NC banking: Moore money

 In Features June 2016

Only 15 years ago, nine of North Carolina’s largest 15 banks were based outside the state’s biggest cities. Nine CEOs, nine CFOs, nine chief lending officers and so on spent much of their time hopping around smaller Tar Heel cities like Asheboro and Reidsville, leading or raising money for as many Boy Scout troops, chambers of commerce, Little League teams and other civic groups as time permitted.

Now, after the pending sale of CommunityOne Bank, the number of $1 billion-plus bank CEOs viewing the world through the prism of rural North Carolina is down to four.

First Bancorp is the largest remaining holdout, with 42 people working at its headquarters on the picturesque main street in Southern Pines, the Moore County city with a population of 12,500. The company has $3.3 billion in assets, including 75 offices in 29 N.C. counties and 13 branches in South Carolina and Virginia. More than 85% of the bank’s deposits came from outside the state’s 10 most populous counties as of Dec. 31.

That won’t cut it forever. About half of North Carolina’s population growth over the next 20 years is expected to occur in a handful of urban counties, leaving First Bank CEO Richard Moore and President Mike Mayer with an intriguing challenge: Can the company expand into the Charlotte, Triangle and Triad regions effectively without ditching its commitment to smaller towns? It’s a microcosm of the issue facing the state as it seeks to avoid splitting into a few “haves” surrounded by lots of “have-nots.”

“We have to follow the growth patterns of North Carolina, but we are working very hard to not turn our backs on the rural areas,” says Moore, a London School of Economics graduate and former N.C. treasurer who joined the bank as a director in 2010. He grew up in Granville County, son of a World War II vet. Tingley Moore owned a warehouse business, chaired the Methodist church’s trustee board and led the local Jaycees. “We can’t have a market economy without a healthy and efficient banking system,” Richard Moore says. “Our country is blessed to have that, but like so much else going on in our economy, the rural areas are getting weaker and the urban areas are getting stronger.” For First Bank to expand in Fairmont in Robeson County, it has to take business away from a rival because there is no underlying growth, Mayer says. But in Charlotte, with annual loan growth topping 10% in recent years, First Bank just needs to keep the same market share to achieve its goals.

First Bank has a chance to make it work. Under Jimmy Garner, CEO from 1995-2006, it grew to more than $2 billion in assets, aided by the acquisitions of banks in Southern Pines, Thomasville and Latta, S.C. During those 11 years, First Bank’s share price more than tripled. Garner retired at age 77, succeeded in 2007 by veteran bank employee Jerry Ocheltree. First Bank appeared less damaged by the 2007-09 recession than many of its peers, earning a spot on federal regulators’ list of banks eligible to take over foundering rivals. In 2009, First Bank bought the assets of Wilmington-based Cooperative Bankshares, initially adding $940 million in assets, the largest FDIC-assisted takeover in N.C. history. Two years later, it added about $200 million in assets of the failed Bank of Asheville.   

But the recession wasn’t painless. In 2012, the bank reported a $26 million loss after writing down the value of some bad loans and disclosing it had failed to report six transactions involving two senior bank executives, a director and their families who may have received preferential treatment. By failing to report the deals in 2009-11, First Bank showed a lack of control and violated disclosure rules, the Securities and Exchange Commission said in a 2015 report. Theresa Nixon left the bank in March 2012 after 15 years as chief lending officer, while Anna Hollers retired in 2014 after nine years as chief operating officer. Both consented to SEC cease-and-desist orders, and First Bank paid a $275,000 fine. Ocheltree, who wasn’t named in the SEC report, was demoted in 2012 when Moore was named CEO. He left a year later, receiving a $1.1 million severance.

Moore had joined First Bank’s board in 2010, recruited by two veteran directors, Carthage automobile dealer Tommy Phillips and Sanford lawyer Dennis Wicker, a former N.C. lieutenant governor. (Each of the bank’s nine directors lives within 70 miles of Southern Pines.) Ready for a new challenge, Moore jumped at the chance to run a business. He’d been a rising star in the N.C. Democratic Party since he was elected to the General Assembly in 1992. In 2000, he was elected state treasurer, raising the office’s profile by repeated appearances on business cable-TV shows, protesting excessive executive pay and promoting shareholder rights.

His last election campaign ended on a bitter note in 2008, when Beverly Perdue bested him in a Democratic gubernatorial primary. “Never again,” he says, when asked about lingering political ambitions. After leaving office, he worked as a managing director of San Diego-based Relational Investors, an investment firm that works with large pension funds, including North Carolina’s.

“A lot of people thought Richard was a gamble because he hadn’t had any experience as a community banker, but we realized that he is a special talent,” Wicker says. “He had a great background as state treasurer, in the finance industry, as an investor and as a small-business person. His performance has shown that we were correct and he was the right person.”

Since June 2012, First Bank shares have more than doubled, outpacing North Carolina-based community banking peers Charlotte-based Capital Bank Financial Corp. and Park Sterling Bank, both operating mostly in fast-growing metro markets. First Bank’s stock has underperformed High Point-based BNC Bancorp and Raleigh-based Yadkin Financial Corp., which are considered more likely takeover targets. Bank of North Carolina and Yadkin shares trade for about two times book value, compared with about 1.5 times at First Bank. But industry analysts like the smaller bank’s approach. “Richard has a very clear vision where he wants to take First Bancorp, and his company has definitely gained momentum,” says Chris Marinac, an analyst with Atlanta-based FIG Partners LLC.

First Bank boosted investor confidence by hiring industry veteran Mayer as president in 2014 and moving its headquarters from Troy, where it was hard to attract talented people, says Allen Rogers, a principal at Allen C. Ewing & Co. in Charlotte, an adviser to North Carolina banks. The bank still employs 100 at an operations center in Troy, a town of 3,200 where the bank started in 1935. Mayer says it was an easy decision to relocate to Southern Pines, an unusually cosmopolitan retirement haven with a collection of restaurants — Southern Prime, Chef Warren’s, 195 are examples —  that Moore says match any peers in Raleigh.

After 24 years at Bank of America, Mayer left to start a new bank that never got off the ground. He then led two N.C. community banks that were hobbled in the recession. Gastonia-based Carolina Commerce was sold to Carolina Trust Bank of Lincolnton in 2009, while Hendersonville-based Mountain 1st Bank & Trust was acquired in 2013.

That record didn’t deter Moore from hiring Mayer. “Mike’s a banker’s banker, and I was never going to get that credential. He’s the guy I used as a benchmark during the six or nine months when I looked all over the country for someone for that job.”

Mayer found a bank that lacked spirit. “When I visited branches, there often wasn’t a single thing that said First Bank except the sign out front. We didn’t have a rallying cry,” he says. “We just needed to get our employees re-engaged.” He also has added experienced colleagues, raiding rivals for more than 20 lenders in the state’s metro areas. It opened its first Fayetteville office last year and is hunting for Charlotte sites.

What Moore hasn’t done is cinch a merger to quickly bolster the bank’s size. In Moore’s four years as CEO, acquisitions have included an insurance agency and a California-based company that advises banks on U.S. Small Business Administration lending. He also is swapping seven Virginia branches for six in the Winston-Salem and Charlotte areas.

Moore won’t comment, but industry sources say he looked at buying Greensboro-based NewBridge Bancorp and Asheboro-based CommunityOne Bank before Yadkin and Capital Bank agreed to acquire them, respectively. “We’ve walked away from some opportunities and right now, we are being rewarded because our stock price has held up well,” Moore says.

The patient approach can work because, unlike its peers, First Bancorp has no private-equity owner with more than 4.9%, Mayer says. (Private-equity investors typically have a three- to five-year time horizon.) CommunityOne, for example, had two groups that each owned 24.9% stakes, effectively dictating its future. Its sale to Capital is expected to close by June 30.

“When you’ve got large institutional ownership, you’ve got to do something to provide them with higher-than-market returns,” Mayer says. “It’s almost impossible to accomplish that with anything other than an M&A transaction. But our board wants to remain independent, which is one thing that attracted me here. That doesn’t mean that if they get an offer, they wouldn’t do their due diligence.”

First Bank’s board favors a measured approach to growth, focusing on improving operations before paying up for a partner, Wicker says. “The natural instinct is to grow, but shareholders realize the value of seeing that we are a strong, robust bank and that we can start growing by buying value rather than just looking for revenues.”

Some N.C. bankers question if Moore, 55, will stay interested in the nitty-gritty details of banking. While his compensation has averaged about $915,000 annually over the last three years, other financial-industry assignments could prove more lucrative. Not that money is a pressing issue: His wife, Noel Crook, is part of a Texas family with a net worth topping $10 billion, according to Forbes magazine.

Dan Blue, a Raleigh lawyer and state senator who has been a director since 2010, thinks Moore has a long future at First Bank. “Richard is committed to our customer base with the realization that the bank had to go into hotspots of the state,” says Blue. “He has the trust of the directors who embrace his strategy of how to do that.”

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