Sunday, Oct. 25, 2009

Beach banking booms

In a year where government regulators are poised to shutter more than 100 banks nationwide, this corner of South Carolina is bucking the trend.

The economic downturn has not stopped growth in the Grand Strand's banking industry, with the number of banks doing business in Horry County spiking to 27 on June 30 compared to 22 at the same time in 2007, government figures released last week show.

The number of banks nationwide has plummeted at the same time, dropping from about 8,600 banks to about 8,200 as banks are closed or merge with larger competitors, the Federal Deposit Insurance Corp. said.

Certain economic indicators still appear bleak, but experts and local bank officials said Myrtle Beach's combination of population growth and a strong tourism industry are helping local banking survive and even thrive during the financial crisis.

"Startups are always looking to find business, and when business is slow it's that much more difficult for them to find it," said Robert Burney, a professor of finance at Coastal Carolina University who specializes in banking.

"That makes it even more curious that we've had multiple startups in the recent past. Some of the players are thinking that it's a good long-term bet, and they're willing to go ahead and start and wait things out for when the economy starts heating up again."

That's good news for consumers, Burney said. The Grand Strand's growth, specifically its development of new roads and facilities, has created profitable lending opportunities for financial institutions and has attracted national and regional banks.

At the same time, lending associated with tourism and real estate development, Myrtle Beach's two largest industries, is a specialized field that has spurred the development of community banks whose executives are familiar with the Myrtle Beach market, Burney said.

"Both the businesses and the individuals that live along the Grand Strand are benefiting from it because there's so many different styles of financial institutions," he said. "If you can't find a bank that suits your needs along the Grand Strand, you're probably not going to find one."

BB&T was the biggest bank in Horry County in terms of deposits, holding 14.6 percent of all deposits in the county, according to the FDIC. Conway National Bank had 11.5 percent, Horry County State Bank had 9.4 percent, Wachovia had 9 percent and Beach First had 7.8 percent.

Grand Strand banks have had their troubles. In June, the FDIC closed Wilmington, N.C.-based Cooperative Bank, which had two offices in the Myrtle Beach area. The bank was taken over by First Bank of Troy, N.C.

And the number of deposits in Myrtle Beach contracted slightly between 2008 and 2009, from $5.69 billion to $5.58 billion, says the FDIC.

Some say that indicates Myrtle Beach already has more banks than it can support, at least for now.

"When the growth is there, then a new bank coming into the market really doesn't upset the apple cart," said David Morrow, the chief executive of Crescent Bank, which started about eight years ago and has since grown to four branches.

"But because of the lack of growth in the last couple years, the new banks coming into the market have created a tougher market for the existing banks that are already struggling."

Two new banks have already opened buildings in the region this year. Coastal Carolina National Bank opened its offices on Oak Street in June, and South Atlantic Bank recently opened a building in Murrells Inlet. South Atlantic's headquarters in Myrtle Beach is under construction at 29th Avenue North and Robert Grissom Parkway and should open early next year.

Atlantic Bank & Trust, which started in Charleston in 2007 and opened a branch on the Grand Strand the following year, has already outgrown its facilities, said Nick Sherfesee, the bank's Myrtle Beach market executive.

"You're still seeing strong community banks that aren't just being gobbled up by the big banks," Burney said. "That's a story worth telling. Otherwise it sounds like the march of the giant banks slowly gobbling everybody else, and that's not the whole story by a long shot."

It took South Atlantic Bank less than three months to raise $27.5 million in capital after the bank was planned in 2007, said bank president Scott Plyler in an e-mail. The bank has had a better-than-expected start, Plyler said, noting that its recent beginning has allowed it to avoid the toxic assets and bad loans that plagued other banks.

The new competition and the sluggish economy do not have everyone worried, though it has delayed some banks' expansion plans. Morrow said Crescent Bank has always aimed for six or seven branches, but those plans have been slowed.

"Community banks understand that we're all in this to try and service our customers and try to be the best bank we can," said Tommy Bouchette, an executive vice president at South Carolina Bank and Trust. "Sometimes that competition will drive you to be a better bank."

SCBT, a statewide bank, entered the Myrtle Beach market in 2005 after it purchased SunBank, which had two branches and a loan office in the area, for about $22 million. Bouchette and others started SunBank, and Bouchette stayed on after the acquisition.

The entry of SCBT and the expansion of other regional banks like BB&T, which bought Coastal Federal Bank a couple of years ago for nearly $400 million, has not taken some bankers by surprise. Nor has the abundance of start-up banks in the area.

"That's not really a secret," said Ford Sanders, an executive vice president at Conway National Bank, which operates 14 branches on the Grand Strand. "The outlook for our area is very good. All banks with any reasonable radius of our market have sought to establish their position in this market."

That's probably not a bad business move. Burney said a lot of recent development has occurred farther inland even though Myrtle Beach's tourism economy is centered on the coast, and others noted there is still a lot of available real estate left to develop.

And although much of that development is on hold for now, bankers said they are optimistic the economy would eventually turn around and give local, regional and national banks alike a good chance to grow.

"This isn't the first time there's been a downturn in the Myrtle Beach market," Bouchette said. "This one is more severe, and it's going to be probably a lot longer before we come out of it. But the sun's going to come back out again."