The Bank Slate


Select in N.C. discussed a merger with four banks

Select Bancorp in Dunn, N.C., decided early on to deal exclusively with First Bancorp in Southern Pines, N.C., according to a regulatory filing tied to their pending merger.

The companies announced a $314 million deal in early June. 

First, a review of the acquisition’s terms:

The deal, expected to close in the fourth quarter, priced the $1.8 billion-asset Select at 185% of its tangible book value. 

The $7.7 billion-asset First Bancorp said it expects the deal will be 10% accretive to its earnings per share. It should take First Bancorp about two years to earn back an expected 3% dilution to its tangible book value.

First Bancorp expects to incur $20 million of merger-related expenses. The company will look to cut about 45% of Select’s annual noninterest expenses. 

Here’s what we learned from First Bancorp’s recent regulatory filing:
  • Select began the process of actively seeking a potential buyer in March.
  • It contacted four potential merger partners in April, including First Bancorp.
  • William Hedgepeth, Select’s president and CEO, and J. Gary Ciccone, the company’s chairman, met with the president and CEO of one bank on April 3, discussing potential pricing and cultural fit.
  • Hedgepeth and Ciccone met with Richard Moore, First Bancorp’s CEO, and Michael Mayer, the company’s president, on April 7. They discussed the potential advantages and pricing. “At the conclusion of the meeting, the participants agreed that the potential combination had merit.”
  • First Bancorp on Aug. 8 asked to negotiate exclusively.
  • The Select executives met with the management team of another bank on April 12. They discussed pricing and corporate cultural issues.
  • First Bancorp and Select entered into a nondisclosure agreement on April 13 so they could conduct due diligent. Select entered into a similar agreement with another bank two days later.
  • Hedgepeth met with the chairman and CEO of a fourth bank on April 28, covering potential pricing and cultural fit. After the meeting, Select “determined that the pricing of a potential transaction with First Bancorp was superior to the pricing indications received from” the other banks. 
  • First Bancorp and Select entered into a 45-day exclusivity agreement on April 29.
  • Executives from First Bancorp and Select met in-person on May 19. The filing never goes into the specifics of negotiations.
  • Select’s board unanimously approved the merger on May 28. First Bancorp’s directors did the same on June 1. The merger was announced late on June 1.
  • Hedgepeth is set to earn an annual base salary of $429,000 as an executive vice president of First Bank. He is also in line to receive a $100,000 bonus on his last day of employment and $700,000 for agreeing to certain non-compete and non-solicitation covenants. 
  • Lynn Johnson, Select’s chief operating officer, will also join First Bank as an executive vice president and be paid $294,000 a year. She is in line for a $100,000 bonus on her last day of employment, along with $150,000 tied to non-compete and non-solicitation covenants.
  • Hedgepeth and Johnson agreed to two-year consulting periods that begin after their employment ends. Hedgepeth will be paid $8,333 a month, or nearly $200,000. Johnson will receive $12,500 per month for the first year and $8,333 for the second year, or roughly $250,000.

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