COLUMBIA, S.C. - Robert V. Royall Jr. and William L. Pherigo are fighting a war against northern aggression.

For nearly three years, the two former executives of Citizens and Southern Corp. have been racing to turn the once sleepy National Bank of South Carolina into a competitor that can stand up to NationsBank Corp., and the other powerhouses from North Carolina.

The objective is to build a bank big enough - perhaps $3 billion in assets within four or five years - to serve businesses and consumers statewide. But some think the mission will be a difficult one to achieve because the bank is dwarfed by many of its competitors, and the state may soon opt for nationwide interstate banking.

Piece of the Pie

"I won't call it a war, but I can assure you that Bill Pherigo and I intend to get our share of the marketplace," said Mr. Royall, the 59-year-old chairman and chief executive who left Citizens and Southern as vice chairman in 1990 before it was acquired by NationsBank. "We are on track. We are not just blowing hot air."

Mr. Royall and Mr. Pherigo's efforts, indeed, are a case study of how smaller banks are striving to carve out a place for themselves in a world increasingly dominated by giant players.

Mr. Royall speaks calmly about the mission, but since he and Mr. Pherigo, the 51-year-old president and chief operating officer, took over the management of the bank in early 1991, NBSC has been anything but a relaxed place to work.

That's because NationsBank, First Union Corp., Wachovia Corp., and a handful of other banks from North Carolina control more than 60% of the state's $28 billion in banking and thrift deposits. And they are still on the march. Just last week, BB&T Financial Corp., Wilson, N.C., snapped up LBS Bancshares Inc., Lexington, S.C., the third-largest bank in the state.

Mr. Royall and Mr. Pherigo see it as a prime time to steal customers and expand market share while the big banks are digesting their prey. Since December 1990, NBSC's assets have jumped 53% to $974 million; deposits have grown 52% to $867.6 million; and loans, after write-downs in 1991, have increased 21% to $591.3 million.

The bank has added 14 branches, acquired two thrifts with assets totaling $232 million, and raised $14.2 million in capital last May. It has done this while adding 38 former C&S officers to beef up senior staff.

"We kind of took the culture with us," Mr. Pherigo said. "Bob and I hired basically everyone who had come into that company [C&S] in the past 20 years."

Their efforts haven't gone unnoticed.

"The company is really making headway," said Christopher Marinac, a bank analyst at Interstate/Johnson Lane Corp. "I think the outlook is clearly very positive. They carry a lot of weight, and they have a good following in South Carolina."

Deposits Up in Capital

In Columbia, where North Carolina's Big Three have a sizable presence, NBSC's deposits have jumped fivefold to $352 million as of October 1993, from December 1990. And loans have more than doubled to $123 million.

"It's all take-aways," said Fred L. Green 3d, a fomer C&S executive who heads general banking operations for NBSC in Columbia, Camden, and Hilton Head Island. "We set out from the very beginning to be the local bank. Our goal became one of stealing customers and selling our name."

A customer, who wanted anonymity, recently moved his distributorship business to NBSC because it put together a multimillion-dollar loan package that NationsBank refused to handle.

"We talked to NBSC, and literally within several weeks it was a done deal," the owner of the company said. "We just felt like they were a lot more flexible than the large banks. Their attitude was that they really wanted to learn about us as small-business owners."

Mr. Green said loan officers "sell personal relationship, we sell responsiveness, we sell South Carolina Bank. If we only sold rate, we'd lose every time."

Prominent Figure in the State

The bank's main salesman is Mr. Royall. He's been in banking for 33 years, and he's one of the most prominent business figures in South Carolina.

Mr. Royall is chairman of the influential South Carolina State Ports Authority, which oversees the operations of the second-largest port on the Atlantic coast, and owns more than 2,000 acres of land in the state.

Last year, he was named "South Carolina Businessman of the Year," in part for working with Gov. Carroll A. Campbell to convince BMW of North America Inc. to build a plant in Spartanburg. It will mean $577 million in revenue over 20 years for the state.

As an example of Mr. Royall's zeal, the executive bounded back to work this summer right after throat surgery, to assist the governor in a deal to bring Daimler-Benz AG into the state. Unfortunately, the deal collapsed - and so did Mr. Royall's voice.

"I learned that maybe listening was good," he said.

The person whom Mr. Royall listens to most these days is Mr. Pherigo, who runs the day-to-day operations of the bank. The two have worked together for more than 20 years. They grew up in the same South Carolina town - Mt. Pleasant - but didn't know each other until 1974 when Mr. Royall became president of Citizens and Southern National Bank of South Carolina.

Mr. Pherigo joined C&S after graduating from the University of South Carolina in 1963. He worked in a number of positions, including human resources, and later was named senior executive vice president for administration and finance.

Fighting a Takeover

In 1989, Mr. Royall moved to Atlanta as vice chairman of Citizens and Southern Corp. When he left the South Carolina bank, it had $3.9 billion in assets and a return on average assets of 1.38%. That year NCNB Corp. chairman Hugh L. McColl Jr. made an unsuccessful attempt to take over C&S Corp.

"I fought it with great energy," Mr. Royall said. "I just thought C&S had a great opportunity to grow and develop on its own. We were a $25 billion [-asset) bank."

Mr. Royall resigned in 1990 when C&S merged with Richmond-based Sovran Financial Corp. Almost immediately he was approached by an NBSC board member.

NBSC had seen better days; it operated in small towns that didn't show much promise of growth, earnings were sagging, and problem loans were on the rise. Board members were also wrestling over whether to sell out to Southern National Corp., Lumberton, N.C., but the deal was terminated.

|Very, Very Sleepy'

Mr. Royall took the job in February, and Mr. Pherigo came aboard a month later.

"It was a very, very sleepy bank," Mr. Royall said.

Directors couldn't be more pleased with their decision.

"They are putting NBSC on the map," said Ramon Schwartz Jr., an attorney and bank director who holds 4.4% of the bank's stock.

"If I didn't think a lot of them, I wouldn't be serving on the board," added Edgar A. Buck, president of Buck Lumber and Building Supply Inc.

Within a week, the new management restated 1990 earnings, taking $1 million out of net income and putting it into loan-loss reserves. Meantime, Mr. Pherigo began filling empty slots: The bank didn't have a chief financial officer, a credit review officer, and a senior credit officer. He filled the positions by dipping into a pool of C&S executives who wanted a change.

"It [NBSC] was not in position to accomplish what we wanted it to accomplish," Mr. Pherigo said. "The first year I could not say was fun."

Intense Competition

Other bankers have taken notice of NBSC and its growth, but say its goals will be tough to achieve with the intense competition in the state.

"I think it is going to be extremely difficult for a bank that size, especially if we get into interstate banking, which could come about in 1996," said Robert Hubbs, president of Lexington State Bank, which this week announced a deal to merge with North Carolina's BB&T.

Mr. Royall admits that becoming a statewide force is a tall order, but it is not impossible. He says it will take several years before earnings are up to snuff.

For the first nine months of the year, NBSC earned $4.6 million and returned 0.82% on average assets - hardly the earnings C&S of South Carolina churned out.

The two bankers, however, say they are determined to build a bank the state can call its own.

"The larger we get for South Carolina, the more we can do for South Carolina. There is a lot of pride in being a South Carolinian."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.