Scrutiny, suit delay local bank sale

The all-stock acquisition of Southcoast Community Bank and its parent by BNC Bancorp was valued at about $95 million as of Friday. The exact amount won’t be determined until the sale is finalized.

BNC Bancorp has sewn up more than a dozen acquisitions since 2010 in its quest to expand as the lending industry consolidates.

The deals are starting to get a bit trickier.

A case in point is BNC’s proposed buyout of Mount Pleasant-based Southcoast Financial Corp.

The all-stock deal was supposed to be wrapped up by Thursday. The companies have had to push the closing date into the second quarter, namely because of a couple of unexpected wrinkles. They also waived their rights to terminate the deal if it wasn’t signed, sealed and delivered by March 31.

“The transaction remains subject to required regulatory approvals and the satisfaction of other customary closing conditions,” Southcoast said in a filing with the Securities and Exchange Commission on Monday.

In hindsight, the March 31 deadline was “probably a little bit aggressive,” BNC Bancorp chief executive Rick Callicutt said that day.

“It’s getting more complicated,” the CEO said of the merger approval process. “Because of the size of our organization and our company, you get a lot more attention, a lot more scrutiny. It just comes with the territory.”

Even so, Callicutt still expects to fold Southcoast Community Bank into the expansion-minded operation he runs by early summer.

“We’re very confident about and committed to the transaction,” he said Thursday. “It’s not a matter of if. It’s a matter of when.”

Announced in August, the Southcoast purchase would instantly make High Point, N.C.-based BNC a sizable player on the local lending scene. Its footprint would swell from five branches to as many as 15 in Mount Pleasant, Charleston, Moncks Corner, Johns Island, Summerville, Goose Creek and North Charleston, though a few overlapping locations will likely be combined.

BNC — known as Bank of North Carolina in its home state — has it would rank among the top 5 lenders in the region based on deposits after the buyout.

“This partnership will allow us to expand our presence in one of the fastest growing and most dynamic regions in the Southeast, the Charleston and Mount Pleasant ... markets,” Callicutt said when the deal was announced seven months ago.

The Southcoast purchase was designed to build on previous smaller acquisitions. As it moved into South Carolina, BNC focused at first on mortally wounded banks. It gained a foothold along the coast in 2010 when it took over the Grand Strand’s failed Beach First National in a deal with the federal government. It migrated south to Charleston almost four years ago when it assumed the assets of the seized two-branch Carolina Federal Savings.

As the weaklings were weeded out, BNC turned its sights on small but healthy banks struggling to balance their rising regulatory costs with anemic profit margins. Among them: Charleston-based Harbor National, a $51 million deal that went off without a hitch in 2014.

BNC’s latest pursuit has proven to be slightly more difficult.

A Southcoast shareholder from Pennsylvania threw up the first roadblock by filing a lawsuit that alleged the terms of the sale were unfair because they undervalued the company and prohibited competing bids. The investor voluntarily dismissed the complaint, with no money changing hands.

“That monkeyed things up and slowed things down,” Callicutt said.

Then, two New York-based public interest groups, Inner City Press and the affiliated Fair Finance Watch, filed a protest by raising questions about BNC’s lending record with minority borrowers under the Community Reinvestment Act. The Federal Reserve asked for additional information Dec. 2. BNC has responded and requested that the minority lending data it provided remain confidential.

“It’s a process you have to go through,” Callicutt said. “Anytime there’s any kind of protest or things of that nature, it just adds time to the process.”

The fact that the government approval phase straddled the year-end holidays didn’t help either, he said.

Assuming regulators clear the deal, BNC hopes to seal its latest Palmetto State purchase as soon as it can. Its goal is to transfer the Southcoast accounts to its technology backbone and put its name on the newly acquired branches over the last weekend in June.

“We’re still all marching down that road. ... We feel pretty good about being able to hit that,” Callicutt said.

Contact John McDermott at 843-937-5572.