Posted: July 16, 2010

By Bill Cresenzo

Suffolk-based TowneBank announced Friday that it is buying the troubled Bank of Currituck and its six branches in northeastern North Carolina for $10 million.

The move fits into the bank’s strategic goal of reaching customers from Williamsburg to the Outer Banks, said G. Robert Aston Jr., chairman and CEO of TowneBank.

Aston called the deal unusual, because TowneBank is not taking on $35 million in loans from the Bank of Currituck. About $25 million of those loans are non-performing, and all the loans will be spun off into a non-commercial bank corporation.

The Bank of Currituck has branches in Myock, Kill Devil Hills, Grandy, Camden, Corolla and Southern Shores.

Most of the Bank of Currituck’s employees will keep their jobs under TowneBank. However, four of the Bank of Currituck’s top brass, including President Matthew A.R. Converse, will not join TowneBank, Aston said. Aston and Converse said that it is possible that Converse will oversee the non-commercial bank corporation, pending board approval.

“We were obviously not interested in buying non-performing assets,” Aston said. “Over the next three years, they will be in the process of collecting the loans, and then dissolve itself at the end of the third year. Whatever funding is left will be directed to their shareholders.”

Converse called the deal an “arm-in-arm” relationship.

“Our objective is to do the best we can for the shareholders, and that is Bob’s and TowneBank’s objective as well,” he said

The Bank of Currituck is one of many banks – including Hampton Road Bankshares and Bank of the Commonwealth – that have been under written agreements with the Federal Reserve to turn their performance around.

TowneBank says that it is buying $173,000 million in assets, including $96 million in performing loans and $173 million in deposit accounts.

The current board of directors of The Bank of Currituck will join the regional board. The transaction is expected to close this fall and is subject to approval by the Bank of Currituck’s shareholders.

The recession has hit The Bank of Currituck particularly hard. A high concentration of construction loans to homebuilders who thought they would build and quickly sell turned sour.

The Bank of Currituck lost $7.27 million in 2009. At the end of the year, it had $17.57 million in past due and non-accrual loans and $8.03 million in foreclosed real estate.