Southern Pines, N.C.-based First Bancorp, the parent company of First Bank, will enter some of the most highly coveted markets in South Carolina with its acquisition of Greenville, S.C.-based GrandSouth Bancorp., the parent company of GrandSouth Bank, as a scarcity of targets in the region drives up deal values.
First Bancorp has been outspoken in its desire to expand its South Carolina presence, and the acquisition of GrandSouth, which also specializes in commercial banking, was an ideal opportunity to do so, First Bank CEO Michael Mayer said in an interview.
"We like the people and they're more of a commercial bank kind of like us, so it just seemed like the right fit," Mayer said.
GrandSouth is also attractive as one of only three community banks in South Carolina with a presence in all three of the state's major markets including Greenville, Columbia and Charleston, GrandSouth Bank CEO JB Schwiers said in an interview, adding that GrandSouth has a great efficiency ratio thanks to its "branch-lite" business model with only eight offices across the entire state.
"I really felt like we were in those three major markets and if you're not in South Carolina, that's where you want to be," Schwiers said.
S&P Global Market Intelligence calculated the deal value to be 189.24% of tangible common equity at the announcement. Over the last five years, bank deal valuations have consistently been higher in the Carolinas compared to the U.S. as a whole, with deals in the states being priced 48.7% higher in 2021 and 24.7% higher so far in 2022.
South Carolina has seen considerable consolidation over the last decade with 47 banks in the state today compared to 85 in 2010, according to S&P Global Market Intelligence data, and scarcity value in the South Carolina markets played a role in the deal's premium pricing, Mayer said.
"Any bank of any stature in North or South Carolina right now, if they decide they want to pursue and find a partner, they're going to be pretty well sought after, especially if they have the markets that these guys had, and there just aren't many that do," Mayer said.
From the perspective of GrandSouth, the deal made sense because the bank will gain substantial lending resources by folding into First Bancorp with combined total assets of $12 billion following the merger and will keep many of its employees after the deal's close, Schwiers said.
"We just don't have much overlap and they're gonna need a lot of help from our staff, so we feel that we're going to retain a lot of our employees," Schwiers said.
Additionally, First Bancorp will bring a lot of new product offerings to GrandSouth's repertoire, including wealth management, residential mortgages, treasury management and Small Business Administration lending, Schwiers said.
"They have an asset-based lending department," Schwiers said. "They have an SBA department, which we don't have. That's very complimentary to what we do. We have a good treasury management department, but they have a more robust product offering in their treasury management business."
GrandSouth also has a specialty lending division called "Carbucks," for used car dealers with headquarters in Greenville and business in 23 states, Schwiers said.
"It's about a $110 million loan portfolio, but they really liked that specialty lending division and they want to grow it," Schwiers said.
Following the deal, Schwiers hopes to continue to expand into other South Carolina markets and leverage his familiarity with Marion County's Pee Dee region, where he spent his first 10 years in the industry, to the benefit of First Bank's five existing branches in that area.
"I know that market and I think I can add some value to their existing branch footprint that they've got in South Carolina," Schwiers said. "I'll be the president of the South Carolina operation and I'll continue to manage Carbucks and their asset-based lending division."
First Bank is likely to be selective with regard to further M&A in the near term, Mayer said.
"Obviously, we need to swallow this one," Mayer said. "We'll continue to look, but I think we'll be fairly selective, certainly for the next little bit if we were to do anything."
