By CHUCK CRUMBO - ccrumbo@thestate.com

A sour economy and a bank-building boom in the late 1990s and earlier this decade have led to the fewest number of bank branches being opened in South Carolina in five years.

The handful of branches that are being opened this year are either the result of banks consolidating and relocating offices or projects that were committed to years ago.

The current banking climate in South Carolina makes it tough for bankers to OK branch construction projects that can cost as much as $3 million, said Johnathan Munn, a Francis Marion University economics professor.

Banks are making the move to grow despite the fact that South Carolina may be one of the most over-banked states in the country. The national average is 1 office per 1,500 people, but S.C. averages 1 office for 600. While the economy could thin the ranks of banks, one company, Florence-based First Reliance, recently opened a new branch in Lexington County and is looking to add more. Here, customer service representative Helen Lanier, right, smiles as she completes a transaction for Aaron Ghouralal of Columbia, left, on Tuesday, July 21, 2009
- Erik Campos/ecampos@thestate.com

"I think a bank is going to be very, very careful and do its due diligence before opening a new branch," said Munn, a former Pee Dee banker.

According to statistics compiled by the Federal Deposit Insurance Corporation, the state's 88 banks opened 36 branch offices between July 1, 2008, and June 30.

That's less than half the 77 new office openings the federal agency recorded for a comparable period in 2007-'08.

In fact, each year between 2004 and 2008, an average of 71 bank offices were opened.

The growth in S.C. bank branches was fueled by the state's surging population and development of the lucrative coastal real estate markets.

Now the state's banking industry is suffering growing pains.

"I've been saying for the last 10 years there are too many banks and too many branches," said Rick Saunders, president and CEO of Florence-based First Reliance Bank.

Citing statistics compiled by FiServ, a banking industry analyst, Saunders said some areas in the state have almost one branch office for every 600 households. Usually a branch needs 1,200 households to be profitable, Saunders said.

Still, there are some communities where banking hasn't kept up with the population growth. One of them is Lexington County, where First Reliance on June 24 held the grand opening of its first office in West Columbia.

Lexington County has about one branch for every 1,100 households, according to FiServ data. Richland County's ratio of bank offices to households is about the same. The national average is 1,275 households per branch.

First Reliance committed to opening the West Columbia office, located in a small strip shopping center off Sunset Boulevard, years ago before the economy went south, Saunders said.

But the bank saw an opportunity to grow, and so far the branch is ahead of schedule in the number of customers it has acquired, Saunders said.

First Reliance also plans to build branches on Forest Drive in Columbia, across from Shandon Baptist Church, and on Lake Murray Boulevard in Irmo, Saunders said.

Building, equipping and staffing a free-standing branch office is a major commitment, costing $2.5 million to $3 million, said Richard Sturm, head of Ameris Bank's S.C. operations.

Given the economy and regulators tightening down on how much cash needs to be on hand, some banks are holding off on expansion plans, Sturm added.

"Right now capital is precious," Sturm said, adding that Ameris has "no plans to open any new offices (in South Carolina) right now. And I don't see it happening in 2010."

That contrasts with 2008, when Ameris, based in Moultrie, Ga., opened nine offices, including branches in Lexington and Irmo.

Executives of Columbia-based SCBT Financial, parent of South Carolina Bank & Trust Co., said the company is moving ahead with plans to start construction later this year on a free-standing branch on Forest Drive.

It will replace a smaller office located about a block away in a building SCB&T rents.

The bank also plans to open a branch in Mount Pleasant this fall, said Robert Hill Jr., CEO of SCBT Financial.

While some banks are struggling, Hill said his company has been growing in the number of customers and deposits.

Jack Goettee, the bank's Midlands division head, said SCB&T plans to add "two to three offices a year" through 2010.

Hill thinks the S.C. banking industry is due for a wave of consolidations and wants his company in position to grow.

"There's clear overcapacity in our industry and our state," Hill said.

"We'll see a natural wave of consolidation" due to a slow economy and tighter bank regulations, he added.

Reach Crumbo at (803) 771-8503.

Courtesy of The State and http://www.thestate.com