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Yadkin Valley Financial to buy community bank in Charlotte
$92 million deal is 76 percent premium on bank's share price
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Published: September 11, 2008
Yadkin Valley Financial Corp. said yesterday that it will expand its reach into the Charlotte area with a proposed $92 million purchase of American Community Bancshares Inc.
American Community, based in Charlotte, was founded in November 1998 and has total assets of $530 million. The deal requires regulatory and shareholder approval and is expected to be completed by year's end.
American Community shareholders can choose either $12.35 in cash or about 0.85 shares of Yadkin Valley stock for each American Community share. However, the banks said that the deal would be limited to 80.5 percent stock and 19.5 percent cash.
Investors were cool to the idea of Yadkin Valley paying a 76 percent premium on American's share price. Yadkin Valley's share price was down 26.2 percent, or $4.45, to finish at $12.54 yesterday.
It would be by far the largest of Yadkin Valley's four bank purchases, more than doubling the $41.8 million it paid for Cardinal State Bank of Durham in June 2007.
What Yadkin Valley would get in return is nine branches in Mecklenburg and Union counties in North Carolina and four branches in Cherokee and York counties in South Carolina, as well as an increase in total assets to nearly $2 billion.
Just as important during the current housing crisis, American Community has a "fairly clean loan portfolio with little deterioration" in one of the nation's prime -- but struggling -- real-estate markets, said Bill Long, the president and chief executive of Yadkin Valley.
"While we believe Yadkin's existing markets are excellent, the demographics of metropolitan Charlotte/Mecklenburg are simply some of the best in the entire nation," Long said.
Most banks have been wary of making deals in the past year because they don't want to buy another's bank suspect real-estate loan portfolio. Also limiting deals is the asking price of many community banks, which some larger banks consider unrealistic.
"Yadkin Valley and Bill Long run a first-class bank, but sometimes it costs a little more to travel first class," said Chris Marinac, an analyst with FIG Partners LLC. "The acquisition was not cheap in today's market, where prices have adjusted lower, but we feel credit quality is still better at American Community than most community-bank peers.
"We are in a recession, perhaps early stages for the Carolinas and Charlotte in particular, so this may have been the catalyst for American Community to establish value now instead of riding rocky waves in the quarters ahead," Marinac said.
Long said that Yadkin Valley was unlikely to gain a similar foothold through opening branches.
"We haven't bought any broken banks," he said. "We saw the chance to buy a healthy bank as a reasonable price.
"American has gotten to a place in its life cycle where it needs to grow and needed some capital to do that, " Long said. "We could provide that capital, and that was the enticement to America."
Yadkin Valley would gain the biggest presence in the state's three major metropolitan areas for community banks based in the Triad. It would have 11 branches in the Charlotte area, six in the Triad and four in the Triangle.
American Community would operate as a division of Yadkin Valley Bank and Trust Co. Yadkin Valley has a similar branding arrangement with the other banks it has bought.
American fits a trend in which start-up banks in North Carolina are sold within five to 10 years, analysts said. The average independent life span of community banks started since 1990 is 5½ years, according to the N.C. Banking Commission.
"American Community Bank was founded to take advantage of the economic growth in North Carolina's Union County and Charlotte/Mecklenburg markets and the surrounding communities," said Randy Helton, the president and chief executive of American Community.
"Our partnership with Yadkin Valley Financial will provide us access to the capital, technology and expertise in the products and services that we need to truly take advantage of the outstanding opportunities in our market," Helton said.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
Expanding its reach
Yadkin Valley Financial Corp. would gain 13 branches and three markets in its proposed deal for American Community Bancshares Inc.
-- - Yadkin Valley - American Community
Hometown - Elkin - Charlotte
Founded - 1968 - 1998
Branches - 29 - 13
Counties served - 12 - 4
Total assets - $1.4 billion - $530 million
Total deposits - $1.1 million - $417 million
Source: Bank financial data
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