Shareholders of Midlands bank vote to sell to Charleston lender (copy) (copy)

Carolina Financial Corp. is the parent company of Charleston-based CresCom Bank, which recently agreed to be sold. File/Staff

To the casual observer, a bank that oversees nearly $4 billion in assets and operates more than 70 branches in two states might appear to be large.

Not so much, it turns out.

As customers of Carolina Financial Corp.-owned CresCom Bank are learning, size seems to matter more than ever in the loan-making and deposit-taking business. The Charleston holding company recently agreed to be sold for $1.1 billion to a far-flung competitor from another Charleston — in West Virginia. 

"Scale is important," said Carolina Financial CEO Jerry Rexroad hours after the all-stock deal with United Bank was announced on Nov. 18.

The 10-figure price tag dwarfs previous buyouts involving South Carolina-based lenders. For example, First Citizens of Raleigh forked out about $637 million to acquire its smaller Palmetto State cousin of the same name five years ago. The 2013 transaction that combined First Federal of Charleston and Columbia's SCBT to create regional heavyweight South State was valued at $447 million.

CresCom opened its doors almost 23 years ago at 288 Meeting St. under the name Community FirstBank. Its parent company expanded to the Grand Strand market in 2000 by forming Crescent Bank. Carolina Financial then combined the two coastal franchises under the CresCom name in 2012.

The newly rebranded bank jumped on the merger-and-acquisition bandwagon about a year later, eventually expanding its reach to the Midlands, the Upstate and several key North Carolina markets. 

It met its match when United Bank came knocking. The West Virginia lender has inked more than 30 buyouts since going public in 1987. It now manages $20 billion in assets and has branches in seven states and Washington, D.C., with virtually no overlap with CresCom's footprint.

"They had had a strong interest in the Carolinas," Rexroad said. "They approached us with an opportunity … where it was very attractive to our shareholders."

Area bank owner's shares on Nasdaq (copy) (copy) (copy)

Jerry Rexroad is CEO of Charleston based Carolina Financial Corp., parent of CresCom Bank. File/Provided

It's the latest turn in a flurry of dealmaking that has bifurcated the banking business since at least the 2008 financial crisis. The early post-recession consolidation wave involved mostly small, capital-starved lenders that were weakened by the downturn. More than a decade on, the dealmaking has shifted to healthy franchises in attractive growth markets.

Over that period, the number of banks that call South Carolina home has shriveled nearly by half, according to the Federal Deposit Insurance Corp. The CresCom sale will cut that figure by one, to 46, when it's finalized next year.

As Rexroad sees it, the deal will benefit borrowers and account holders, citing the additional resources his bankers will be able to offer under the much larger United Bank umbrella. 

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"It brings a lot more products and services to our customers," he said.

At the same time, Rexroad pointed to one of the big financial risks of remaining independent at a time when larger rivals can tap deeper pockets to invest more in technology, "particularly on the digital platform."

"It's getting harder and harder for smaller banks to compete with across the retail channel," he said.

Even some of the industry's biggest players are wrestling with that quandary. Southeast regional giants BB&T and SunTrust are merging, in part, so they can more effectively battle the financial behemoths of the world, namely Bank of America, Citibank, JPMorgan Chase and Wells Fargo. Their $28 billion tie-up is scheduled to close later this week.

“We’ll have the scale to be able to be a player,” BB&T chief executive Kelly King said during a visit to Charleston in April.

Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott