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Upstate banking market competition still prevalent

Banking & Finance
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According to the Federal Deposit Insurance Corp., the number of bank offices located in the Upstate has dropped to its lowest number in 15 years.

In fact, there has not been this few of branch offices located in the region since before the most recent recession. All told, there are 333 bank offices in the Spartanburg and Greenville-Anderson-Mauldin metropolitan statistical area, according to the FDIC. Just five years ago there were nearly 370.

However, that doesn’t mean banks — whether newly established or longtime market regulars — aren’t still competing for the business of the over 1 million residents in the 10-county area. The amount of deposits in Upstate banks surpassed $19 billion in 2011 and has been steady at between $18 billion and $19 billion since.

It means there are fewer banks seeking out a lot of potential business. In fact, there are just 37 institutions represented in the Upstate, but that doesn’t include credit unions and other financial institutions in the market.

“It’s competitive, there is no doubt about that,” said John Kimberly, president and CEO of Spartanburg-based Carolina Alliance Bank.

Despite that, Kimberly said different banks in the Upstate cater to different niches in the market. For example, he said Carolina Alliance caters to more “small business and professional people.” That means Carolina Alliance isn’t necessarily going up against regional banking giants like Wells Fargo NA, Bank of America NA and Branch Banking and Trust Co., or BB&T.

Why the Upstate?

Lynn Harton, president and COO of Georgia-based United Community Bank, said the competition is a natural part of the industry. United Community entered the Upstate market in 2015 following its acquisition of Palmetto Bancshares. United, along with Entegra Bank and JP Morgan Chase, have all opened in the Upstate since 2013. Louisiana-based IberiaBank Corp. announced in December it was planning expansion into the market in the near future.

For Harton, the competition takes a different angle. He said the expansion philosophy of United Community is to find the talent, then find the market to expand based on where that talent is located.

“We found a deep well of talent and Greenville has always craved a real broad, powerful bank,” Harton said. “This has always been the entrepreneurial center of the state and they wanted a bank they could be proud of.”

He said the Upstate is a natural fit for many in the banking industry because of its consistently thriving and diverse economy. Harton said things like education, transportation, the industrial base of talent and quality of life are drivers to bring companies, including banks, to the Upstate market.

“Quite simply, the reason everyone wants to come here is because it is a great market,” Harton said.

Industry changes

Of course no industry isn’t without change and banking is no different.

According to a study by the Pew Research Center, in 2013 over half of U.S. adults — or 61% of internet users — were banking online using apps or websites. Those growing numbers have led to changes in the way banks do business.

“A lot of it has to do with how our customers want to use their bank today,” Kimberly said. “We are much more technology oriented than we were five years ago and many of our customers are interested in mobile banking.

“We see much less foot traffic in our branches and as a result, banks are divesting themselves of branches that aren’t being fully utilized.”

Over the last five years, the number of banking offices in the Upstate has decreased by 34. The 333 bank offices in the Upstate in 2016 is still lower than the 356 in 2006 and even lower than the 338 banking offices located in the region in 2001.

For those banks still on the ground and offering mobile banking services, the competition remains, but Kimberly said it comes down to how each bank’s staff deals with customers with different needs and abilities.

“I’m 52 and I am of a generation that probably fears technology as opposed to my 19-year-old son who doesn’t fear it,” Kimberly said. “We try to focus on showing our customers how to use technology like that.”

Mistakes of the past

One thing banks in the Upstate try to avoid is making the same critical business errors that have sunk banks in the market before.

One such recent example is CertusBank.

CertusBank began by acquiring five failing banks in Georgia, North Carolina and South Carolina, but closed its doors in 2015 after former executives filed a defamation lawsuit that was eventually dismissed in federal court. The bank, according to reports, lost nearly $76 million in 2013.

“Running a bank is like running a business, you have to plan your cash flow to pay for those expenses,” Harton said.

But, the market could sustain keeping those branches so, instead of closing them, BNC Bancorp acquired seven CertusBank branches later in 2015. In January 2017, Tenn.-based Pinnacle Financial Partners announced it was acquiring BNC Bancorp for an estimated $1.9 billion.

Kimberly said one way to avoid those business mistakes is for banks to remember “the conservative practices of the past.” He said Carolina Alliance takes a conservative approach to lending, both in commercial and personal loans. Shareholders for the bank will soon vote on the creation of CAB Financial Services, a holding company for Carolina Alliance that, Kimberly said, will give the bank flexibility to grow and “raise capital in a favorable way for our shareholders.

“We have been able to support our growth with the capital we raised when we started the company,” Kimberly said. “We’ve grown to a size where we need to be thinking about the next step if we need to raise more capital and this structure allows us to look at different options.”

Both Harton and Kimberly said the growth of banking, even in the competitive Upstate market, has to be managed. That growth has to be planned, the bank executives said. But, the important thing is, to remain relevant in the market, banks cannot lose focus of one core responsibility:

“We still think this is a people-oriented business,” Harton said.

Reach Matthew Clark at 864-720-1222.

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