Dive Brief:

• Rockville, Maryland-based Capital Bancorp has agreed to buy Raleigh, North Carolina-based Integrated Financial Holdings in a cash-and-stock deal valued at $66 million, the companies announced Thursday.
• The transaction, expected to close in the second half of this year, will create government-guaranteed lending across the Department of Agriculture and Small Business Administration, including IFH’s Windsor Advantage platform. 
• “This acquisition represents a continuation of our strategy to build a highly diversified business that generates best-in-class returns for our shareholders and allows us to better serve our customers,” Ed Barry, CEO of Capital Bank, said in a statement Thursday. “IFH’s expertise originating and servicing USDA and SBA loans fits well with our strategic objectives and will allow us to serve a market with substantial need and growth potential.”

Dive Insight:

Integrated has been on the hunt for a buyer since its $98 million deal with Fairmont, West Virginia-based MVB Financial fell through in May. 

Both parties credited the termination to regulatory delays and changing market conditions following last year’s bank failures, after which a crisis of confidence unsettled customers.

When the acquisition was scrapped, MVB’s shares were down over 30% from early March. The plunge would have brought down the $98 million valuation by nearly half if the deal closed in the first half of 2023 as expected since MVB was using its stock currency to buy Integrated, American Banker reported.

“During the pendency of the merger, we have right-sized IFH in a number of respects, and with our strong capital base and improving efficiency, we believe that [IFH] is well-positioned to proceed as an independent company,” Integrated’s CEO, Marc McConnell, said in May.

McConnell will join the board of directors of Capital Bancorp and Capital Bank once the transaction is complete.

He knows, too, about midstream change. He became IFH’s acting CEO in January 2023 — while the bank awaited approval of the MVB deal — when Integrated’s previous chief executive, Eric Bergevin, died in a plane crash.

“We are excited for this partnership with Capital and for the benefits that it brings to both banks,” McConnell said in Thursday’s release. “With a larger balance sheet and our combined lending and deposit-gathering capabilities, we believe that we can secure and grow our position as a leader in nationwide government-guaranteed lending.”

Capital started the discussions with IFH shortly after the merger with MVB was called off, Barry told Banking Dive via email.

“They were in process of evaluating strategic options but were open to having a dialogue.  I believe several potential suitors approached them over the past year,” he noted.

The present valuation is a drop from what MVB proposed a year ago — a change reflective of the decline in values of bank stocks over that time period, according to Barry.

“The decline in purchase price outperformed the decline in the bank index,” he added.   

Under the agreement, IFH shareholders will receive $5.36 in cash and 1.115 shares of Capital Bancorp.’s common stock for each share of IFH common stock they own. At closing, Capital shareholders will own roughly 84% of the combined company, leaving IFH shareholders with about 16%.

After the completion of the deal, A. Riddick Skinner, executive vice president of government lending at IFH, will become head of the government-guaranteed lending program, and Melissa Marsal, IFH’s chief operating officer, will join Capital Bank in a leadership role, according to Thursday’s release. Mike Breckheimer, IFH’s chief strategy officer, will lead Windsor Advantage.