ROCKVILLE, Md., March 28, 2024 (GLOBE NEWSWIRE) — Capital Bancorp, Inc. (NASDAQ: CBNK) and Integrated Financial Holdings, Inc. (OTCQX: IFHI) today announced that they have entered into a definitive merger agreement under which CBNK will acquire IFH in a cash and stock transaction valued at $66 million, exclusive of the value of a dividend to be received by IFH shareholders at or immediately prior to closing.
Under the terms of the merger agreement, IFH shareholders will, subject to certain adjustments, receive $5.36 in cash and 1.115 shares of CBNK common stock for each share of IFH common stock. Based on the closing price of Capital common stock of $20.00 on March 26, 2024, the implied per share purchase price, inclusive of the cash consideration, is $27.66. At or immediately prior to the closing, IFH is expected to distribute its minority equity interest in Dogwood State Bank to IFH shareholders in the form of a dividend equal to approximately 0.469 shares of Dogwood State Bank for each share of IFH common stock, a value of $7.69/share or approximately $18 million based on the closing price of Dogwood State Bank on March 26, 2024. At closing, Capital shareholders will own approximately 84% and IFH shareholders will own approximately 16% of the combined company.
This transaction adds another high-return vertical to Capital’s business model, further complementing its existing set of commercial and consumer businesses and contributing to a highly diversified and differentiated earnings mix across various local, regional and national businesses.
Creating a Nationwide Leader in Government Guaranteed Lending and Servicing
The transaction will create a best-in-class nationwide lender in government guaranteed lending across both U.S. Department of Agriculture (“USDA”) and U.S. Small Business Administration (“SBA”) government guaranteed lending. Including Windsor Advantage’s industry leading government guaranteed servicing platform, Capital is well positioned to capitalize on this growing niche.
“Capital has a track record of creating value by investing in teams and lines of businesses that generate strong returns for shareholders. 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,” said Ed Barry, Chief Executive Officer of Capital Bank. “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.”
“We are excited for this partnership with Capital and for the benefits that it brings to both banks. 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,” said Marc McConnell, Chairman, President and CEO of IFH.
Financial and Strategic Benefits of the Merger
| 1) | Meaningfully grows commercial loan book: ~38% of the pro forma loan book will consist of C&I and owner-occupied CRE |
| 2) | Balanced pro forma business mix: ~70% contribution from commercial and ~30% contribution from consumer on a net income basis based on illustrative adjusted full year 2023 earnings |
| 3) | Financially compelling: expected to produce 17% EPS accretion in 2025 with manageable tangible book value dilution of ~5% earned back in approximately ~1.8 years |
| 4) | Significant accretion to returns profile: expected to be ~260bps accretive to CBNK’s already high return on tangible common equity in 2025 |
| 5) | Increases Fee Income: Pro forma fee income contribution will exceed ~20% of total revenue |
| 6) | Robust pro forma capital ratios: Modest capital ratio dilution; Strong pro forma capital generation; Pro forma tangible common equity / tangible assets ratio of 11.0% |
Leadership
Upon closing of the transaction, Marc McConnell, Chairman, President and CEO of IFH, will join the board of directors of Capital Bancorp, Inc. and Capital Bank. A. Riddick Skinner, EVP of Government Lending at IFH, will join Capital Bank as Head of Government Guaranteed Lending Program. Melissa Marsal, EVP and Chief Operating Officer of IFH, will join Capital Bank in a leadership role. Mike Breckheimer, EVP and Chief Strategy Officer at IFH, will join Capital Bank as Head of Windsor Advantage.
Approvals
The transaction with IFH has been unanimously approved by both IFH’s and CBNK’s boards of directors and is expected to be completed in the second half of 2024, subject to approval of Capital’s and IFH’s shareholders, regulatory approvals and the satisfaction of other customary closing conditions.
Advisors
Stephens Inc. served as financial advisor and Squire Patton Boggs (US) LLP served as legal advisor to CBNK. Raymond James & Associates, Inc. served as financial advisor and Wyrick Robbins Yates & Ponton LLP served as legal advisor to IFH.
About Integrated Financial Holdings, Inc.
Integrated Financial Holdings, Inc. is a financial holding company based in Raleigh, North Carolina. Integrated Financial Holdings had assets of approximately $548 million at December 31, 2023. The company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its full-service office located in the greater Chicago area. IFH is also the parent company of Windsor Advantage, LLC, a loan service provider that offers community banks and credit unions with a comprehensive outsourced U.S. Small Business Administration 7(a) and U.S. Department of Agriculture lending platform. IFH is registered with and supervised by the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.
About Capital Bancorp, Inc.
Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. Capital’s wholly-owned subsidiary, Capital Bank, N.A., is the fourth largest bank headquartered in Maryland at December 31, 2023. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in four locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.2 billion at December 31, 2023 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at Capital’s website www.CapitalBankMD.com under its investor relations page.
