Black banks’ merger stays on track despite push to derail it

• Key insight: Two Black-owned banks in the Carolinas expect their proposed merger to be approved by the end of the year, after fending off another bid this fall.
• What’s at stake: The deal, which still needs regulatory approval, would create the largest Black-owned bank in the nation, based on total asset size, while also reducing the number of Black-owned banks in the U.S. to 16.

The proposed merger of two Black-owned banks in the Southeast is closer to being finalized after a vote by shareholders of the selling company served to rebuff a third bank’s effort to derail the deal.

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M&F Bancorp in Durham, North Carolina, and Optus Financial in Columbia, South Carolina, now await regulatory approval for the $105 million transaction, in which M&F is set to be acquired by Optus to create the largest Black-owned bank in the country. If it closes, the acquisition would reduce the number of Black-owned banks in the U.S. to 16.

In a press release, the banks said they continue to expect the all-cash deal to close by the end of this year.

The shareholder vote came during a contentious period in which another suitor, Triad Business Bank in Greensboro, North Carolina, argued that M&F’s plan to be acquired by Optus would be a bad deal for its shareholders.

Triad also maintained that the Optus deal would be a negative development for Black-owned banks, whose existence has dwindled amid struggles to obtain capital, invest in operations and compete with non-Black-owned banks.

The preliminary results from a Wednesday vote by M&F’s shareholders show that nearly 74% of the shares entitled to vote on the deal voted in favor of it, M&F said. The vote was initially scheduled to take place on Oct. 7, but it was adjourned until Oct. 20 and then adjourned again until Wednesday. M&F had previously indicated that the delays were meant to give M&F shareholders enough time to consider a counter-proposal by Triad.

James Sills III, M&F’s president and CEO, said in a statement Wednesday that the results mark “an important milestone” for the $503.5 million-asset bank, which was founded in 1907.

The combination of Optus and M&F, which will have roughly $1.3 billion of assets, will be “positioned to expand access to capital and economic opportunity across the Carolinas,” Sills added.

Liberty Bank & Trust in New Orleans, Louisiana, is currently the largest Black-owned bank, with $1.1 billion of assets as of June 30, according to the Federal Deposit Insurance Corp.

Optus and M&F must still receive approval or non-objections from four regulators: the Federal Reserve, the FDIC, the North Carolina Commissioner of Banks and the South Carolina Board of Financial Institutions, according to M&F’s disclosures. The banks have filed applications with each regulator, M&F has said.

Triad responded Thursday to the shareholder vote with a statement saying it is “grateful to the shareholders, employees and customers who listened and considered our proposals to create a better outcome for them, for Parrish Street and for North Carolina.” Parrish Street, where M&F was founded, is a commercial district in Durham that was once known as “Black Wall Street.” 

“We respect their decision,” Triad added.

The $536 million-asset Triad, which is not Black-owned, published a detailed report last week arguing that its most recent proposal was superior to the one M&F accepted from Optus in July. 

Triad’s plan called for preserving M&F’s name, charter and status as a minority depository institution. It also called for writing into the charter that the bank’s board must be majority African-American, and it emphasized the fact that the 119-year-old M&F will cease to exist if it’s sold to Optus.

Triad has criticized M&F for not lending more of its capital, and for awarding bonuses worth a combined $2.6 million to the board and management earlier this year.

Part of Triad’s argument was that M&F’s shareholders would get a better deal from Triad, even though Triad’s offer would leave them with a bit less than half of the shares of the combined company. Triad projected that the combined bank’s tangible book value per share would rise from $29.87 at the deal’s closing to between $44.52 and $49.50 five years later.

Terms of the Optus deal call for shareholders to receive up to $53.30 per share of common stock, payable in cash, starting with a cash payment of $46.57. An additional cash payment of $6.73 could be payable at a later date, depending on whether M&F successfully redeems certain preferred stock prior to or within 12 months of the acquisition.

In Wednesday’s press release, M&F noted that shareholder approval of the Optus deal came amid “unsolicited proposals” from Triad. It said its board, with help from financial and legal advisors, “considered those proposals and continued to recommend the Optus transaction.” M&F also said it did not “intend to comment further” on the Triad proposals.

Under the terms of the Optus acquisition, Sills will become CEO of Optus Financial and Optus Bank. Paul Mitchell, chairman of Optus Financial and its bank subsidiary, will continue in his current role. 

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The two merging banks have not said if Benita Lefft, president of Optus Bank, will have a role with the combined company post-acquisition. 

Two years ago, Lefft succeeded Dominik Mjartan, who had been president and CEO since 2017 and led the bank through a period of enormous growth and profitability. Optus, which was founded in 1999, had about $764 million of assets as of June 30, according to the FDIC.

Post-acquisition, Optus is set to operate 10 branches, including eight in North Carolina that are currently operated by M&F.