CommunityOne Bancorp turns its eye to mergers and acquisitions

Charlotte-based CommunityOne Bancorp is stepping up its search for other lenders to possibly acquire or merge with, its chief executive said this week, a further sign that the bank is shifting its focus from rebuilding to growth.

The announcement comes more than a year after CommunityOne returned to profitability for the first time since being bailed out by U.S. taxpayers. CommunityOne, which last year became the last Charlotte-based lender to exit the federal Troubled Asset Relief Program, hasn’t acquired another bank since 2011 as it has concentrated on improving its financial health.

“We’ve got our balance sheet in a good position, and so I will begin spending a little bit more time looking at possible merger partners and looking at potential acquisitions,” CommunityOne’s chief executive, Bob Reid, told the Observer.

CommunityOne has spent the past several years cleaning up its two struggling banks – its namesake bank based in Asheboro and Granite Falls-based Bank of Granite, which it bought in 2011. The two banks were merged in 2013 under the CommunityOne name.

“Now we’re at a stage of: How do we not only continue nice organic growth, but how do we continue now to begin looking at merger partners that make sense for us?” Reid said.

Reid said the bank is having “general discussions” with other lenders. Those talks have not led to any deals.

CommunityOne struggled to become profitable after the financial crisis. It wasn’t until the third quarter of 2013 that it logged its first quarter of operating profit since 2008.

On Friday, the bank said it made a profit in the fourth quarter, marking its sixth profitable quarter in a row. The higher profit came as the bank grew its loans and deposits. CommunityOne’s consistent profitability enabled it to take an accounting step that gave a $142.5 million boost to its fourth-quarter earnings.

CommunityOne’s announcement comes at a time when mergers and acquisitions among small U.S. banks have been rising. Last year, the number of announced U.S. bank and thrift merger and acquisition deals totaled 294, up 29 percent from 2013, according to data firm SNL Financial.

The cost to comply with regulations put in effect because of the financial crisis is often cited as a key factor in such combinations. By merging, banks can spread those costs out over a larger institution.

Reid said growing CommunityOne through an acquisition would improve the value of the company. “And ultimately that will reflect in the market in terms of what investors are willing to pay for our stock,” he said.

CommunityOne, which employs about 80 people in its Morehead Street headquarters building and branches in the region, has recently taken cost-cutting measures.

Last year, it consolidated its separate president and chief operating officer positions under Reid. That resulted in President Brian Simpson stepping down in September. Its recent cost-cutting strategy also includes a plan to eliminate six branches, none of which are in the Charlotte area. The branch closures were announced in December.

Reid said CommunityOne continues to focus on improving its profitability. To help boost its lending, it has been adding bankers in Charlotte and elsewhere in the state. This month, the bank announced it has begun offering Small Business Administration loans for the first time since the financial crisis.

Under TARP, the U.S. Treasury took a loss on its $51.5 million investment in FNB United, the name CommunityOne Bancorp used before it merged Bank of Granite and CommunityOne Bank. Treasury used the money to buy preferred stock from FNB United in 2009. Treasury later agreed to convert the preferred stock to common stock at a 75 percent discount.

The total loss to the Treasury on the FNB investment, when unpaid principal, dividend and interest payments are tallied, was $45.2 million, according to the inspector general’s office for TARP. But without the bailout, CommunityOne might not exist today.

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