trending Market Intelligence /marketintelligence/en/news-insights/trending/P3re0qq6rE9c4h_U8Us7Sg2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

United Community moves further into South Carolina with troubled-bank buy complementing lift-out

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good

Street Talk Episode 67 - Veteran investor tabs Mick Mulvaney to help with latest financial stock-focused fund

Street Talk Episode 65 - Deferral practices trap US bank portfolios in purgatory


United Community moves further into South Carolina with troubled-bank buy complementing lift-out

's partnershipwith a troubled lender in the Charleston and coastal South Carolina areas will solidify the bank's presencein the region while providing enough accretion to negate the impact of crossing$10 billion in assets.

UnitedCommunity, which had $9.63 billion in assets at the end of 2015, to acquire Mount Pleasant, S.C.-based Tidelands Bancshares Inc. and unit Tidelands Bank for a reported deal value of $2.2 million,according to an April 4 news release. The acquisition extends a lifeline to thetroubled institution, which had $466.2 million in assets at the end of 2015 andhad recently disclosed doubts about its ability to continue as a .

The acquisitionis the second step in United Community's strategy toward the Charleston market,following its earlier lift-out of a lending team that has already made an impacton the bank's balance sheet. Analysts said in reports following the deal that itwas a logical step with minimal integration risks that will allow the bank to quicklygain scale in the area, and is attractively structured to benefit both the targetand seller.

The deal"increases the likelihood" that United Community will reach $10 billionin assets by the end of 2016, according to President and COO Herbert Lynn Hartonin the company press release. Crossing the threshold and incurring higher FDIC insuranceand the lower interchange income as part of the Durbin amendment will cost the banka little more than 2 cents per share a quarter, starting in the third quarter of2017 at the earliest.

But managementexpects the deal to offset the impact of crossing $10 billion. Keefe Bruyette &Woods analyst Jefferson Harralson wrote in an April 4 flash note that the deal adds6 cents to 7 cents a share to 2017 EPS; adding the benefit of the lending team lift-outin Charleston increases the potential EPS benefit to 9 cents to 10 cents a share.

"[UnitedCommunity] is adding a nice financial transaction that helps build the bank aroundits recent Charleston lift out that is expected to have $85 million in average loangrowth and $95 million in mortgage production," he wrote. "At the sametime, accretion from the deal offsets the Durbin expenses."

The dealcarries attractive structuring for United Community, including a 56% discount fromthe U.S. Treasury Department on Tidelands' outstanding stock issued under the CapitalPurchase Program for a total payment of $9.0 million. Tidelands was a "verytroubled" bank since the financial crisis, and had continued to grapple withits elevated problem assets and credit costs, reported losses and negative tangiblecommon equity, wrote Hovde Group analyst Kevin Fitzsimmons in an April 5 note. Hesaid the bank was "effectively kept afloat" by TARP. United Communitywill take a 5% mark on Tidelands' loans and a 50% mark on its OREO.

"Ourunderstanding is that while [Tidelands] has been taking steps to resolve the situation,the pace and magnitude of such steps was limited by the tight capital situation,"he wrote.

The acquisitionalso offers United Community a chance to leverage its budding footprint in Charleston.While Tidelands "is not in pristine shape," the deal gives United Communitythe infrastructure needed to expand its coastal footprint and "essentiallycompensates for the expected dilution" related to crossing the $10 billionthreshold, wrote Raymond James analyst Michael Rose in an April 4 note. It increasesthe bank's market share in the state by about 42%, giving it the ninth spot in thestate's deposit-share ranking, he wrote.

But thepartnership of Tidelands' footprint leveraging the strength of the lifted-out lendingteam from Toronto-Dominion Bankmay have been the difference in making the deal work for United Community when comparedto other sellers. The lift-out occurred in the third quarter of 2015, and the teamhas originated about $85 million in new loans and commitments in the last five months.

In aninterview before the deal was announced, Fitzsimmons had said that United Communitywould "be an interesting one to watch," given that the bank's of had taken the bankto just under $10 billion in assets.

"It would take them only a smalldeal to cross it; I would have to imagine with organic growth, they're going tocross it," he said in the interview. He said at the time that the bank maydecide to pass on smaller deals because it would perhaps pull forward costs likeDurbin ahead of when management had originally anticipated incurring them.

The Hovdeanalyst wrote in his report following the deal that management had acknowledgedthat Tidelands had been targeted because it could be coupled with an existing platform,and may have not been on their radar if the bank did not already have a team inthe area.

"In some ways, we suspect that [management] viewed the economicsand timeline of the benefits from this transaction as very favorable relative tothe more timely and costly option of building new branches/offices," he wrote,adding that United Community is currently in discussions with other lenders in theSouth Carolina coastal markets that could join the bank.