First Citizens Bank is adding a dozen branches in Western North Carolina by acquiring the corporate parent of Mountain 1st Bank & Trust, a struggling bank based in Hendersonville.
“This is a great opportunity for us to grow our franchise in Western North Carolina,” First Citizens spokeswoman Barbara Thompson said.
“We have a strong branch network and customer base there.”
Today Raleigh-based First Citizens has 402 branches in 17 states, including 259 across North Carolina.
The deal announced Wednesday, which is legally defined as a merger, calls for Raleigh-based First Citizens to pay just $10 million for Mountain 1st – and only $2 million of that goes to shareholders.
The other $8 million goes to the U.S. Treasury to pay off funds that Mountain 1st received under the federal bailout program for banks, the Troubled Asset Relief Program.
Mountain 1st has $692 million in deposits and was profitable in 2012 and the first half of this year, but it has been under the gun to raise additional capital since 2010, when it entered into a consent order with state and federal regulators.
The bank reported in a recent Securities and Exchange Commission filing that “the company’s low capital ratios have placed it in a weakened position to respond to adverse unforeseen events in the future.”
Mountain 1st also noted that failure to raise substantial capital could result in the bank being taken over by regulators.
“As you would imagine, we have pursued every avenue available to us to raise capital,” Mountain 1st CEO Michael Mayer said.
Mayer said that First Citizens’ strong track record made the deal “very attractive.”
Since 2009, First Citizens has exercised its financial muscle by acquiring a half-dozen failed banks that had been taken over by regulators.
Those deals were covered by loss-share agreements between First Citizens and the Federal Deposit Insurance Corp. that offer the bank protection against losses.
The Mountain 1st deal is different in that it hadn’t been taken over and, as a result, there is no loss-share agreement.
But Thompson said the lack of such a pact wasn’t a concern.
“We are very confident with what we are going to be able to do with this merger in that region of the state,” she said.
The deal is expected to close no later than the first quarter of next year, subject to regulatory approval and the approval of the shareholders of Mountain 1st’s corporate parent, 1st Financial Services Corp. The Mountain 1st branches will operate under the First Citizens banner when the deal is completed.
Mayer said of the upcoming shareholders’ vote: “We’re confident they will see the value in merging our company with First Citizens.”
Mountain 1st has $692 million in assets, $669 million in deposits and $363 million in loans.
First Citizens has $21 billion in assets.
First Citizens’ shares closed Wednesday at $204.30, up $1.80. Its shares have risen 25 percent this year.