The figure draws attention at first sight.
A new report from the Federal Deposit Insurance Corp. showed that the 45 banks that call South Carolina home saw their profits plummet 54%, or nearly $ 250 million, last year.
The automatic assumption is that 2020 was an exceptionally difficult period, as COVID-19 wreaked havoc in the consumer-oriented service sector.
It is a reasonable hypothesis. But it is not worth it in this case.
A closer look at the data exposes a culprit who has been thinning out the composition of the lending industry for years. It’s called consolidation.
Some banks in South Carolina certainly achieved their financial results last year, after being forced to temporarily close some or all of their branches as a security measure. In addition, the Federal Reserve’s policy of keeping interest rates at historic lows has cut loan margins profoundly.
But as a group, the nearly four dozen financial institutions in the state of Palmetto faced the health crisis without major casualties, the FDIC year-end figures show.
The agency’s accurate statistical analysis showed that three banks – all tiny – lost money, but it was not an alarming amount. The combined damage was less than $ 1 million.
Another 22 creditors who posted black figures did not fall as much as in 2019.
The largest and most profitable bank based in South Carolina was also responsible for the biggest drop in profits against the dollar. Greenville-based net income Southern First it fell by about a third, mainly because it spent almost $ 30 million in its rainy day reserve fund to cover loans that could end later.
Meanwhile, the biggest winner among the largest banks in South Carolina was First Reliance, which serves Pee Dee, Grand Strand Lowcountry, Midlands and Upstate and is expanding across the state’s borders to the Charlotte and Winston-Salem markets. The Florence-based franchise saw its profit more than double to $ 12.1 million in 2020, according to FDIC figures, which are calculated differently from what is reported to shareholders.
On a smaller scale, another highlight of earnings last year was that of Columbia Optus Bank, one of less than two dozen black-owned financial institutions in the country. Its net profit jumped five times to about $ 3.3 million.
In all, South Carolina’s national banks earned a combined total of $ 209 million in 2020, a figure that paled compared to the $ 456 million a year ago.
The difference of US $ 247 million can be explained by two merger and acquisition transactions that reorganized the sector’s hierarchy.
Southern State and CresCom for years they were the largest and most profitable banks in South Carolina. But in 2020, both fumbled and their corporate offices were moved to Florida and West Virginia, respectively. Therefore, their disproportionate gains were not accounted for in the most recent FDIC count, distorting the most recent results.
A simple math exercise provides a comparative comparison, subtracting the $ 260 million in profits that South State and CresCom brought to the table in 2019. That leaves about $ 196 million for the other 45 banks, compared to US $ 209 million in 2020, which means they actually got almost 7% advantage over the past year as a group, with a pandemic and all. Who knows.
Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott