half of the state. The deal is valued at $51.6 million.
“We’ve been looking for opportunities to grow,” Scott Custer, CEO of Crescent Financial, said in an interview. “We believe this is the best strategic partner we could find, given the complementary nature of the markets they’re in, their business model.”
Custer described ECB as “a healthy bank, a bank that has weathered the storm of the past five years better than most.” ECB generated $965,000 in profit in the first half of this year, up from $61,000 a year ago.
Last year East Carolina announced that it had agreed to acquire seven Gateway Bank branches in North Carolina, including four in the Triangle. But it subsequently pulled the plug on that expansion when its plan to raise $80 million in a private stock offering fell through.
The combined bank will have about $2 billion in total assets and 45 branches. East Carolina, currently based in Engelhard, will contribute $900 million in assets.
The totals for the combined company include the previously announced merger between Crescent, which has 15 branches, and VantageSouth Bank, a Burlington-based bank with a network of five branches. Both Crescent and VantageSouth are owned by Piedmont Community Bank Holdings of Raleigh, which acquired an 88 percent ownership stake in Crescent in November.
The Crescent-VantageSouth merger is expected to be completed before the end of the year; the ECB deal is expected to close in the first quarter of 2013. The ECB deal is subject to regulatory and shareholder approval.
Crescent also announced that when the Crescent-Vantage merger is completed, the combined operation will assume the VantageSouth name. The VantageSouth brand also will endure after the ECB deal is completed.
Custer said he believes that the VantageSouth name “plays better in the marketplace. … There is more we can do more with the name Vantage. You can play off that name.
“You can have products,” he added, “that create an ad-Vantage for your clients.”
ECB shareholders will receive 3.55 shares of Crescent Financial stock for each share of ECB that they own. Based on Crescent’s average share price of $5 over the past five years, that amounts to $17.75 per share – a premium of about 50 percent over Monday’s closing price of $11.75 per share.
“It’s a premium to where they were trading, but it’s at a discount to their book” value, Custer said.
A company’s book value is its total assets minus liabilities, preferred stock and intangible assets. Custer said Crescent is paying 78 percent of book value.
After the deal is completed, Dwight Utz, president and CEO of ECB, will be chairman of what will become VantageSouth Bank and president of the corporate parent.
“Scott and I have built a great relationship over the last 90 days or so and we are excited to join … the team at Crescent,” Utz said during a conference call.
The two banks’ networks of branches have no overlap except in Wilmington, where Crescent and VantageSouth have offices near each other, Custer said.
Crescent is interested in further acquisitions down the road, but not any time soon.
“We’re pretty big on not getting ahead of our headlights, and we want to be sure that what we have already acquired and invested in is working well before we go to the next thing,” he said.