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Two large community banks merging in South Carolina could create the next Southeast regional player and acquirer of choice.
February 20 -
The Columbia, S.C., company is used to gaining branches and other assets in past deals. Buying Savannah Bancorp adds an investment advisory firm and mortgage capabilities at a time when banks are looking everywhere for ways to boost fees.
August 9 -
SCBT Financial Corp. in Columbia, S.C., announced Tuesday morning that it is buying the $546 million-asset Peoples Bancorporation Inc. in Easley, S.C., for $28 million in stock.
December 20
Core banking is the steak in dealmaking, but the sides are rather enticing.
Fee-generating business lines are playing a more important role in how buyers view potential acquisitions. Buyers still covet deposits and loans, but a seller stands out when it offers a side business that the buyer can add to a larger platform and build scale.
"Margins are tough to come by, so fee income becomes even more important," Robert Hill, the chief executive of SCBT Financial (SCBT), said in a recent interview. "We want several different engines that are going to drive the bottom line."
Take the Columbia, S.C., company's announcement last month that it
"You put these [banks] together, they just complement each other almost market by market," Hill told analysts during a call to discuss the deal last month. "But I will tell you it is not just the market position."
SCBT has a wealth management department that benefited heavily from last year's
SCBT and First Financial originated about $1 billion in mortgages last year, but First Financial has the ability to sell directly to Fannie Mae and Freddie Mac and has a servicing platform.
"One of the things that I have always wanted my entire career was to have the ability to sell direct, have a servicing platform," said John Pollok, chief operating and financial officer of SCBT during the call. "Think of the power of all of our customers being able to walk in to our local offices and make their payments in the local office. It's just going to be an extremely powerful event."
Hill reiterated in the interview that the core banking business was the main draw, but SCBT is looking to make fees a bigger part of its revenue. Its long-standing goal is to make fees between 30% and 35% of revenue; in the fourth quarter core fees made up roughly 29% of its revenue.
The additions of First Financial's wealth and mortgage operations would accelerate SCBT's diversification and eliminate the risk of building out those businesses itself.
"With wealth and mortgage we did not have scale — these acquisitions get us over the hump," Hill says. "We now have significantly more mass and therefore more of the revenue falls to the bottom line."
Fees at the largest banks in the country make up about 50% of total revenue, while community banks' fees are between 20% and 30%. As more banks look to expand their assets beyond $1 billion, they will seek to scale up their fee businesses.
"The larger an institution becomes, the more opportunity they have to leverage these businesses," says Mark Saunders, managing director of Banks Street Partners in Atlanta. "The bigger banks are naturally able to roll that product out over a greater area."