A Georgia lender looking to beef up its coastal presence in South Carolina is buying the financially struggling Tidelands Bank franchise to help accelerate its growth plans.
United Community Banks Inc. announced the definitive agreement Monday. It will pay $2.2 million to stockholders of Mount Pleasant-based Tidelands Bancshares Inc., or 52 cents a share.
As part of the deal, the Peach State purchaser said the U.S. Treasury has agreed to sell the preferred stock it has owned in Tidelands since 2008 for $9 million — or a $10.4 million loss for the government when unpaid dividends are factored in.
The sale has been unanimously approved by the boards of each company. It is expected to close in the third quarter, and the seven acquired coastal branches would switch to the United Community name. Shareholders must approve the transaction.
Tidelands has four offices in the Charleston area, two in Myrtle Beach and one in the Hilton Head market. It has more than 10,000 customers, $466 million in assets, $421 million in deposits and $325 million in loans.
United Community CEO Jimmy Tallent called the acquisition “the second step of a two-step plan associated with our coastal South Carolina growth strategy.”
The first was the opening of its first Charleston-area office that he said has generated about $80 million in loans and commitments in the past five months.
“The combination of these two steps goes beyond the traditional entry-by-acquisition model and firmly establishes us in three key coastal South Carolina markets that are considered to be among the most attractive for growth and business in both the Southeast and in the country,” Tallent said.
United Community is based in Blairsville, Ga., and is nearing $10 billion in assets. Its lending subsidiary is one of the Southeast’s largest banks, with 134 offices in Georgia, the Carolinas and Tennessee.
In September, United Community completed its $240.5 million acquisition of Upstate-based Palmetto Bank, which at the time was the third-largest financial institution headquartered in South Carolina.
Its latest buyout target in the state was formed about 12 years ago after raising $10.2 million. The shares in that private offering were priced for $10 each.
Unlike most of its rivals, Tidelands never was able to recover from the recession and real estate downturn that started in 2007. It hasn’t turned a full-year profit since that year. Losses have totaled more than $54 million.
It was widely expected the bank would need to seek out a buyer.
The deal with United Community was announced about a month after Tidelands was notified that it had defaulted on securities totaling more than $18 million, including unpaid interest that’s been accumulating since 2010.
The investors in those notes could have forced the bank’s ailing parent company into bankruptcy. Instead, they have agreed to waive the defaults because United Community will take on that debt, according to a filing with the Securities and Exchange Commission.
Shares of Tidelands jumped to as much as 35 cents on Monday’s buyout announcement, but they fell back to close at 20 cents, a gain of 25 percent. United Community slipped almost 1 percent to end at $18.27.
Contact John McDermott at 843-937-5572.