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After struggling in recent years, a pair of North Carolina banks with more than two centuries of combined service are merging.
News of the merger came just ahead of a Department of Justice announcement that the future banking brand for both financial institutions agreed to pay a $400,000 restitution settlement after it failed to detect a $40-million Ponzi scheme operated through its accounts.
Merger details announced Wednesday reveal long-time Hickory Metro financial institution Bank of Granite will become part of Asheboro-based CommunityOne Bank and its parent company FNB United Corp. After the merger is completed in the third quarter of 2011, Bank of Granite will operate under FNB United Corp., and the company will be headquartered in Asheboro. While both banks will run separately until an unannounced future date, all bank offices will ultimately operate under the current CommunityOne Bank brand.
The merger means the community banking companies will consolidate more than $5 billion in assets and deposits, as well as 63 banking offices.
The deal also includes a cash infusion of $155 million into FNB United's common stock by two private equity firms, The Carlyle Group and Oak Hill Capital Partners.
The merger is dependent upon shareholder and regulatory approval.
"Bank of Granite and CommunityOne share many synergies, including the top priority of providing excellent and reliable banking services to our local communities," Bank of Granite Chairman John Bray said in a Wednesday morning press release. "Both institutions have enjoyed great successes and weathered challenging times for more than a century, and the announcements today will help position both companies for the future."
Founded in Granite Falls in 1906, Bank of Granite operates 18 banking offices in seven N.C. counties, including six in Catawba County. Among those are banking offices in Newton, Conover, Mountain View and the Springs Road community.
FNB United Corp, the parent company of CommunityOne operates 45 offices in 38 communities throughout North Carolina. CommunityOne has two Catawba County locations, including one in Newton.
The merged banking operations will be led by a new management team, including a new board of directors that bears little resemblance to the banks' current leadership.
Current First Union Corp. Operating Committee member Brian Simpson will serve as chief operating officer, and former Wachovia and First Union banking executive Bob Reid will serve as president. The new management board includes two FNB United and one Bank of Granite legacy board members, but otherwise the leadership panel is void of other faces previously tied to the banks. Instead, the new board will include one representative each from The Carlyle Group and Oak Hill Capital Partners, as well as Austin Adams, chief information officer, JP Morgan Chase, BankOne and First Union; Jerry Licari. national banking practice leader, KPMG LLP; Chan Martin, retired treasurer and senior risk executive, Bank of America; and Jerry Schmitt, former asset/liability committee chairman, First Union.
According to terms of the agreement, Bank of Granite shareholders will receive 3.375 shares of FNB's common stock in exchange for each share of Bank of Granite stock they own immediately prior to the merger.
At the close of business Wednesday, stock values for both Bank of Granite (GRAN) and FNB United (FNBN) spiked on the NASDAQ. GRAN climbed more than 58 percent to 85.5 cents per share, and FNBN climbed 67 percent to 41.8 cents per share.