Banking getting better after getting smaller
The banking business in South Carolina continues to regain its strength.
And while it's not quite a 98-pound weakling, it remains a shadow of its former self.
The latest government figures show that federally insured lenders based in the state have had a pretty good run this year through the third quarter, along with the broader economy.
Homes sales, for instance, are up sharply, fueling demand for mortgages. And the fast-rising tide of failed loans and foreclosures that crested after the last recession finally has receded to a manageable level.
That's helped those lenders earn a collective $167 million from Jan. 1 to Sept. 30, a hefty 35 percent jump from the same period last year, the Federal Deposit Insurance Corp. said this month. Nearly 82 percent of those lenders were in the black, up from 77 percent in the 2012 third quarter, according to the agency's latest report.
But the impressive-looking gains pale when stacked against the peak January-September period in 2006, right before the industry was about to lose its footing. At that time, South Carolina-based banks had pulled down a stunning $474 million in year-to-date profits, reflecting the fleeting fortunes of a runaway real estate market.
The wheels started to come off that same year, just as the subprime lending crisis began to overheat and demand for homes and commercial buildings softened. Then it got real ugly. Most banks hunkered down and cut costs. Others sought buyers, sometimes out of desperation. A few failed.
The contraction comes into sharp view by rewinding to seven years ago, when nearly 100 South Carolina-based banks were staffed by more than 12,000 workers, according to the FDIC. As of this past September the state was home to 69 lenders that accounted for about 9,300 jobs.
The retrenchment isn't exclusive to South Carolina.
As reported in The Wall Street Journal last week, the number of U.S. banks figure slipped below 7,000 for the first time since the government began tallying failures and buyouts 80 years ago. That figure peaked at about 18,000 in the mid-1980s.
Meanwhile, no new banks are being formed to fill the void, unlike previous boom-and-bust cycles. Locally, the last newcomer to enter the fray was Harbor National Bank, which opened its doors in 2006.
The upside, in Charleston at least, is that the industry is showing signs of expanding again. Instead of eager upstarts, it's mostly out-of-town community banks that are driving much of the new growth.
High Point, N.C.-based BNC Bank, for example, recently opened a peninsular branch on East Bay Street, more than a year after tip-toeing into the market by acquiring a tiny failed savings and loan.
Greenville's CertusBank, meanwhile, is putting the final touches on its first local office on Meeting Street, in the heart of the city's financial district.
More recently, Southern First Bank of Spartanburg broke ground on a corner branch in Mount Pleasant.
Locally based lenders aren't sitting idly by. The Bank of South Carolina and Harbor National have recently expanded their mortgage businesses, and they're planning to open their first branches in North Charleston and Summerville, respectively.
It's an old banking saw that the ups and downs of the lending industry mirror the health of the communities it serves.
Contact John McDermott at 937-5572.