By James T. Hammond
jhammond@scbiznews.com

The national credit crisis defined the most recent quarterly earnings statements of S.C. banks big and small.

Most of the reports of poor earnings, ranging from a $23.89 billion loss at Wachovia Corp. to a $127,000 loss at Southern First Bancshares Inc., could be traced back to real estate and risky home mortgage lending.

Even banks that made money reported profits significantly lower than 2007 levels, with the exception of a few banks that posted gains from last year. Here’s how the most recent quarter shook out:

Wachovia Corp., one of the nation’s largest banks and the largest banking system in South Carolina, reported the largest quarterly loss by a bank ever. During September, Wachovia, based in Charlotte, N.C., lost more than $13 billion in deposits in an unprecedented run on the troubled bank. Because of its troubled West Coast real estate investments and the loss of confidence by its depositors, Wachovia was forced to agree to be acquired by Wells Fargo bank of San Francisco.

The South Financial Group, parent of Carolina First Bank, had losses of $237 million for the first nine months of 2008. Carolina First, the largest bank headquartered in South Carolina, attributed its troubles to problem real estate loans made by its Florida subsidiaries.
Federal regulators are planning to buy stock in the troubled banks to get them lending again, and state officials have looked for ways to prime the pump, too.

Allen Berger, professor of finance at the University of South Carolina’s Moore School of Business, said the more worrisome prospect is the looming recession, which he expects to be long and deep.

“I believe 2009 will be a bad year. Maybe things will turn up at the end of next year, but I think we are headed into a significant recession,” said Berger, who spent 26 years as a senior economist at the Federal Reserve Board. “The recession that is already under way is the bigger fear, the bigger concern.”

He predicted some of the stronger regional banks would use the money they receive from the U.S. Treasury Department’s troubled assets relief program to acquire other banks.

Berger cited BB&T Corp., based in Winston-Salem, N.C., among the banks that could consolidate with others. “BB&T has already said that’s what it will do,” he said. “If you end up with a combined institution that is a stronger institution, that’s good for lending.”

BB&T, the third-largest bank in South Carolina by deposits, reported that net income for the third quarter shrank to $358 million from $444 million a year ago.

BB&T’s increases in net charge-offs, nonperforming assets and the provision for credit losses were driven by losses in troubled residential real estate markets in Georgia, Florida and metro Washington, D.C., the bank said.

Atlanta-based SunTrust Banks Inc., which has the eighth-largest banking operations in South Carolina, reported that net income fell to $307.3 million for the third quarter.

Smaller S.C.-based banks also felt the sting of failed mortgage-backed securities issued by Fannie Mae and Freddie Mac.

Lexington-based First Community Corp. reported a third-quarter net loss on the heels of a $5.1 million charge against earnings. The Midlands bank had net income of $1.2 million a year ago. The loss was caused by the bank’s holdings of Freddie Mac stock.

“While the Freddie Mac issue can tend to overshadow everything else, it is important to step back from this issue and from all of the headlines that can be overwhelming at times and evaluate the operating performance of our company,” said President and CEO Mike Crapps.
Greenville-based Southern First Bancshares Inc., the holding company for Southern First Bank and Greenville First Bank, said it had a net loss of $127,000 for the third quarter, compared with net income of $957,000 a year ago.

The bank holding company — the 20th-largest operating in South Carolina, according to the FDIC — posted a charge in the third quarter of $1.8 million on its Fannie Mae preferred stock.
Freddie Mac investments slammed third-quarter profits at SCBT Financial Corp., which had net income of $5.6 million a year ago. For the nine months ended Sept. 30, the company reported net income of $12.2 million, a 25.5% decrease from $16.4 million in the year-ago period.
Bank of South Carolina Corp. reported third-quarter income of $712,072, fueled largely by volume declines in the secondary mortgage market.

The Charleston-based bank intends to boost business by offering more services to commercial customers, said President Hugh Lane Jr., who expects 2009 will be “another difficult year.” He attributed much of the decline to lost balances in the real estate market, in loan originations the bank sold in the secondary market.

Synovus, parent company of National Bank of South Carolina, reported a loss of $26.9 million for the third quarter, compared with $134.9 million of net income in the third quarter of 2007.
First National Bancshares Inc. posted a $2.9 million loss for the third quarter, compared with net income of $1.3 million a year ago. The bank reported after-tax expenses of $2.8 million for loan losses and $413,000 in after-tax adjustments related to nonperforming assets, specifically on real estate it owned.

Mount Pleasant-based Tidelands Bancshares Inc. took hits on Fannie Mae and Freddie Mac stock. The bank paid $4.6 million in charges related to the two mortgage companies.

Tidelands also incurred expenses by opening several new branches.

For the nine months ended Sept. 30, Tidelands reported a $2.9 million loss, after having reported a $175,000 gain during the same time period last year.

First Financial Holdings Inc. of Charleston reported net income of $6.3 million for its fiscal fourth quarter, compared with $5.2 million a year ago. Net income for the 12 months ended Sept. 30 fell 9.9% to $22.6 million, compared with $25.1 million a year ago.

“The housing market outlook remains challenging and we are continuing to see slowness in the housing market as a result of increased inventories of residential units and fewer housing starts,” President and CEO A. Thomas Hood said.

The state’s 10th-largest bank, Palmetto Bancshares Inc. of Laurens, boosted net income by 2.7% in the first nine months of 2008. Perhaps more important, Palmetto’s total deposits had jumped by $78.3 million at the end of the third quarter, to $1.12 billion. The bank’s deposits grew by $30 million since June 30 when comparing FDIC figures with Palmetto Bank’s latest earnings statement.

First Citizens Bancorp’s net income declined to $13.83 million from $15.37 million a year ago.

“We have no stock in Fannie or Freddie; 97% of our investment portfolio is invested in U.S. Treasury and government agency securities,” said Ashley Sherry, First Citizens’ manager of corporate communications.

First Reliance Bancshares Inc. of Florence, the 22nd-largest bank in the state, increased its deposits as of Sept. 30 by $6.8 million, to $447.6 million, compared with Sept. 30, 2007.

“It is clear from the positive results of the third quarter that our focus on profitable growth backed by conservative business decisions has been a rewarding business strategy for our bank,” said President and CEO Rick Saunders.

Tidelands’ president and CEO, Robert Coffee Jr., summed up the third quarter: “In my 35 years of banking experience, this is the most difficult and unique time that I have ever seen.”

Scott Miller contributed to this report.