Southern Bank acquires Bank of Commonwealth
By Steve Herring
Published in News on October 3, 2011 1:46 PM
A Southern Bank customer leaves the bank's Mount Olive main office. Bank officials say they expect the merger to go smoothly.
MOUNT OLIVE -- Southern Bank and Trust Co.'s acquisition of the 21-branch Bank of the Commonwealth of Norfolk, Va., nearly doubled the bank's assets to $2 billion, while giving it a foothold in the populous Tidewater region of Virginia.
"This is the largest acquisition event in Southern Bank's 110 years of existence," said Grey Morgan, chairman and chief executive officer of Southern Bank. "Our ability to do this is a direct reflection of the strength and stability of Southern Bank.
"In fact, we have maintained a five-star 'Superior' rating with BauerFinancial -- the largest independent bank rating firm in the country -- for a long time now."
"No one can pay to be rated and no one can avoid being rated," said John Heeden, Southern Bank vice president/marketing director. "They rate everybody. We have had their highest rating for as long back as I can remember."
Southern Bank and Trust Company is a wholly owned subsidiary of Southern BancShares (N.C.), Inc. The company and its banking subsidiary did not take funding from the federal government's Troubled Asset Relief Program, bank officials said.
Southern Bank has entered into an agreement with the Federal Deposit Insurance Corp. to purchase substantially all the assets and assume the majority of the liabilities of Bank of the Commonwealth of Norfolk, Va. It is Southern Bank's first FDIC-related agreement.
The FDIC was appointed receiver after the Bank of the Commonwealth was closed by the Virginia State Corporation Commission.
"Like most other banks that have been having trouble they have been having challenges," Heeden said. "It is related a lot to the economy and real estate and stuff like that.
"They felt the bank didn't have a viable future and when that happens the FDIC puts out a notice of bids for other banks that might have an interest. "
On March 31, 2011, the Bank of the Commonwealth reported total assets of $1.03 billion, net loans and leases of $898 million and total deposits of $913 million. Under the terms of the agreement, Southern Bank has the option to purchase any owned bank premises or to assume the leases on any or all of the banking offices.
The loans and other real estate owned by the Bank of the Commonwealth and purchased by Southern Bank are covered by a loss-share agreement between the FDIC and Southern Bank, which provides protection against losses to Southern Bank.
The agreement covers only the assets and liabilities of the Bank of the Commonwealth. Assets, liabilities and common stock of the Bank of the Commonwealth's former parent company, Commonwealth Bancshares, Inc., have not been purchased or assumed by Southern Bank.
As of August 31, 2011, Southern BancShares Inc. had $1.3 billion in assets. Including the agreement, Southern Bank now has assets approaching $2 billion and provides a broad range of financial services to individuals, businesses, professionals and the medical community through a network of 77 branch offices, telephone banking, online banking at southernbank.com and ATMs.
It is too early to say what the acquisition will mean for the new employees and branch locations, Heeden said.
"We are getting the word out. Nothing has changed. It is business as usual. It is now Southern Bank as opposed to the Bank of the Commonwealth. Their checks are still good. Their debit cards still work. All the deposits are guaranteed by the FDIC and we have assumed all of those deposits."
Currently the two banks' technology is not "talking to each other," he said. That will probably be the biggest challenge in the coming year, merging the two into one system, Heeden said.
Drew Covert, president and chief operating officer for Southern Bank, said customers can expect a smooth transition.
"We will eventually have everything moved to one unifying system, but it's a significant undertaking and that process will take a while."
The transaction includes 21 branch locations in southeastern Virginia and northeastern North Carolina. The purchase complements 56 branches currently operated by Southern Bank in North Carolina.
The new market population exceeds 1 million people. Southern Bank's previous market population was slightly more than 900,000.