Cadence National Bank was to shed its public company status Friday to become the private property of Community Bancorp LLC in an acquisition that rescued the Starkville regional bank from a federal order to significantly increase its capital levels.
With the acquisition, Cadence gets a $100-million capital injection that frees it from a consent order the Office of the Comptroller of the Currency issued the bank in the spring of 2010. “With our new capitalization,” said CEO-designate Mark Abernathy, “we are positioned better than ever to provide our customers and communities with improved financial resources.”
Community Bancorp is buying a five-state entity that has eliminated about 100 employees in the past 12 months and seen non-performing loans and leases grow nearly $21 million during the fiscal year that ended Dec. 31. In reports to investors, Cadence executives cite the national economic recession and a late entry into the residential and commercial real estate markets of Greater Memphis and suburban Nashville for the loan troubles.
About $15 million of the increase in troubled loans came in the fourth quarter, with non-performing loans and leases rising from $76.39 million to 90.85 million, according to the fourth quarter aggregate report Cadence filed with the Federal Deposit Insurance Corp.
In an email response to questions about the increase in non-performing loans, Abernathy said the financial information “is irrelevant due to the closing of the sale of the bank in early March, the mark-to-market entries that are required under the purchase accounting rules and the capital injection into the bank.”
After completion of the sale to Community Bancorp, Abernathy is to take over for CEO Lewis Mallory Jr. Paul Murphy, a principal of Community Bancorp, is to become chairman.
Mallory, the current chairman and CEO, reached an agreement with the Cadence board three years ago to retire in 2011. The 67-year-old Mallory will depart after 47 years with Cadence.
Murphy has said he intends to make Cadence’s Starkville headquarters the hub of a network of community banks his group plans to buy.
In early October, Cadence backed out of an announced “definitive agreement” to be acquired by Trustmark, a Jackson-based regional bank. Cadence opted instead for an offer from Community Bancorp that included paying off its $44 million in Troubled Asset Relief Program, or TARP, debt and paying shareholders $2.50 in cash per common share.
With $1.5 billion in assets, Cadence has 41offices with operations in Mississippi, Tennessee, Alabama, Georgia and Florida.
Cadence was to hold a press conference in Starkville Monday to announce the closing of the acquisition and to detail plans for the new private bank.
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