Capital G Bank Ltd. and First Bermuda Group (FBG) have agreed to merge in a deal that is expected to close within the next six weeks.

If the amalgamation is finalised, the new combined entity will have deposits in excess of $1.2 billion, a loan portfolio of $950 million and a team of more than 200 employees.

The news is the latest twist in an eventful year for FBG, coming just five months after the Permanent Investments Ltd., the owners of Bermuda Commercial Bank (BCB), had announced their own agreement to take over the deposits and mortgage firm.

That agreement lapsed at the end of June, leaving the way clear for FBG to explore other options.

Capital G and FBG yesterday announced the signing of a Memorandum of Understanding outlining the preliminary terms of a merger. Capital G bosses indicated that most FBG staff would be retained.

BCB chairman and managing director Michael Collier said last night that his company had decided not to pursue further merger efforts with FBG. On hearing the news of the Capital G agreement, he added: "I wish them well."

The exact terms of the proposed merger are still being discussed by the parties and will be subject to various consents including the Bermuda Monetary Authority.

Asked how the deal had come about, John Kephart, chief executive officer of holding company Capital G Ltd., said last night that he had first mentioned the possibility of a merger to former FBG CEO Jeff Conyers in a conservation back in February. "I didn't know at the time they were in discussions with BCB," he added.

The talks were resurrected after the BCB-FBG merger agreement was allowed to lapse. "Our first meeting with FBG's executive committee was on August 13, and we've been in discussions since then, leading up to the Memorandum of Understanding," Mr. Kephart said.

Capital G Bank chairman James Gibbons said: "The merger presents a significant opportunity for us to grow the bank's business in a short time frame in a cost effective way while also demonstrating Capital G's commitment to the Bermuda market and our mission to be a leading provider of financial services on the Island.

"One of the most important aspects of the merger is the retention of the majority of the FBG workforce. A successful transition can only be more successful by capitalising on the talent already available at FBG."

FBG employs around 20 people in its offices on the corner of Church Street and Par-la-Ville Road. After the merger, this will also serve as a second branch for Capital G Bank, while the bank's Reid Street headquarters will also deal with FBG customers.

In August, the Bermuda Monetary Authority fined FBG $100,000 for breaching anti-money laundering regulations, specifically relating to customer due diligence and staff training.

Capital G Bank CEO Ian Truran said it was expected that by the end of November all the staff of both companies would become employees of the amalgamated entity. There would then be an evaluation process.

He conceded it was possible there may be some job losses "through natural attrition" of those unable to meet objectives of their jobs, though he added that the bank aimed to help staff improve their skills as necessary.

As a larger organisation, with a larger structure, the combined company would offer staff more opportunities for promotion, he added.

"This marks an important milestone in Capital G's history," Mr. Truran said. "The merger will provide full-service banking opportunities for the clients of both institutions.

"FBG customers will receive all of the benefits of the Capital G network including a variety of savings and investment options, expanded credit facilities including credit and debit cards, commercial and private banking and estate and trust services."

As of August 31, 2010 Capital G Bank held deposits in excess of $1.035 billion and a loan portfolio of $782 million.

FBG has been in operation since 1990 and as of March 31 this year, held more than $206 million in deposits. The operating divisions of FBG include First Bermuda Savings & Loan and First Bermuda Securities.

FBG chairman Eugene Bean said in the companies' joint statement: "As we celebrate our 20th anniversary, First Bermuda Group is pleased to be announcing today this proposed merger.

"Capital G is a well-established financial institution with a culture that is very similar to that of FBG's. We also believe that the service provided by Capital G is commensurate with the service that our customers have come to expect so we believe that a merger with Capital G would be seamless to both our employees and customers.

"We look forward to working with the team at Capital G to conclude this deal."

FGB's executive committee of Mr. Bean, directors David Pugh and John Cunningham, and CEO Jonathan Clipper are representing the interests of FBG shareholders. Mr. Truran said it was anticipated that he and Capital G Bank chief financial officer Ralph Kern would be elected to the FBG board, possibly as soon as today.

The combined company will operate under the Capital G banner.

Mr. Kephart said: "Capital G has always been a community bank and FBG is the same thing, so we see the merger of the two as a nice fit."