Over the last decade SCBT Financial Corp. in Columbia, S.C., has built market share quickly in areas it has entered through acquisitions, and now it is aiming to replicate that success in the Carolinas' largest metropolitan market.
The $2.7 billion-asset company entered Charlotte in late November by acquiring the $193 million-asset TSB Financial Corp. and its Scottish Bank. SCBT had hovered on the edge of Charlotte's market, which borders South Carolina, but buying TSB gave the company its first branches in a city dominated by two of the industry's largest companies: Bank of America Corp. and Wachovia Corp., which are both headquartered there.
Charlotte's economy is one of the strongest in the Southeast, and SCBT executives are counting on population growth and business expansion there to help fuel loan and deposit growth at Scottish Bank. (It retained its name, charter, and management team.)
The executives also expect Scottish Bank to capture at least some customer runoff created by Fifth Third Bancorp's recent acquisition of Charlotte's third-largest banking company, the $4.8 billion-asset First Charter Corp.
But the executives expect SCBT to achieve most of its Charlotte growth by using a broader array of products and services and higher lending limits to lure business from other banks, as it has done in other markets it entered through acquisition.
"Most of our bankers used to work for the large banks, so we know what they're very good at, and we know some areas where they have some weaknesses," said Robert R. Hill, SCBT's president and chief executive officer. "We feel we focus on areas where we're strong and where they might not be as strong, and that's small to medium-size businesses and private banking and mortgages. That's where we think we stack up and can compete with really just about anybody."
Since 1999, SCBT has acquired four South Carolina banks, all with about $100 million of assets, and has merged them into its two subsidiaries there: South Carolina Bank and Trust and South Carolina Bank and Trust of the Piedmont.
Mr. Hill said that the smaller banks SCBT bought "had very good bankers" but did not have the size, capital, or products to compete effectively in their markets.
"We have used small acquisitions to move into the markets that we want to get to as really one step above a de novo expansion," he said. "It gives us a little bit of market presence, gives us a few branches, and then we build organically from there."
For example, since moving into the Greenville by acquiring New Commerce Bancorp in 2005, SCBT has tripled its assets there, to about $300 million.
Craig Colasono, an analyst with Sandler O'Neill & Partners LP, said in an interview that small businesses tend to be overlooked by large banks, because a "several-million-dollar relationship really doesn't move the needle at those larger banks, but there is value for a bank of SCBT's size."
Charlotte is one of the strongest markets in the Southeast, Mr. Colasono wrote in a note issued last week. New businesses continue to come to the area and create jobs, he wrote, and even though residential real estate sales are beginning to slow, home values have not deteriorated the way they have in other markets in the Southeast.
Scottish Bank had not been a particularly active mortgage lender but has become more so as part of SCBT. In the first quarter the bank's home mortgage volume increased about 11% from a quarter earlier, to $39 million, according to Federal Deposit Insurance Corp. data.
The bank also has been marketing more aggressively to small and midsize business owners, particularly professionals such as attorneys, doctors, accountants, and real estate brokers.
Mark Muth, an analyst at First Horizon National Corp.'s FTN Midwest Research Securities Corp., said SCBT is one of his strongest companies he follows and one of the few faring well. Its first-quarter earnings rose 14.5% from a year earlier, to $6 million. Its net chargeoff rate dropped 2 basis points, to 0.09% of average loans, versus the 0.34% average for South Carolina companies of its size. Its provision for loan losses rose 59% from a year earlier but fell 24% from the fourth quarter, to $1.2 million.
SCBT now has the No. 8 deposit share in the Charlotte metropolitan statistical area — though at 0.39%, its share is small.
Mr. Muth said he does not expect SCBT to have too much trouble gaining share in Charlotte, because the other markets where it operates — Greenville, Columbia, and Charleston — are "dominated by the same large regional and national banks that dominate Charlotte."
The Charlotte market is larger, but "competitively it's not materially different from the metro markets they're already in," he said.
Rick Mathis, SCBT's chief risk officer, said his company is keeping things in perspective.
"Do we think we're going to cause their market share to drop 5 percentage points? No," he said. "But if we go from 0.39% to, say, 1%, that would nearly triple the market share. And you can do the math with the dollars. It can be significant just moving up fractions of a percentage point."
