Capital Bancorp (CBNK), a Maryland-based registered bank holding company listed on the Nasdaq, has agreed to acquire Integrated Financial (IFH) in a cash and stock deal worth $66m.

Integrated Financial, based in Raleigh, North Carolina, operates as a financial holding company and trades on the OTC Markets Group.

As of 31 December 2023, Integrated Financial reported assets totalling approximately $548m.

One of its subsidiaries is West Town Bank & Trust, a state-chartered bank in Illinois, which serves customers through a full-service branch in the greater Chicago area.

Additionally, Integrated Financial is the parent company of Windsor Advantage, a provider of loan services catering to community banks and credit unions. Windsor Advantage has an outsourced US Small Business Administration (SBA) 7(a) and US Department of Agriculture (USDA) lending platform.

Capital Bancorp, the parent entity of Capital Bank, reported assets of approximately $2.2bn as of 31 December 2023. The company operates bank branches across four locations within the greater Washington, DC and Baltimore, Maryland markets.

According to Capital Bancorp, the transaction will establish a leading nationwide lender specialising in government-guaranteed lending, encompassing both USDA and US SBA programmes.

Furthermore, with the addition of Windsor Advantage’s government-guaranteed servicing platform, Capital Bancorp anticipates being strongly positioned to leverage and capitalise on the expanding niche market.

Capital Bank CEO Ed Barry said: “Capital has a track record of creating value by investing in teams and lines of businesses that generate strong returns for shareholders. This acquisition represents a continuation of our strategy to build a highly diversified business that generates best-in-class returns for our shareholders and allows us to better serve our customers.

“IFH’s expertise originating and servicing USDA and SBA loans fits well with our strategic objectives and will allow us to serve a market with substantial need and growth potential.”

According to the merger agreement terms, Integrated Financial shareholders will trade each of their company shares for $5.36 in cash and 1.115 shares of Capital Bancorp.

Following the closure, Capital Bancorp shareholders will hold roughly 84% ownership, while Integrated Financial shareholders will possess around 16% ownership of the merged entity.

Just before or during the closing, Integrated Financial is anticipated to disburse its minority equity stake in Dogwood State Bank to its shareholders via a dividend. This amounts to approximately 0.469 Dogwood State Bank shares for each Integrated Financial common stock share.

Integrated Financial chairman, president, and CEO Marc McConnell said: “We are excited for this partnership with Capital and for the benefits that it brings to both banks.

“With a larger balance sheet and our combined lending and deposit-gathering capabilities we believe that we can secure and grow our position as a leader in nationwide government guaranteed lending.”

The deal has received unanimous approval from the bank holding firms’ boards of directors. It is anticipated to finalise in the latter half of 2024, pending approval from the two parties’ shareholders, regulatory clearances, and the fulfilment of other standard closing prerequisites.

Stephens acted as the financial adviser, and Squire Patton Boggs (US) served as the legal adviser to Capital Bancorp. On the other hand, Raymond James & Associates provided financial advisory services, while Wyrick Robbins Yates & Ponton acted as the legal adviser to Integrated Financial.