Regional banking powerhouse Entegra finalizes deal for Old Town Bank
Old Town Bank shareholders overwhelmingly approved the sale of the start-up bank headquartered in Waynesville last week, ending its nine-year run as a small independent local bank in light of the changing landscape facing financial institutions in the post-recession world.
Old Town’s sale to Entegra Bank, formerly known as Macon Bank, garnered approval from 99 percent of the shares participating in the vote.
Old Town Bank President Charles Umberger said the sale is a good news story rather than one of defeat.
“We are two strong survivors that are partnering strategically to better serve our markets and communities in the future,” Umberger said of the institutions.
Not unlike Old Town, Entegra has small-town roots of its own, dating back to 1922 in Franklin. It has grown over the decades to become one of the most prominent banks in the far western region, with 15 branches spanning 10 counties and two states.
The decision to sell Old Town was a tough one, however, admitted Neal Ensley, chairman of the Old Town Bank board. Bank founders had envisioned a locally owned, community-minded bank based in Haywood County, and letting go of that dream wasn’t easy.“It is hard to give it up. There were mixed emotions,” Ensley said.
Umberger and Entegra Bank President Roger Plemens can now laugh about the initial phone call between them a year ago, when Umberger told Plemens a resounding “no” when asked if Old Town was open to a merger.
“We were not for sale,” Umberger said. “We were profitable and independent and planned to remain that way.”
Plemens said Umberger didn’t exactly hang up on him, but made his fierce pride for Old Town known. That was something Plemens respected, but as a businessman he knew that acquisition proposals often go like that initially, and didn’t write off the idea.
Entegra had made its intentions known to expand into Haywood County. Entegra had the wheels in motion to open a branch in Waynesville early last year, and was even eyeing property directly across South Main Street from Old Town Bank.
But Entegra held off in hopes of courting Old Town.
Plemens said it takes a new branch a couple of years to build up a customer base. Old Town brought an existing local customer base to the table already, and had earned the community’s trust and loyalty — something he hopes will transfer to Entegra.
Meanwhile, the board of Old Town Bank began to ponder the merits of a merger. Entegra offered Old Town a way forward that preserved their community-minded values but also ensured its staying power by joining forces with a larger institution.
It also allowed shareholders to be made whole on the investment they made when founding Old Town in 2007.
“The shareholders have really not had any return on their investment. They would have loved to have some dividends, but it hasn’t been practical,” Ensley said. “We felt like it was the best deal for our shareholders going forward.”
Old Town Bank had roughly 400 shareholders. When the bank launched in 2007, it raised capital through a private offering of one million shares at $11 a share.
The number of shares has remained fixed at one million, and while some shareholders have sold their shares to other investors in private transactions, the shareholder base has remained static for the most part.
“The shareholder base has remained fairly constant and supportive throughout,” Umberger said.
Entegra offered shareholders $11.05 a share in cash — a modest return on the initial share price of $11 nine years ago, but a return nonetheless.
“The bank is not being sold because we are in distress, but the shareholder is getting out whole,” Ensley said.
That’s saying a lot given the carnage witnessed among smaller locally owned banks during the economic recession. Several in the region have simply closed, or were absorbed for pennies on the dollar.
“Times have just been tough for community banks,” Ensley said.
That said, Old Town had largely weathered the storm.
“We are not leaping into the arms of a rescuer. These are two strong organizations who weathered some difficult times, who had strong local boards and strong local managers who stuck to their knitting and stuck to the game plan and said ‘we are going to make it to the other side,’” Umberger said. “Now that we are on the other side, we have a different world than we had in 2006.”
The bad economy and troubled real estate market aren’t the only things that have taken a toll on smaller, local banks. The regulatory and political environment is more difficult today, and the climate is more challenging for smaller banks to navigate.
While the offer was financially attractive to shareholders, what clinched the deal was Entegra’s philosophy. Shareholders and founders realized they didn’t have to compromise their ideals of a community-minded bank by selling out to Entegra.
“Our board believes we have a responsibility to our community we serve. The more we got to know Entegra and their vision of what a bank ought to be, we said ‘This sound like a strategic partner that makes sense,’” Umberger said.
Known as Macon Bank until its name change last year, Entegra began as a small local bank almost 90 years ago in Franklin. Entegra has 46 percent of the banking market share in Franklin — a testament to its hometown legacy and symbiotic relationship with the community.
“You don’t stay around since 1922 without helping your community grow and thrive,” Umberger said. “They share our vision of community commitment. We weren’t going to partner up with someone who wasn’t.”
Plemens said Entegra plans to be active in civic causes and the business community in Haywood just as Old Town was.
“They are very much a community oriented bank. I think they will continue that spirit,” Ensley added.
From Main Street to Wall Street
Entegra Bank wasn’t without its own challenges during the recession and real estate crash. During the boom years, Macon Bank was a major lender for the parade of speculative developers and wave of second-home and retirement lot buyers flooding the mountains.
When the house of cards collapsed, Macon Bank was left holding the bag on hundreds of foreclosed lots and bankrupt developments.
It ultimately landed the bank on the FDIC watch list in 2012. It had a lot of company, however, with hundreds of banks across the nation in a similar predicament with an out-of-kilter portfolio. Entegra quickly turned the corner and got off the watch list, however.
“Management handled it quickly to recapitalize the bank and go forward,” Plemens said.
Not one to be beaten, Entegra is now in a stronger position than ever and in a full-scale expansion mode. It was greeted with wild success on the stock market in fall 2014 when it became a publicly traded company.
It was a surreal experience for Plemens, who traveled to Wall Street and rang the opening bell for the stock market the day Entegra went public.
“You are standing in Times Square and they are putting your picture up seven stories tall,” Plemens recalled.
Plemens had a good feeling about it, however. Demand was so high during the initial public offering that shares were oversubscribed.
“We had seen a very positive trend. We felt it was going to be successful, we just didn’t know how successful,” Plemens said.
Entegra opened at $10 a share the day it went public and was trading for $12.50 by the time the market closed.
“That is beyond not-too-shabby,” Umberger said. “It was probably one of the most successful capital raises of a financial institution in recent history. Everyone took notice.”
The share price was at $17.50 as of Monday.
The bank raised $65 million in capital by going public. That in turn launched an expansion phase for Entegra. Last year, it purchased two bank branches in Anderson and Chesnee, South Carolina.
“Now we have this capital we need to put to good use,” Plemens said.
Part and parcel to its expanding foot print, bank leaders had to relinquish their long-held identity as Macon Bank.
“We didn’t want a name that was going to tie us to a geographic region,” Plemens said.
Entegra has 16 branch locations in 10 counties and two states.
Umberger said the sale to Entegra is exciting for both customers and employees of Old Town Bank.
“Entegra is large enough and strong enough to offer things that we as a small bank hoped to and planned to some day but Entegra already does,” Umberger said, noting everything from quicker, more seamless mortgage loans to better employee benefits.
“We do as much as we possibly can given our size, but the reality is we could only lend so much,” Umberger said of Old Town. “We had business accounts we could no longer continue to serve, because our ability to grow did not keep up with their credit needs as they continue to grow.”
On a practical note, Old Town customers working in other counties won’t have to rush back to Waynesville to make a deposit by 5 p.m., since Entegra has 15 branches from Upstate South Carolina to the far west.
“The people in our region are becoming more regional,” Umberger said.
While the sale will officially go through on April 1, the 2,000 customers of Old Town Bank won’t notice any changes right away, however.
“The sign will still say Old Town Bank. Check stock, debit cards, the online platform will all stay the same for now. We will work toward system convergence in August,” Umberger said. “That will give us five months to do what’s called map-and-merge to move our customers into the Entegra system. That will give us a lot of time to do it in a well thought-out way.”
Umberger will join the executive management team of Entegra as a vice president. The rest of Old Town’s staff will remain exactly where they are now.
“They will still see these same smiling faces who know their name when the walk in the door, who deliver quality, professional, friendly, reliable service that they count on,” Umberger said. “That is number one. I hope our customers and community realize that.”