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North Carolina community banks grew deposits faster than peers in Q2'19

North Carolina's community banks grew deposits faster than their Southeastern counterparts in the second quarter, but profitability did not keep up.

The median return on average equity for North Carolina's banks and thrifts with less than $10 billion in assets was 6.96% in the second quarter, compared to 9.30% for all Southeastern community banks and 9.59% for all U.S. community banks. The median net interest margin for the state was 3.80%, lower than the Southeast median of 3.96% and the U.S. median of 3.84%.

North Carolina's nonperforming assets ratio improved by 15 basis points year over year to 0.83% as of June 30, but that was still higher than the Southeast median of 0.82% and the national median of 0.63%.

However, deposit growth was stronger in North Carolina. The median deposit growth among the state's community banks and thrifts was 4.4% year over year, compared to 3.4% for the nation as a whole.

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Southern Pines-based First Bank, the state's largest community bank under $10 billion in assets, posted better results than the national and Southeast median in five of six key banking metrics. Only loan growth came in a little shy at 4.5% year over year, compared to 5.7% in the Southeast and 5.0% for the U.S. as a whole.

According to S&P Global Market Intelligence data, First Bank operates 101 branches, 95 in North Carolina and six in South Carolina. First Bancorp last completed a whole-bank acquisition in 2017, when it acquired both Asheville-based ASB Bancorp Inc. and Greensboro-based Carolina Bank Holdings Inc.

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This year, M&A volume has been slow in North Carolina. As of Aug. 28, only two whole-company or minority interest deals have been announced with a North Carolina bank target, not including terminated deals. Last year, three deals were announced, but in 2017, 10 deals were announced.

On July 15, Charleston, S.C.-based Carolina Financial Corp. announced that it would acquire Lincolnton-based Carolina Trust BancShares Inc. for $100.1 million. This year's only other deal, Raleigh-based First Citizens BancShares Inc.'s acquisition of Franklin-based Entegra Financial Corp., was announced April 24.

Entegra had earlier agreed to a merger of equals with Knoxville, Tenn.-based SmartFinancial Inc. in January, but terminated the transaction in light of First Citizens' superior offer.

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North Carolina, like the rest of the nation, is seeing more branch closures as banking goes digital. During the second quarter, 23 branches were closed in the state, while only four were opened. Over the last 12 months to June 30, 87 branches were closed and 18 opened.

As the blockbuster merger of BB&T Corp., headquartered in Winston-Salem, and SunTrust Banks Inc. nears completion, some bankers are hoping that the resulting branch closures and redundancies will allow smaller banks to poach personnel and customers.

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Click here for a spreadsheet containing results for all North Carolina community banks in the second quarter of 2019.