First Tennessee Bank is buying Capital Bank, expanding its Triangle presence

The corporate parent of First Tennessee Bank has agreed to acquire Charlotte-based Capital Bank, a deal that will create the fourth-largest regional bank in the Southeast and consolidate the two banks’ presence in the Triangle.

First Horizon said the deal would accelerate its plans to expand in high-growth Southeastern markets.

The stock and cash deal, valued at $2.2 billion, will create a bank with more than 360 branches in the Carolinas, Tennessee, Florida and Virginia.

First Tennessee, owned by Memphis-based First Horizon National, has $30 billion in assets and 170 branches, including four in the Triangle, according to Federal Deposit Insurance Corp. data. It opened a Raleigh branch in 2013 and expanded its local network when it acquired Raleigh-based TrustAtlantic Bank for $80 million in 2015.

Capital Bank has $10 billion in assets and 193 branches, including 14 in the Triangle, according to the FDIC.

Although the corporate parent of First Tennessee is the acquirer, its local branches will be re-branded Capital Bank. The announcement of the deal, issued Thursday morning, disclosed that the First Tennessee brand will prevail in Tennessee – where the bank has a 153-year history – but its branches outside Tennessee will take the Capital Bank name.

Since the recession began at least nine community banks with either a Triangle headquarters or a local presence have been acquired, or have agreed to be acquired, by larger competitors.

Consolidation is running rampant through the banking industry because of the added cost of regulations imposed since the recession, bankers say. Just last week Raleigh-based Paragon Bank agreed to be acquired by one of the largest banks headquartered in Virginia in an all-stock deal valued at $323.7 million.

The current version of Capital Bank got its start in 2009 when two former Bank of America executives, including former Vice Chairman Gene Taylor, formed North American Financial Holdings and raised $900 million from investors to acquire troubled banks.

Its first acquisition was Capital Bank, which was formed in 1997 in Raleigh and quickly grew to become one of the Triangle’s most successful community banks with 32 branches across the state. But that Capital Bank fell on hard times when the recession hit. North American ultimately became Capital Bank Financial after acquiring the bank and adopted the Capital Bank brand for its subsequent acquisitions.

Banking executive Jim Beck, the chairman of the Triangle market for First Tennessee, also has ties to the original, Raleigh-based Capital Bank. He was CEO of Capital Bank before becoming a founder and CEO of TrustAtlantic.

First Horizon spokeswoman Amy Tharrington said that after the deal closes, which is expected in the fourth quarter, the bank will dive into whether it makes sense to close any Triangle branches.

In the meantime, she said, “Capital was in the process of closing 18 branches this year throughout their footprint. That process will continue.”

Information on whether any of those 18 Capital branches scheduled for closure are in the Triangle wasn’t immediately available.

Capital Bank shareholders will receive 1.75 First Horizon shares and $7.90 in cash for each Capital Bank share – which will give them about $411 million in cash plus a 29 percent ownership stake in First Horizon.

Gene Taylor, Capital Bank’s chairman and CEO, will become vice chairman of First Horizon.

The deal is expected to close in the fourth quarter.

This story was originally published May 4, 2017 at 10:54 AM with the headline "First Tennessee Bank is buying Capital Bank, expanding its Triangle presence."