When Charleston, W.Va.-based United Bankshares Inc. announced that it would acquire Charleston, S.C.-based Carolina Financial Corp. on Nov. 18 for $1.12 billion, it was not only the largest amount ever paid for a South Carolina bank, it was also the most expensive deal in the state since Wilmington, N.C.-based Cooperative Bankshares Inc. offered to buy Jefferson-based Bank of Jefferson at a valuation equal to 267.1% of the company's tangible common equity in March 2007.
With Carolina Financial, United will not only get the largest South Carolina community bank under $10 billion in assets, CresCom Bank, it will also pick up Lincolnton, N.C.-based Carolina Trust BancShares Inc., the holding company of North Carolina's 14th-largest community bank, which announced a deal to be acquired by Carolina Financial on July 15. Once the deal is completed, United will be the ninth-largest bank by deposits in South Carolina, according to data from the FDIC's 2019 Summary of Deposits. This is also United's first M&A deal south of the Virginias.
Prior to the United deal, M&A activity had been quiet in South Carolina in 2019. Only one other deal had been announced this year — Raleigh, N.C.-based First Citizens BancShares Inc.'s $37.3 million acquisition of Spartanburg-based First South Bancorp Inc., which was announced on Jan. 10. In 2018, four M&A deals were announced in the state, while five were announced in 2017.
South Carolina's community banks were less profitable but faster-growing than the U.S. community banking sector as a whole in the third quarter.
Among the state's banks and thrifts with under $10 billion in assets, the median return on average equity was 8.23% in the third quarter, lower than the Southeast median of 9.67% and the U.S. median of 9.86%. Similarly, South Carolina's median net interest margin was 3.72% in the third quarter, 26 basis points below the Southeast median and 13 basis points below the national median.
Meanwhile, loan and deposit growth in the state outpaced both regional and national peers. Deposits grew by a median 5.2% year over year in the state, compared to 4.7% in the Southeast and 4.4% nationwide. In addition, loans grew by a median 6.0% year over year in South Carolina, compared to 5.3% in the Southeast and 4.4% in the whole U.S.
At slightly more than half the size of CresCom Bank, South Carolina's second-largest community bank by assets, Greenville-based Southern First Bank, turned in a strong third quarter. The company's 14.32% return on average equity was significantly higher than the state median, and its loan and deposit growth, at 15.3% and 19.6%, respectively, trounced the state median. Among the six key banking metrics analyzed, Southern First only came up short in net interest margin, which was 3.56% for the quarter.
Southern First Bancshares Inc.'s stock has done well in 2019, returning 32.7% as of Dec. 4, outpacing the SNL U.S. Bank and Thrift index's 29.1% return and the S&P 500 at 26.5%.
Like most of the rest of the nation, banks and thrifts in South Carolina have been closing more branches than they have been opening, as banking goes more digital. During the third quarter, seven branches were closed in South Carolina and only five were opened. Over the last 12 months to Sept. 30, 52 branches were closed in the state and 27 opened.
Click here for a spreadsheet containing third-quarter 2019 financial results for all South Carolina community banks and thrifts.