First Bancorp in Southern Pines, North Carolina, has agreed to acquire the $1.8 billion-asset Select Bancorp in a $314 million, all-stock deal that will bolster First Bancorp’s position in a number of key in-state markets.
Select, of Dunn, North Carolina, has the No. 6 deposit market share in Fayetteville, home to the Army’s Fort Bragg — it has about 7% of the region’s $5.4 billion-asset deposit market, according to Federal Deposit Insurance Corp. statistics. Fayetteville’s population of 212,000 is expected to grow 5% over the next five years.
Select also has a presence in Charlotte, Raleigh and Wilmington. First Bancorp and Select disclosed the transaction after the market closed Tuesday.
“We see this as a highly-attractive fill-in acquisition,” Stephen Scouten, analyst for Piper Sandler, wrote Wednesday in a research note. “First Bancorp knows the Select team well and the cost saves should be readily achievable.”
The deal’s $314 million price tag works out to 185% of Select’s tangible book value. First Bancorp is projecting cost savings of 45%, with about three-fourths of that realized in 2022. Earnings accretion should top 10% thereafter, according to First Bancorp.
“There are a limited number of banks remaining in North Carolina, hence the price paid for Select,” Chris Marinac, director of research at Janney Montgomery Scott, wrote Wednesday in a note.
Select's shareholders will receive 0.408 First Bancorp Shares for each share of their Select common stock.
First Bancorp’s deal for Select “makes sense given the solid EPS accretion as well as the importance of playing defense within its strong North Carolina footprint,” Marinac wrote.
The combined company would have $9.6 billion in assets and $8 billion of deposits.
"Select Bank is a high-quality institution with a longstanding history of service and strong community banking relationships," First Bancorp CEO Richard Moore said Tuesday in a press release.
First Bancorp’s last bank acquisition was in May 2017, when it
Select reported first-quarter earnings of $6.3 million, up from $1.1 million a year earlier. CEO William Hedgepeth attributed the spike to its April 2020 acquisition of three branches in western North Carolina from First Citizens Bank & Trust Co. in Raleigh and its participation in the Small Business Administration’s Paycheck Protection Program.
"We have long admired First Bancorp, and our combined company will be positioned to capitalize on an enhanced presence in exceptional markets, talent, and financial strength,” Hedgepeth said in the release.
The deal is expected to close in the fourth quarter. The acquisition would dilute First Bancorp’s tangible book value by 3%; the company says it expects to earn back the dilution within two years.
