Two struggling N.C. banks have agreed to merge in a transaction that would bring in new management and inject much-needed capital.

The merger of Asheboro-based FNB United Corp. and Granite Falls-based Bank of Granite Corp. would create a combined community bank with $2.9 billion in assets, $2.4 billion in deposits and 63 branches. But it's contingent on a number of factors, including the raising of $310 million in capital and the preservation of a key tax benefit.

On Wednesday, the U.S. attorney's office for the Western District of North Carolina also announced FNB's banking subsidiary, CommunityONE Bank, had agreed to pay $400,000 to the victims of a Ponzi scheme that operated through accounts maintained at the bank.

In a securities filing, FNB said two private-equity firms - the Carlyle Group and Oak Hill Capital Partners - required CommunityONE to resolve prosecutors' claims before agreeing to invest $155 million in FNB, half of the $310 million needed in the transaction. The rest would come from other investors in a private stock offering.

The deferred prosecution agreement included a harsh assessment of the bank's financial condition, saying it was on the "verge of failure." Operating under regulatory orders to raise capital, the bank's holding company had negative net worth, the agreement said.

If placed into receivership, the bank's failure would have cost the Federal Deposit Insurance Corp.'s insurance fund $500 million, the document stated.

The transaction announced Wednesday is expected to close during the third quarter, pending regulatory, shareholder and other approvals. After the merger, the two banking subsidiaries will continue to operate under separate names until they are eventually merged under the CommunityONE brand.

Two Charlotte bankers, Brian Simpson and Bob Reid, would helm the new parent institution, which will keep FNB's name and Asheboro headquarters. Simpson, a former First Union Capital markets executive, will serve as chief executive; Reid, a former First Union, Wachovia and Wells Fargo executive, will be president. Both live in Charlotte.

Simpson had previously sought to buy troubled banks through a startup entity called Union National Bank, but last year that firm withdrew its application for a federal banking charter.

The board of the merged bank would include three Union National organizers: Austin Adams, Jerry Licari and Jerry Schmitt. Former Bank of America treasurer Chan Martin would also serve as a director, along with appointees from Carlyle, Oak Hill, FNB and Bank of Granite.

Both banks are more than 100-year-old institutions. Bank of Granite's home turf is the four-county Hickory area, but four of its 18 offices are in Mecklenburg County through a 2003 acquisition. FNB has 45 locations in 18 counties, including Mecklenburg, Gaston, Iredell and Rowan. FNB bought Charlotte-based Dover Mortgage Co. in 2003.

Both banks have faltered in recent years as bad loans mounted in the economic downturn. Bank of Granite lost $23.7 million in 2010 and is under regulatory orders to shore up its capital base. FNB lost $116.2 million for common shareholders in 2010. At the end of December, FNB said it had $393 million in troubled loans, or one-fifth of its total.

Under the Troubled Asset Relief Program, FNB received $51.5 million in government bailout dollars in February 2009. As part of the transaction announced Wednesday, the U.S. Treasury has agreed to exchange its preferred stock holdings in FNB for common stock worth 25 percent of the TARP loans, according to a securities filing.

The completion of the merger and the private-equity investments is contingent on the private stock offering not jeopardizing FNB's net operating loss deferred tax asset, which was $36.9 million at the end of 2010. Deferred tax assets can be used to offset future tax liabilities.

Under the merger agreement, Bank of Granite shareholders would receive 3.375 shares of FNB's common stock for each Bank of Granite share they own, an exchange worth 84 cents per share at Tuesday's closing price. Bank of Granite shares were worth as much as $19 in 2007 but have fallen steadily since, languishing below $2 since summer 2009.

Wednesday, FNB shares jumped 15 cents to 40 cents. Bank of Granite's climbed 32 cents to 86 cents.

In their investment, Carlyle and Oak Hill will each receive about 484 million shares of FNB's common stock at a value of 16 cents per share. Neither would own more than 24.9 percent of the combined company's outstanding shares.

Bank of Granite's largest shareholder is a trust set up by longtime chief executive John Forlines Jr., who died last year at age 92. His son, John Forlines III, now holds the voting and investment power for the 799,639 shares, equal to 5.17 percent of shares outstanding on March 15.

"I think it's a good day for Bank of Granite shareholders," said Forlines III, an investment manager in New York.

The family has held onto the shares because it believed in the survivability of the bank, he said, crediting the current management for shepherding the bank during difficult times. As for the eventual loss of the Bank of Granite name, he said his father would not have been bothered. He had considered changing the name as the bank grew over time.

"It would have been much more disappointing to him if there had been a failure," Forlines III said.

Wednesday's news release did not disclose whether any current executives will stay with the combined company. The proposed new management declined to comment, citing securities laws related to the private stock offering.

Simpson and Reid are the latest Charlotte bankers to target troubled banks for acquisitions. Since last year, North American Financial Holdings, led by former Bank of America executives, has bought up banks in the Carolinas and Florida; Blue Ridge Holdings, steered by Bank of America and Wachovia alumni, has acquired a failed S.C. bank; and Park Sterling Corp., led by former Wachovia officials, has agreed to buy a struggling S.C. bank.