SCBT executive says acquisition positions bank for high growth
By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published May 24, 2010
When S.C. Bank and Trust purchased a failed bank in northern Georgia earlier this year, total assets of the Columbia-based financial institution jumped nearly 45%.
President and CEO Robert Hill calls the acquisition transformational.
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| SCBT President and CEO Robert Hill |
It broadened SCBT’s footprint from two states to three, burgeoned its customer base and deposits, pushed earnings beyond historic highs, boosted stock value and created a need for 100 new jobs in South Carolina.
With the increased assets, SCBT is positioned to bid for even larger banks that fail in the future, Hill said, and continued expansion through consolidation is what SCBT’s leaders are focused on.
“We really want to be the premier
community bank in the Southeast,” Hill said, speaking this month to a group in Charleston about the bank’s future.
SCBT is looking to grow in Georgia, up the Interstate 85 corridor to Charlotte, where the bank has had a presence since 2007, and into other major markets in North Carolina, Hill said. To the south, Hill said Atlanta, Savannah and Jacksonville, Fla., are all targets for growth.
The bank also is likely to expand more in Charleston, a market it entered in 2007. SCBT has six locations in the region.
Transformational growth
SCBT’s Jan. 29 purchase of Community Bank and Trust of Cornelia, Ga., from the Federal Deposit Insurance Corp. increased its assets from $2.7 billion to $3.9 billion.
Hill said that’s significant because it puts SCBT closer to $5 billion in assets.
Larger banks can offer more sophisticated products to customers and are more competitive with banks the size of Wachovia and Bank of America.
Based on its current size, SCBT can lend about $50 million to a business, Hill said. “We’re not going to bank Boeing; but the people who are servicing Boeing are the people we are dealing with every single day.”
SCBT will bid for other failed banks, Hill said, and possibly larger banks.
He said the FDIC requires a financial institution to have assets twice as large as a bank for which it bids. With the addition of Community Bank and Trust’s assets, SCBT is positioned for faster growth.
Hill said he expects the recent spate of U.S. bank failures to go on for about two more years, and consolidations will continue after that through traditional mergers and acquisitions. Banks that struggled through the financial crisis will emerge looking for ways to increase stock prices and earnings, Hill said, and consolidation will be a good answer.
“There’s just overcapacity in our industry,” he said. “There’s just too many banks.”
Through the acquisition, SCBT picked up about 60,000 checking accounts at once, a rarity, Hill said.
“To get 60,000, you don’t do that in a few years,” he said.
The purchase also had a major impact on SCBT from an earnings perspective.
The deal, which like all similar transactions was sweetened by the FDIC’s backstop on losses, brought a one-time gain that boosted SCBT’s earnings in the first quarter of 2010 beyond any amount the bank has earned previously in an entire year, let alone a single quarter.
First-quarter profit was $49 million; in its best year ever, SCBT earned about $24 million, Hill said.
The dramatic earnings growth is directly tied to the deal and won’t likely be repeated. But Hill said the gain boosts SCBT’s future earnings potential and stability. The bank has already shown stability, reporting positive earnings in every quarter of the recession while many similarly sized banks have posted big losses.
Waiting for the right deal
SCBT is one of three South Carolina-based banks to expand recently by purchasing failed banks in neighboring states.
Columbia-based First Citizens and Charleston-based First Federal also have purchased failed banks and increased their assets and market footprint.
Hill said SCBT has been watching bank failures over the past year, looking for the right opportunity to make a bid. The company considered 30 to 50 banks, but it didn’t like core operations at any except Community Bank and Trust.
“Some banks that fail are better than other banks that fail,” Hill said.
Community Bank and Trust was attractive, in part, because of its size. It was ranked among the top five banks in market share in nine of the 10 counties it served, Hill said. Having operated for 110 years, the bank also came with generations of customer loyalty, he said.
Many banks that have failed recently have been newer institutions with heavy concentrations of real estate loans and without long-term loyalty, said Bill Medich, Charleston city executive for SCBT.
To integrate the Georgia bank to its network, SCBT plans to add about 100 jobs in its loan operations, call center and information technology departments, which are in Columbia and Orangeburg.
Recent growth
SCBT started out 76 years ago in Orangeburg as First National Bank. In 2001, the company set its sights on statewide operations, and in 2002 it relocated its headquarters to Columbia and changed the bank’s name to S.C. Bank and Trust. SCBT now operates 86 locations in the Carolinas and Georgia.
As of June 2009, SCBT claimed 2.90% of deposit share in South Carolina, up from 2.49% the year before, according to the FDIC. The year-to-year gain, larger than that any other bank’s, moved SCBT from No. 9 to No. 8 statewide.
In the Charleston metro area, SCBT ranked No. 12 as of June 30, with 1.96% of market share, about even with its 1.94% in 2008. Overall, Hill said, SCBT’s core deposits grew 20% in 2009.
Hill said SCBT made $1 billion in loans in 2009, despite the common belief that banks aren’t lending money.
He predicted that commercial real estate lending, generally, will remain slow for a while, because the secondary market is still frozen, properties are difficult to value and many banks have a high concentration of those loans.
Reach Ashley Fletcher Frampton at 843-849-3129.
