Integrated Financial finds new buyer in Capital Bancorp

Raleigh, North Carolina-based Consolidated Financial Holdings has agreed to sell itself to Capital Bancorp.

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Capital Bancorp of Rockville, Maryland, signed a $66 million deal to acquire Integrated Financial Holdings of Raleigh, North Carolina. The cash-and-stock deal is part of Capital Bancorp’s expansion of its commercial and government-guaranteed lending business.

The deal, expected to close in the second half of this year, will provide Capital with $548 million of Integrated’s Windsor Advantage, a Small Business Administration and USDA loan origination and servicing business. The company has served more than $2 billion in clients. loan.

Integrated’s “expertise in originating and servicing USDA and Small Business Administration loans aligns well with our strategic objectives and will enable us to serve markets with significant need and growth potential,” said the $2.2 billion Capital Chief Executive Ed Barry announced the acquisition Thursday.

The seller is also the parent company of West Town Bank & Trust, an Illinois-chartered bank operating in the greater Chicago area.

Integrated has been seeking a buyer to gain the scale and resources to further expand its nationwide lending facilities. Signed agreement to sell to MVB Financial in Fairmont, West Virginia, but the companies called off the deal last year as area banks failed and financial stocks came under intense pressure.

MVB agrees to acquire Integrated for $98 million in stock Accelerate growth Its government-guaranteed loan business.But last spring, in Silicon Valley Bank and the Failure of Signature Bank In March, First Republic Bank collapsed in May.

These failures compounded the challenges posed by soaring inflation and interest rates. When the deal was called off last May, MVB’s shares were down more than 30% from early March (before the initial failure). The plunge will slash the $98 million price tag given that MVB used its shares as currency to buy Integrated, which closed half of what it planned to do in the first half of last year.

MVB CEO Larry Mazza said in an interview at the time that sellers did not find the lower price acceptable and that MVB did not like the idea of ​​effectively leveraging its stock at a depressed price. This was due to industry factors, not its own performance.

“It just didn’t make sense financially,” Maza said.

Here are a few of them Canceled deals last year.

Since then, however, bank stocks Recovered most of the land They failed after failure, analysts More transactions are expected in the future.

While high interest rates remain a “barrier” to deals, the fallout from the failure is largely behind the industry, Piper Sandler analysts said in a report on Thursday. This is because they make it difficult for sellers to understand the cost of financing as well as the quality of their credit. Whereas higher interest rates push up deposit outlays and create greater risk of defaults on floating-rate loans. However, Piper analysts said that negotiations are accelerating as banks now expect a rate cut in the second half of this year and will agree on it, citing comments from Fed policymakers after their March meeting.

Integrated Chairman and CEO Marc McConnell said in a press release that by merging with Capital now, it will gain the leverage it needs to compete with larger lenders. “With our larger balance sheet and our comprehensive loan and deposit collection capabilities, we believe we can secure and solidify our position as the national leader in government-guaranteed lending.”

Capital said it expects the deal to generate 17% earnings per share growth in 2025. A 5% tangible book value dilution is expected to be recovered within two years.

As part of the deal, McConnell will join the boards of Capital and its banking unit. Riddick Skinner, Integrated’s executive vice president of government-guaranteed lending, will lead the same business unit at Capital Bank.

Integrated chief strategist Mike Breckheimer will join Capital Bank as head of Windsor Advantage; Integrated chief operating officer Melissa Marsal will also join Capital Bank in a leadership role.

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