NC bank M&A hits 5-year high as out-of-state buyers come calling

Bank M&A in North Carolina hit a five-year high amid the M&A doldrums.

Bluefield, Va.-based First Community Bankshares Inc.'s Nov. 18 announcement that it plans to acquire Mount Airy, N.C.-based Surrey Bancorp in a $115.5 million deal marked the fourth bank M&A deal in the state this year. By comparison, the state saw only two deals last year, one in 2020 and two in 2019, excluding canceled deals, according to S&P Global Market Intelligence data.

But while the number of deal announcements is up, the $2.35 billion in total assets across the four targeted banks lags last year's total of $2.58 billion across just two targets.

This article is part of S&P Global Market Intelligence's series of state profiles, which take an in-depth look at M&A and key banking metrics for banks and thrifts with less than $10 billion in assets.

NC targets draw out-of-state interest

Interestingly, all four buyers targeting North Carolina banks this year hail from out of state.

First Community Bankshares' Surrey Bancorp buy marked the company's fourth North Carolina bank deal and sixth whole-bank deal overall since 2008, including a failed-bank transaction in 2012.

The transaction is also one of the most expensive bank deals announced this year by both price-to-tangible common equity and price-to-earnings.

Pittsburgh-based F.N.B. Corp.'s $117.7 million purchase of Greenville, N.C.-based UB Bancorp is F.N.B.'s second whole-bank buy in the state since it announced a $1.49 billion deal for Raleigh, N.C.-based Yadkin Financial Corp. in July 2016.

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Meanwhile, Harrogate, Tenn.-based Commercial Bancgroup Inc.'s deal to acquire about 65% of Gastonia, N.C.-based AB&T Financial Corp., which was announced Oct. 29, is the company's first M&A foray in North Carolina.

Similarly, Fairmont, W.Va.-based MVB Financial Corp.'s $98.1 million acquisition of Raleigh, N.C.-based Integrated Financial Holdings Inc. marked its first whole-bank buy outside its home state and only its second M&A deal ever, including a failed-bank transaction in 2020.

NC banks growing faster but less profitably than peers

During the third quarter, North Carolina's community banks and thrifts under $10 billion in assets were less profitable than both their Southeastern and national peers, posting a median 9.71% return on average equity and a median 3.69% net interest margin.

However, the state's banks did best on both the regional and national marks for median deposit and loan growth year over year.

Top 25 community banks set for a shake-up

Once the deals announced this year close, Union Bank, the state's ninth-largest community bank, Surrey Bank & Trust, the state's 17th-largest community bank, and Alliance Bank & Trust Co., North Carolina's 25th-largest community bank, will be under new management.

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As of late November, there were only 39 North Carolina-based community banks in operation, according to S&P Global Market Intelligence data.