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Plantation Federal: After 26 years, a community bank is gone in an instant

By Charles Swenson
Coastal Observer

Buddy Lindsay remembers the day Plantation Federal Savings and Loan was chartered: Oct. 20, 1986. It was his birthday.

“It was the community bank at Pawleys Island, the only community bank, for many years,” he said. He was one of the founders.

After the close of business Friday, federal regulators announced they had put the bank into receivership. That was quickly followed by an announcement from First Federal of Charleston that it had acquired the assets of Plantation Federal.

After 26 years, Plantation Federal ceased to exist.

Staff who had talked just days earlier about the bank’s return to profitability had no notice of the closing.

“I think it will be missed,” Lindsay said. “There’s a place for community banks.”

Lindsay said he was no longer on the board and couldn’t comment on the details of the collapse. Other directors and officers referred questions to a consultant for the bank, who issued a statement from the board last week.

“While we ultimately were unable to sustain the bank in the face of unyielding market conditions, your board of directors worked tirelessly over the last two years on behalf of the company and the shareholders to attempt every reasonable solution,” the statement began.

The bank cut staff, sold mortgages to other lenders and closed branches.

In the end, “the capital just disappeared,” Lindsay said.

As the real estate market collapsed nationally, values fell and federal regulators required the bank to raise capital to cover the difference between what was owed and what the property was worth.

“That’s the irony and the tragedy,” Lindsay said. “Good people and good property just got caught in the deflation.”

In announcing the bank failure, the Comptroller of the Currency cited “unsafe and unsound practices” at Plantation Federal, which converted from an S&L in 1990. “That’s kind of a general statement,” Dean Debuck, a spokesman for the agency said.

Greg Hernandez, a spokesman for the Federal Deposit Insurance Corp., said it will conduct an investigation into why the bank failed. Agency staff were at the bank over the weekend helping employees close out the books. The investigation can take up to 18 months, he said.

“Capital was the one challenges we couldn’t overcome,” said Reed Byrum, a consultant on governance and communications for Plantation Federal. “We fought the good fight.”

Bank employees didn’t learn of the sale until Friday night. First Federal only learned it was the successful bidder about six weeks ago, said Blaise Bettendorf, its chief financial officer. She and other executives met with FDIC officials in Myrtle Beach last week to prepare for the announcement.

She and other First Federal staff arrived at the Pawleys Island branch Friday after federal regulators told Plantation Federal staff of the bank’s failure. “We introduce ourselves to the staff, who you can imagine are shocked. There is some relief; a lot of emotions going on,” she said.

Staff worked through the weekend to prepare for Monday’s re-opening at Plantation Federal branches and at the three branches of First Savers in Greenville that were owned by Plantation Federal.

“It’s a strategically compelling transaction,” Wayne Hall, CEO of First Financial Holdings, the parent company of First Federal, said this week in a conference call with investors. “There are significant synergies in these coastal markets.”

In addition to expanding market shares in Georgetown and Horry counties, the deal gives First Federal a foothold in the Greenville market.

First Federal received $46 million from the FDIC to acquire Plantation Federal’s assets, which were valued at a total of $486.4 million on Dec. 31. The FDIC payment reflects the acquisition of Plantation Federal liabilities, Bettendorf said.

In addition, the FDIC will cover $220 million losses on Plantation Federal’s commercial loans and non-performing assets. The FDIC will cover 80 percent of the losses up to $55 million. First Federal will cover the next $10 million and the FDIC will cover 60 percent of losses above $65 million.

Hall said “no additional external capital was needed” by First Federal to support the acquisition.

First Federal now has the largest share of the Pawleys Island market. It has a branch in Litchfield that it acquired through the purchase of Conway-based Peoples Federal Savings and Loan in 1992. It has an option to purchase the Plantation Federal building.

First Federal hopes to keep all the Plantation Federal staff, Bettendorf said.

That was good news for many customers, as well.

“Community banks are important because they understand their customers,” said Jeff Kinard, an accountant. “It’s important to have that relationship.”

Kinard was the first customer to get a mortgage from Plantation Federal in 1986. “You go with the people you know,” he said.

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