NewBridge Taking Small Capital Hit on N.C. Bank Deal

It can be a bit tricky figuring out just how much NewBridge Bancorp (NBBC) in Greensboro, N.C., paid for Security Savings Bank in Southport, N.C.

NewBridge touted in a press release late Thursday that the deal, which included heavy involvement by North Carolina's banking regulator, has no transaction value. But a closer examination reveals that there are real costs associated with the purchase.

The $1.7 billion-asset company said in presentation materials filed with the Securities and Exchange Commission that its ratio of tangible common equity to total assets would be roughly 7.2% after taking the purchase into account.

NewBridge's tangible common equity ratio was 8.5% at March 31, says William Wallace, an analyst at Raymond James. He says two factors explain the decline in that ratio: a roughly $1.7 million decline in tangible common equity and $224 million in new assets from the acquisition. However, Wallace says the deal could boost NewBridge's annual earnings per share by up to 10 cents.

NewBridge also noted in the filing that it expects to incur $1.8 million in acquisition costs.

"We have to use our existing capital to support the assets we are acquiring," Pressley Ridgill, NewBridge's chief executive, wrote in an email. "This transaction will leverage our balance sheet, but the return to our shareholders looks very attractive."

Several events are poised to cut into tangible common equity, including a $6.9 million loan portfolio mark down involving 4.4% of Security Savings' loans. NewBridge also disclosed that it would record a $4.3 million mark down on the mutual thrift's other real estate owned, among other things.

Nearly a tenth of Security Savings' assets were classified as nonperforming at March 31.

NewBridge said in its filing that it should take less than a year to get its tangible book value back to levels that existed before the acquisition. Security South also adds $156 million in loans and an opportunity to increase the average yield in NewBridge's loan portfolio, the filing said.

Cost cutting also factors heavily in the deal's metrics. NewBridge estimated that it could cut half of the existing expenses at Southport Savings. The mutual's noninterest expenses total $9.3 million last year, including $3.4 million in salaries and employee expenses. Security Savings also spent $836,000 last year for data processing and $698,000 for consulting and advisory services.

NewBridge also used its filing to state that it is ready to become more aggressive with acquisitions after exiting the Troubled Asset Relief Program. The Security Savings deal establishes NewBridge "as an active acquirer in the Carolinas," the filing states.

A spokeswoman for the North Carolina Commissioner of Banks declined to comment, citing state and federal confidentiality laws.

A spokeswoman for the North Carolina Commissioner of Banks said the agency does not comment on pending acquisitions. Regulatory approval is required before the deal’s expected completion in the third quarter.