The banking business is getting better, financially.
Now, the focus is on getting bigger, physically.
Two newly announced deals in South Carolina illustrate the shift, which began to gain traction with the surprise SCBT-First Federal marriage last year.
The smaller of the latest transactions involves Harbor National Bank. Just eight years old, it's the newest startup lender based in the Charleston region. Its owner agreed June 5 to be sold to the larger High Point, N.C.-based BNC Bancorp in a stock swap valued at nearly $51 million.
But even bigger banks that have been around for a century or more are coming to realize that size matters these days.
A case in point is First Citizens Bank and Trust, which boasts an ancestry dating back to 1913. With $8.5 billion in assets, it's the largest lender headquartered in the Palmetto State.
The privately held Columbia company announced late Tuesday that it's merging with publicly traded First Citizens BancShares - a beefier, distant cousin from North Carolina with assets of $22.2 billion and 400 branches in 17 states and Washington, D.C.
Bankers have been either bracing for or embracing an extended period of consolidation for their industry as it recovers from the so-called Great Recession and the 2008 financial crisis. SCBT CEO Robert Hill Jr., for instance, has stated that the number of U.S. lenders could shrivel by more than 40 percent to 4,500, either by choice or necessity.
Industry expert Tony Plath is seeing fewer shotgun marriages. Most of the weak or mortally wounded lenders have been snapped up already.
"That phase of consolidation is over," said Plath, an associate professor of finance at the University of North Carolina-Charlotte.
The deals that are being brokered now tend to be "more strategic" in nature, he said. They typically involve combining stable, profitable institutions.
"What we're seeing is . mergers of opportunity," he said. "That's what we're seeing with First Citizens."
In that case, it wasn't just the smaller South Carolina bank that was hungering for size and scale.
Frank Holding Jr., the third-generation CEO of Raleigh-based First Citizens, made no bones about his desire to bulk up by making smart acquisitions. In a message to employees last week, he said that "to remain competitive and successful well into the future, we aspire to be a significantly larger organization that operates more efficiently and effectively."
"As a larger bank, we can pursue more growth opportunities, expand our lending relationships, and bring our products and services to even more individuals and businesses," Holding said.
In setting its sights on South Carolina, the Raleigh bank is acquiring a large, established franchise in a state where, as Plath noted, other expansion-minded rivals already are making loans and inroads.
"Essentially, for competitive reasons, First Citizens has to follow suit," Plath said.
Certainly, well-managed community banks will survive, though Plath sees few if any newcomers being formed. He also predicted a dim future for marginal lenders that go it alone, again, either by choice or necessity.
He rattles off the challenges: Low interest rates are pinching their bottom lines. The capital markets aren't willing to shovel cash into them anymore. Loan demand in general remains weak. And the government is larding costly regulations on the industry.
"All those things argue for bigger rather than smaller," Plath said.
Contact John McDermott at 937-5572.
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