Another homegrown bank has been bought. Here’s why you should care

The wave of consolidation rippling through the banking industry has claimed another Triangle bank. Four Oaks Bank, a century-old institution based in Johnston County with 14 branches, is being acquired by a larger regional bank based in Georgia in a deal valued at $124 million.

Four Oaks Bank is being acquired by the corporate parent of United Community Bank, which has $10.7 billion in assets and 134 branches in Georgia, the Carolinas and Tennessee. Four Oaks will operate under the United Community Bank brand when the deal is completed, which is expected to happen in the fourth quarter.

Four Oaks is the second Triangle-based bank to be snapped up this year. In April, Raleigh-based Paragon Bank, which has three branches but outsized assets totaling $1.55 billion, agreed to be acquired by Towne Bank, one of the largest banks with headquarters in Virginia, in a deal valued at $323.7 million.

Two other North Carolina-based banks with a significant presence in the Triangle – Bank of North Carolina and Capital Bank – also agreed to be acquired this year.

United CEO Jimmy Tallent said in an interview that acquiring Four Oaks complements its branch network in the western half of North Carolina.

“Raleigh is a very dynamic market,” he said. “It’s one of the strongest and fastest-growing markets in the country.”

Tallent also said United expects to benefit from the wave of bank consolidations across the state, and especially in the Raleigh market. He said United’s focus on customer service should help it attract local bankers now working at other companies that have been acquired by out-of-state banks.

J.D. Power’s bank satisfaction survey has ranked United Community Bank tops in customer satisfaction among Southeast banks for four consecutive years.

United’s investor presentation, featured on its website, notes that 10 of the 15 banks with headquarters in the Raleigh metropolitan area a decade ago have been acquired or exited the market. That tally doesn’t count Four Oaks Bank, which would be No. 11.

Tallent said Four Oaks mirrors United’s attention to customer service.

The disappearing act among local community banks, which mirrors a national trend, has raised concerns.

Ray Grace, the state’s banking commissioner, said in an interview last year that even though community banks have a relatively small share of total banking assets, they make the lion’s share of small-business loans.

He said community banks have a different approach to lending.

“They are relationship lenders. ... Community bankers know their customers very well,” Grace said. “That’s one of the reasons that, during the downturn, the losses in a lot of community bank portfolios were less than the corresponding very large banks.”

Still, the average Triangle consumer shouldn’t be affected by the consolidation, said Peter Gwaltney, president and CEO of the N.C. Bankers Association.

“There is the same level of competition for loans, deposits, and all the services banks offer,” he said. “If anything, these larger banks bring a more robust offering of services because of their sheer size.”

Tallent said United Community doesn’t operate like a single bank with 130 branches. Rather, it operates as if it is 30 different community banks – each with its own market president – with 130 locations.

“Our whole mission is, we want to act small. We want to be close to the customer,” he said.

Tallent said he hopes that Four Oaks CEO David Rupp and his executive team will remain with the bank once the acquisition is completed, although what roles they might play hasn’t been worked out.

“We are really impressed with David and his senior management team,” Tallent said. “Any time you acquire a bank you acquire a customer base, but more importantly, you acquire the bankers.”

Rupp said he intends to stay on after the sale is completed to ensure that, a year from now, customers and shareholders alike will view the deal as good for them.

Tallent also said that United Community plans to keep all of Four Oak’s branches and all of the “customer-facing” employees at the branches. But there will be “some reductions” – how many hasn’t been determined – affecting back-office employees who duplicate functions already handled by United Community employees. Workers whose jobs are eliminated, he added, may be able to fill other roles at the bank.

Tallent also said United Community will maintain the tradition of community involvement established by Four Oaks.

Community, he noted, is “our middle name.”

About four months ago, Rupp said, Four Oaks’ board of directors initiated a review of its strategic options after deciding that the bank needed “more size, more scale, more resources in order to compete.” That review, he said, led to the conclusion that Four Oaks needed to team up with a larger bank.

Four Oaks shareholders will receive .6178 shares of United stock, valued at $16.36 based on Friday’s closing price, plus $1.90 in cash for each share of stock they own. That $18.26 total compensation marks a 24 percent premium from Four Oaks’ closing price on Friday of $14.78.

Four Oaks shares were trading at $17.99, up $2.81, Tuesday afternoon.

Four Oaks reported first-quarter net income of $1.2 million, or 18 cents per share, up from $831,000 a year ago. For all of 2016 Four Oaks reported net income of $6.9 million.

This story was originally published June 27, 2017 at 10:50 AM with the headline "Another homegrown bank has been bought. Here’s why you should care."