First Citizens Bancorp. of Columbia, S.C., is paying top dollar in a deal to add core deposits and beef up market share in its home state.
On Thursday, First Citizens said that it would buy the $585 million-asset Community Bankshares Inc. in Orangeburg for $96.4 million in cash, or $21 a share, nearly double the price at which Community's shares were trading Wednesday.
The deal price, roughly two times Community Bankshares' tangible book value, would have been considered in line with prices two or three years ago, when the market for mergers and acquisitions was far more robust.
Craig Nix, First Citizens' chief financial officer, downplayed the price and focused instead on the 10 branches and $481 million of deposits — 75% of which are core — his $6.4 billion-asset company would be getting.
"Comparing it to a multiple of their stock price right now might not be a long-range view of the value of a bank like Community," Mr. Nix said. "We didn't really harp on where their stock was trading right now, because the general market is pretty much getting beaten up."
Community Bankshares is the parent of Community Resource Bank, which has 10 branches in five counties where First Citizens already operates.
Buying Community Bankshares would give First Citizens the top market share in Sumter, Fairfield, and Florence counties, along with the No. 2 share in Orangeburg County.
"From a strategic standpoint, it increases market share in terms of core deposits," Mr. Nix said.
The deal is the first one announced in South Carolina this year, but the purchase would be First Citizens' second. On June 1 it bought the $145 million-asset bank Merchants and Farmers Bank of Comer, Ga.
Craig Colasono, an analyst with Sandler O'Neill & Partners LP, said that from 2005 to 2007, "when banks were getting nice premiums," the median price for a South Carolina banking company was 1.8 times its tangible book value. Prices dropped off considerably in the second half of last year.
According to SNL Financial LC, the deal price is equal to 35.6 times Community Bankshares' last 12 months' earnings.
The seller's stock increased 73% Thursday on news of the deal, to close at $19 a share.
Samuel L. Erwin, Community Bankshares' chief executive officer, said First Citizens' offer was too attractive to turn down, particularly at a time when buyers are not exactly beating down sellers' doors.
"When you're presented with a $21 a share offer in this market when your shares are trading at close to $11 … that's certainly a very fair deal," Mr. Erwin said in an interview Thursday. "When you look at it in this environment, when you don't have a lot of deals going on, [and] the premiums are much lower than that, it was a deal our board couldn't refuse."
Mr. Erwin became the CEO of Community Bankshares in 2005. He has spent much of the past three years cleaning up its loan problems and improving its efficiency. Community Resource used to have four bank subsidiaries and a mortgage company, all of which have been rolled into a single bank.
Its ratio of nonperforming loans to total loans stood at 3.94% on March 31, 2006, but two years later it stood at 1.57%.
"They obviously had some credit problems in the past, and their numbers show that they've dealt with those," Mr. Nix said. "There's an indication that management has taken those issues very seriously and taken positive steps to address them."
