Daniel Blanton, the president and chief executive of Georgia Bank and Trust Co., had a curious problem.
His $910 million-asset bank is headquartered in Augusta, which sits on the west bank of the Savannah River, on the Georgia-South Carolina border.
It is free to make loans in both states, but because it has a state commercial bank charter, it cannot open branches or take deposits in South Carolina.
Mr. Blanton considered buying a bank in South Carolina to start gathering deposits there, but found the prices too high. In December 2005 he decided on a less conventional but more cost-effective solution: to have his holding company, Southeastern Bank Financial Corp., file an application with the Office of Thrift Supervision to charter a savings bank in South Carolina.
The agency approved the application on July 12, and in September Southern Bank and Trust is expected to open its first branch, in Aiken County, S.C., across the river from the Augusta.
Mr. Blanton said the thrift will probably expand into other parts of South Carolina at some point. If it decides it wants a foothold in other states, the less restrictive branching regulations of the OTS charter would allow it to do so.
"I get the best of both charters," said Mr. Blanton, who is also the holding company's president and CEO.
With community banks' asking prices continuing to rise throughout the country, many banks are seeking cheaper ways to enter states that have laws prevent branching by out-of-state banks.
Some have bought charters that have become expendable after mergers or charter consolidations.
Coastal Banking Co. Inc. in Beaufort, S.C., announced July 13 that to enter Georgia it was acquiring a state charter from Ameris Bancorp in Moultrie, Ga. First M&F Corp. in Kosciusko, Miss., announced the same day that it had agreed to buy Ameris' Florida banking charter to enter that state. (Ameris consolidated its multiple charters into one this year.)
A handful of other companies have opted for a thrift charter.
The $763 million-asset Savannah Bancorp Inc. in Georgia received an OTS charter in December 2005, which enabled it to open a thrift, Harbourside Community Bank, across the river in Beaufort.
"We felt it was more economical to charter than acquire," said Mike Odom, Savannah Bancorp's CEO. "I've accused Dan [Blanton] of stealing my secrets," Mr. Odom joked.
Several years ago, Jerry Von Rohr, the chairman and CEO of Reliance Bancshares Inc. in St. Louis, became intrigued by the profit potential of the Florida market and wanted to get in on the action. Reliance, which has assets of $744 million, opened a loan production office in Fort Myers in July 2004 and soon decided to set up a full-service branch network there. But out-of-state banks cannot open branches in the state unless they have a Florida banking charter.
Mr. Von Rohr shopped around for an acquisition but was put off by the prices of most Florida community banks. And when he looked closely at a bank in his price range, he found it was riddled with asset-quality problems.
"Our conclusion was to go after a thrift charter," Mr. Von Rohr said. "That would allow us to enter into Florida, and that would allow us to also branch into other parts of the country if we chose to do so at a later date."
"Why more people don't do it? I don't know," he said.
Mr. Von Rohr said he got the idea from an official he had spoken with at the $2.3 billion-asset First Busey Corp. in Urbana, Ill.
First Busey moved into Florida after getting a thrift charter in 1998. It converted to a national bank after buying the $153 million-asset Tarpon Coast Bancorp Inc. of Port Charlotte, Fla., in July 2005. Busey Bank, National Association in Charlotte, Fla., now has assets of $422 million.
Bank holding companies that obtain thrift charters are expected to fulfill the three-year business plan they presented in their application. After that they can convert the thrifts to bank charters.
But "we haven't really seen a trend of applicants that have opened up a thrift and flipped it," an OTS spokesman said.
Joe Ford, a lawyer at DLA Piper Rudnick Gray Cary LLP in Austin, said that using a thrift charter for branching purposes has its drawbacks.
The OTS application process is more time-consuming than other agencies', the charter puts more restrictions on commercial lending, and dealing with two different sets of regulators "would be beyond the interest, if not the capability, of most banks," Mr. Ford said.
He said he does not expect a large increase in bank holding companies' use of thrift charters to enter states.
"The opportunity to do this has been around for quite some time, and we really haven't seen many," he said. "So I really don't think we'll see a groundswell of activity of this sort."
Next to the cost of making an acquisition in Florida, though, obtaining a thrift charter is more palatable, Mr. Ford said.
"That's definitely an around-the-horn way of going about that, but I guess in Florida it might make sense," he said.
