United Community Banks in Greenville, South Carolina, moved to fill a conspicuous gap in its North Carolina footprint Thursday, agreeing to pay $131 million in cash and stock for Aquesta Financial Holdings in Cornelius.
Cornelius is a suburb of Charlotte, where the $18.6 billion-asset United Community has been building its presence with mortgage and commercial lending teams, Chairman and CEO Lynn Harton said in a press release.
“This transaction is consistent with our desire to expand into attractive and fast-growing markets that we know well,” Harton said.
The $752 million-asset Aquesta would give United Community seven branches in metropolitan Charlotte as well as a location in Wilmington, North Carolina.
Aquesta is an active Small Business Administration 7(a) lender, generating $690,000 in noninterest income during the first quarter through loan sales. United Community ranks among the top 50 in 7(a) lending, so adding the Aquesta team would likely boost its prospects in 2022, as 7(a) and other regular SBA loan programs are expected to continue their rapid growth into next year.
United Community’s deal for Aquesta is expected to close in the fourth quarter.
While the price United Community is paying appears rich on its face — more than double tangible book value and a 12% core deposit premium — it’s the cost of doing business to buy into the fast-growing Charlotte market, Chris Marinac, director of research at Janney Montgomery Scott, wrote in a research note published Thursday.
Charlotte’s population is 2.7 million and is expected to grow about 7% over the next five years, according to United Community.
“We feel Charlotte is one of the fastest growing metropolitan statistical areas in the country,” Marinac wrote. “Also, United Community plays defense in an important competitive market by not allowing another competitor to win incremental share.”
United Community expects earnings-per-share accretion of 6 cents to 9 cents in 2022, depending on the mix of cash and stock Aquesta investors select. United Community has agreed to pay up to 30% of the total consideration in cash.
United Community reported earnings per share of 66 cents in 2020.
Aquesta reported net income of $2.5 million for the three months that ended March 31.
“From the beginning, we have focused on developing a business model with a focus on relationship banking in Charlotte and other key markets in the Carolinas,” Aquesta CEO Jim Engel, who founded the bank in 2006, said in a press release. “We believe that we have been successful at that. However, to continue growing and becoming more profitable, we needed a partner … with a large balance sheet and expanded products in services.”
Acquiring Aquesta would help United Community deploy excess cash on its balance sheet, according to Marinac. Investors appeared to like the deal: The company’s stock was trading up nearly 1.6%, at $34.32, midday Thursday.
The last bank United Community acquired was the $1.8 billion-asset Three Shores Bancorp in Orlando, Florida, in July 2020.
