TowneBank's Power Play: What the Dogwood Merger Means for the Southeast

RALEIGH, NC – December 10, 2025 – In a move that signals a significant reshaping of the Southeast's regional banking landscape, shareholders of Dogwood State Bank have officially greenlit its merger into the larger TowneBank. The vote of confidence, which took place at a special meeting on December 3, marks the clearing of a major hurdle for a transaction poised to create a formidable financial institution with a deeper footprint across the Carolinas and beyond.

With an anticipated closing in the first quarter of 2026, the merger is now contingent only on customary closing conditions and the final nod from regulators, including the FDIC and state banking commissions. Dogwood State Bank, a Raleigh-based community bank with approximately $2.4 billion in assets, is now on a clear path to being integrated into the nearly $20 billion TowneBank.

Steve Jones, CEO of Dogwood, expressed his satisfaction with the outcome in a statement following the vote. "We are pleased that our shareholders have approved the proposed merger into TowneBank," he said. "This approval marks a significant milestone, and we look forward to completing the merger and moving forward together." While the shareholder vote is a procedural necessity, it represents a crucial endorsement of a strategic vision that extends far beyond a simple acquisition.

The Strategic Blueprint: Consolidating the I-85 Corridor

This merger is far more than a line item on a balance sheet; it's a calculated move by TowneBank to solidify its dominance along the booming Interstate 85 corridor, a vital economic artery stretching from Richmond, Virginia, down through North Carolina and into the upstate region of South Carolina. For TowneBank, the acquisition of Dogwood is not just about getting bigger—it's about getting strategically stronger in some of the nation's fastest-growing markets.

The deal will significantly bolster TowneBank's presence in key North Carolina metropolitan areas like Raleigh, Charlotte, and the Greensboro-Winston Salem region. It also provides a crucial entry point into Charleston, South Carolina, and adds a total of 17 new branches to its network. This expansion is part of a clear and consistent pattern of acquisitive growth for TowneBank, which previously absorbed Paragon State Bank in Raleigh in 2018 and has pending deals with Village Bank and Trust and Old Point Financial Corporation.

By acquiring Dogwood, TowneBank is executing a classic consolidation play, absorbing a smaller, well-positioned competitor to gain market share, operational scale, and geographic density. For other community and regional banks in the area, this move raises the competitive stakes, creating a larger, more diversified rival with a broader service offering and a deeper well of capital.

A Marriage of Strengths: Analyzing the Financials

Investors have enthusiastically endorsed the financial logic behind the union. Under the terms of the agreement, Dogwood shareholders will receive 0.700 shares of TowneBank stock for each Dogwood share, a deal valued at approximately $476.2 million at the time of its announcement. The market's reaction was swift and decisive: shares of Dogwood State Bank (OTCQX: DSBX) surged over 50% in the wake of the news, a clear indicator of shareholder belief in the premium offered.

For TowneBank, the acquisition is expected to be a powerful engine for growth. The bank projects the deal will be approximately 8.0% accretive to its 2027 earnings per share, bolstered by an estimated $15 million in annualized cost savings. This financial upside is rooted in the complementary nature of the two institutions. Dogwood brings a loan portfolio with a higher yield (6.81% in Q2 2025) and a strong concentration in Commercial & Industrial (C&I) loans.

Perhaps most importantly from an innovation standpoint, TowneBank is acquiring Dogwood's highly specialized and successful Small Business Administration (SBA) lending division. This isn't just an add-on; it's a new, high-performing, fee-generating business line that diversifies TowneBank's revenue streams. Dogwood has built its brand on being "the bank for businesses," and TowneBank is paying a premium to integrate that expertise and client base into its own ecosystem. The acquisition's valuation at 2.1 times tangible book value reflects the strategic value placed on Dogwood's market position and specialized lending capabilities.

The Human Element: Integrating Culture and Customers

While the strategic and financial rationales are compelling on paper, the ultimate success of this merger will be determined on the ground—in the interactions with customers and the retention of key talent. Dogwood cultivated a strong "Bank Local" identity, a philosophy that can be challenging to maintain when absorbed by a much larger entity. The most significant risk in any bank merger is customer attrition, as studies show a notable percentage of clients often leave due to uncertainty and a perceived loss of personal connection.

TowneBank faces the critical task of reassuring Dogwood's loyal customer base, especially the small business owners who relied on its specialized services. This will require a masterclass in communication: proactively detailing changes to accounts, ensuring continuity of service, and demonstrating that the combined bank can offer enhanced value without sacrificing the relationship-based approach Dogwood championed. The integration of Dogwood's digital offerings and branch network into TowneBank's platform will be a key test of its customer-centricity.

On the employee front, TowneBank appears to be making strategic moves to ensure a smooth transition. The decision to retain Dogwood CEO Steve Jones as President of TowneBank's North Carolina and South Carolina banking operations is a significant signal of this intent. Keeping Jones in a top leadership role, along with adding a Dogwood director to the corporate board, provides crucial continuity and regional expertise. While some workforce consolidation affecting 10% or less of Dogwood's staff is anticipated, this focus on retaining leadership is designed to preserve institutional knowledge and client relationships. The challenge will be to successfully merge two distinct corporate cultures while keeping the talent that made Dogwood an attractive acquisition in the first place. The true test for TowneBank will be translating this strategic acquisition into tangible, long-term value for its new customers, employees, and the rapidly growing communities it now serves.