First Carolina Financial Services, which owns fast-growing First Carolina Bank, said it raised $45.5 million before fees and expenses by selling shares at $35.
The fundraising follows First Carolina’s plan to buy BM Technologies of Radnor, Pennsylvania, for $67 million. That deal is expected to close in January.
The new investment comes from 200 individual shareholders, including 75 who hadn’t previously owned First Carolina stock, CEO Ron Day said in an interview. Overall, the company formed in Rocky Mount in 2012 has about 850 shareholders, mostly from North Carolina but now including investors living near the bank’s offices in Georgia, South Carolina and Virginia. Shares originally traded for $10.
BM Technologies is a digital banking platform that provides financial aid disbursement services for more than 700 campuses, including Wake Tech Community College in Raleigh and Georgia State University in Atlanta. First Carolina has been its exclusive provider of deposit accounts since December 2023, with about 300,000 students holding First Carolina checking accounts and total deposits of about $500 million, Day says. That represents about 12% of the students enrolled in the disbursement program nationally.
The BM Technologies deal “is the most unique thing I’ve ever had an opportunity to work on,” he says. “It is a limitless customer development opportunity, in our view.”
First Carolina wants to sign up more students in the program and offer added services, particularly for those students living near the bank’s branch offices.
As a relatively new bank, First Carolina didn’t have an established branch network with lots of retail deposits. The BM Technologies operation will help boost deposits, helping the bank fund loans. Day cites the example of a new resident coming into Wake County who deposits $10,000 for a checking account and then seeks a $1 million home mortgage. “This is one way we are solving” that mismatch, he says.
Investors paid for shares at a price representing about 140% of First Carolina’s tangible book value. Shares of well-run community banks often sell for about 200% of book value, Day notes.
It was the company’s 11th private placement since its inception. The largest, for $115 million, was completed in March 2022.
Day worked for Royal Bank of Canada’s N.C. business before helping start First Carolina. First Carolina Bank has total assets of $3.1 billion and offices in Rocky Mount, Raleigh, Wilmington, Cary and Reidsville; Virginia Beach, Virginia; Columbia and Greenville, South Carolina; and Atlanta, Georgia.
The bank hasn’t charged off a soured loan in eight years, Day says. That isn’t because of a lack of growth; lending surged 20%, or about $400 million, in the past year. A substantial share of First Carolina’s loans are made to shareholders, who have an incentive to pay their debt, he notes.