South State Corp - 10-K annual report

 

 

 

 

 

⁽¹⁾All or portions of this item are incorporated by reference to the Registrant’s Proxy Statement for its 2006 Annual Meeting of Shareholders.

SCBT Financial Corporation (the “Company”) is a South Carolina corporation headquartered in Columbia, South Carolina. Known as First National Corporation until February 2004, SCBT Financial Corporation was established in 1985 and is a bank holding company. The Company operates principally through three wholly owned subsidiaries: South Carolina Bank and Trust, N.A. (organized in 1934), South Carolina Bank and Trust of the Piedmont, N.A. (organized in 1996), and SunBank, N.A. (organized in 2000). The Mortgage Banc, Inc. (organized in 2004) is a wholly owned subsidiary of South Carolina Bank and Trust, N.A. The Company’s common stock is listed and traded on The NASDAQ National Market under the symbol “SCBT”.

 

SCBT Financial Corporation’s subsidiaries provide a full range of retail and commercial banking services, mortgage lending services, trust and investment services, and consumer finance loans through forty-two financial centers in fifteen South Carolina counties, and have served South Carolinians for over seventy years. At December 31, 2005, SCBT Financial Corporation had $1.9 billion in assets, $1.5 billion in loans, $1.5 billion in deposits, $148.4 million in shareholders’ equity, and a market capitalization of $290 million.

SCBT Financial Corporation began its operations in 1934 in Orangeburg, South Carolina and has maintained its ability to provide superior local service while at the same time leveraging its size to offer many products more common to super-regional banks. SCBT Financial Corporation has pursued a strategy of growth that relies primarily upon organic growth, supplemented by the acquisition of select financial institutions or branches in some market areas.

In March 2004, South Carolina Bank and Trust, N.A. sold its Cameron, South Carolina branch, including premises, equipment and certain deposits, to Farmers and Merchants Bank of South Carolina and recognized a pre-tax gain of $782,000.

 

In April 2005, SCBT Financial Corporation continued its expansion in the western portion of the State with its acquisition of New Commerce BanCorp and its subsidiary, New Commerce Bank, into the Company’s lead subsidiary South Carolina Bank and Trust, N.A. The acquisition provided South Carolina Bank and Trust, N.A. with two new branches in Simpsonville and Greenville, South Carolina, both located in one of the fastest growing markets in the state.

In November 2005, SCBT Financial Corporation expanded its footprint farther up the South Carolina coast with the acquisition of Sun Bancshares, Inc. and its subsidiary, SunBank, N.A. SunBank, N.A. will act as a third subsidiary of SCBT Financial Corporation until March 24, 2006, at which time it will be merged into the Company’s lead subsidiary, South Carolina Bank and Trust, N.A. The acquisition will provide South Carolina Bank and Trust, N.A. with two additional branches in Murrells Inlet and Georgetown. SunBank's third property, a loan production office, is located in Myrtle Beach.

The Company’s principal executive offices are located at 520 Gervais Street, Columbia, South Carolina 29201. The Company’s mailing address at this facility is PO Box 1030, Columbia, South Carolina 29202 and its telephone number is (800) 277-2175.

SCBT Financial Corporation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are accessible at no cost on our website, www.scbandt.com, as soon as reasonably practicable after those reports have been electronically filed or submitted to the SEC. These filings are also accessible on the SEC’s website, www.sec.gov. In addition, SCBT Financial Corporation makes available on www.scbandt.com(i) its Corporate Governance Guidelines, (ii) its Code of Conduct & Ethics, which applies to its directors and all employees, and (iii) the charters of the Audit, Management Resources & Compensation, and Corporate Governance & Nominating Committees of its Board of Directors. These materials also are available free of charge in print to shareholders who request them by writing to: Financial Management Division, SCBT Financial Corporation, 520 Gervais Street Columbia, South Carolina 29201. SCBT Financial Corporation also makes available through its website statements of beneficial ownership of SCBT Financial Corporation’s equity securities filed by its directors, officers and 10% or greater shareholders under Section 16 of the Securities Exchange Act of 1934. The information on our website is not incorporated by reference into this report.

At the end of 2005 South Carolina Bank & Trust, N.A. conducts its business from thirty-four financial centers in twelve South Carolina counties. South Carolina Bank and Trust of the Piedmont, N.A. conducts its business from six financial centers in two South Carolina Counties. SunBank N.A. conducts its business from three financial centers in two South Carolina counties. In certain of their markets, the three banks (the “Banks”) encounter strong competition from several major banks that have a preponderance of the deposit market share for the commercial banking industry in their service areas and in South Carolina generally.

Several competitors have substantially greater resources and higher lending limits than the Banks and they offer certain services for their customers that the Banks do not offer. In addition to commercial banks, savings institutions and credit unions, the Banks compete for deposits and loans with other financial intermediaries and investment alternatives, including mortgage companies, credit card issuers, leasing companies, finance companies, money market mutual funds, brokerage firms, governmental and corporation bonds, and other securities. Many of these non-bank competitors are not subject to the same regulatory restrictions as the Company and many have substantially greater resources than the Company.

The banking and financial services industry is highly competitive, and the Company’s profitability depends principally upon its ability to compete in its market areas. In the Company’s market areas, it faces competition from national, super-regional, smaller community banks, and non-traditional internet based banks, as well as non-bank financial services companies. The Company encounters strong competition both in making loans and attracting deposits. Competition among financial institutions is based in part upon interest rates offered on deposit accounts, interest rates charged on loans and other credit and service charges. Customers also consider the quality and scope of the services rendered, the convenience of banking facilities and, in the case of loans to commercial borrowers, relative lending limits. Customers may also take into account the fact that other banks offer different services. Many of the large national and super-regional banks against which the Company competes have significantly greater lending limits and may offer additional products; however, the Company’s management believes that SCBT Financial Corporation has been able to compete very effectively with other financial institutions, regardless of their size, by emphasizing customer service and by providing a wide variety of services. Additionally, most of the Company’s non-bank competitors are not subject to the same extensive state and federal regulations that govern bank holding companies and federally insured banks. Competition within the financial services industry continues to increase as a result of consolidation among firms, thus allowing greater lending limits and expanded footprints. Competition may further intensify if additional financial services companies enter markets in which we conduct business or if we enter mature markets as part of our expansion plan.

As of December 31, 2005, the Company’s subsidiaries had 590 full-time equivalent employees compared to 513 as of the same date in 2004. The three acquisitions in 2005 provided 44 of the additional employees. The Company considers its relationship with its employees to be excellent. The employee benefit program that the Company provides includes: group life, health and dental insurance, paid vacation, sick leave, educational opportunities, a cash incentive plan, a stock purchase plan, stock incentive and deferred compensation plans for officers and key employees, a defined benefit pension plan for employees hired prior to or on December 31, 2005, and a 401(k) plan.

 

 

 

The current regulatory environment for financial institutions includes substantial enforcement activity by the federal banking agencies, the U.S. Department of Justice, the Securities and Exchange Commission and other state and federal law enforcement agencies, reflecting an increase in activity over prior years. This environment entails significant potential increases in compliance requirements and associated costs. A number of banking institutions have recently been subject to enforcement actions as well as settlements involving, among other things, cease and desist orders, written agreements, deferred prosecutions and payments of monetary penalties.

 

The Company is a "bank holding company" registered with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and is subject to the supervision of, and to regular inspection by, the Federal Reserve Board. Each Bank is organized as a national banking association and subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (the "OCC"). In addition, the Company and each Bank is subject to regulation (and in certain cases examination) by the Federal Deposit Insurance Corporation (the "FDIC"), other federal regulatory agencies and the South Carolina State Board of Financial Institutions (the "State Board"). The following discussion summarizes certain aspects of banking and other laws and regulations that affect the Company and its subsidiaries.

Under the Bank Holding Company Act (the "BHC Act"), the Company's activities and those of its subsidiaries are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries, or any other activity which the Federal Reserve Board determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The BHC Act requires prior Federal Reserve Board approval for, among other things, the acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all the assets of any bank, or for a merger or consolidation of a bank holding company with another bank holding company. The BHC Act also prohibits a bank holding company from acquiring direct or indirect control of more than 5% of the outstanding voting stock of any company engaged in a non-banking business unless such business is determined by the Federal Reserve Board to be so closely related to banking as to be a proper incident thereto. Further, under South Carolina law, it is unlawful without the prior approval of the State Board for any South Carolina bank holding company (i) to acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank or any other bank holding company, (ii) to acquire all or substantially all of the assets of a bank or any other bank holding company, or (iii) to merge or consolidate with any other bank holding company.

The Graham-Leach-Bliley Act amended a number of federal banking laws affecting the Company and the Banks. In particular, the Graham-Leach-Bliley Act permits a bank holding company to elect to become a "financial holding company," provided certain conditions are met. A financial holding company, and the companies it controls, are permitted to engage in activities considered "financial in nature" as defined by the Graham-Leach-Bliley Act and Federal Reserve Board interpretations (including, without limitation, insurance and securities activities), and therefore may engage in a broader range of activities than permitted by bank holding companies and their subsidiaries. The Company has determined to remain a bank holding company but may at some future date seek to become a financial holding company.

 

In addition, the "cross-guarantee" provisions of the Federal Deposit Insurance Act, as amended ("FDIA"), require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC's claim for damages is superior to claims of shareholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or shareholder. This provision would give depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute the assets of the Banks.

Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the bank's shareholders, pro rata, and if any such assessment is not paid by any shareholder after three months notice, to sell the stock of such shareholder to make good the deficiency.

The various federal bank regulators, including the Federal Reserve Board and the OCC, have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define what qualifies as capital and establish minimum capital standards in relation to assets and off-balance sheet exposures, as adjusted for credit risks. Capital is classified into tiers. For bank holding companies, Tier 1 or "core" capital consists primarily of common and qualifying preferred shareholders' equity, less certain intangibles and other adjustments ("Tier 1 Capital"). Tier 2 capital consists primarily of the allowance for possible loan losses (subject to certain limitations) and certain subordinated and other qualifying debt ("Tier 2 Capital"). A minimum ratio of total capital to risk-weighted assets of 8.00% is required and Tier 1 Capital must be at least 50% of total capital. The Federal Reserve Board also has adopted a minimum leverage ratio of Tier 1 Capital to adjusted average total assets (not risk-weighted) of 3%. The 3% Tier 1 Capital to average total assets ratio constitutes the leverage standard for bank holding companies and national banks, and is used in conjunction with the risk based ratio in determining the overall capital adequacy of banking organizations.

 

FDICIA, among other things, identifies five capital categories for insured depository institutions (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) and requires the respective Federal regulatory agencies to implement systems for "prompt corrective action" for insured depository institutions that do not meet minimum capital requirements within such categories. FDICIA also imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the category in which an institution is classified. Failure to meet the capital guidelines could also subject a banking institution to capital raising requirements. An "undercapitalized" bank must develop a capital restoration plan and its parent holding company must guarantee that bank's compliance with the plan (see "Obligations of Holding Company to its Subsidiary Banks," above). In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness relating generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards.

The various regulatory agencies have adopted substantially similar regulations that define the five capital categories identified by FDICIA, using the total risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the relevant capital measures. Such regulations establish various degrees of corrective action to be taken when an institution is considered undercapitalized. Under the regulations, a "well capitalized" institution must have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least 10%, a leverage ratio of at least 5% and not be subject to a capital directive order. An "adequately capitalized" institution must have a Tier 1 capital ratio of at least 4%, a total capital ratio of a least 8% and a leverage ratio of at least 4% (or 3% in some cases). Under these guidelines, each Bank is considered well capitalized.

Banking agencies have also adopted final regulations which mandate that regulators take into consideration (i) concentration of credit risk, (ii) interest rate risk (when the interest rate sensitivity of an institution's assets does not match the sensitivity of its liabilities or its off-balance-sheet position), and (iii) risks from non-traditional activities, as well as an institution's ability to manage those risks, when determining the adequacy of an institution's capital. That evaluation will be made as a part of the institution's regular safety and soundness examination. In addition, the banking agencies have amended their regulatory capital guidelines to incorporate a measure for market risk. In accordance with the amended guidelines, if the Company and the Banks were to engage in significant trading activity (as defined in the amendment) they must incorporate a measure for market risk in their respective regulatory capital calculations effective for reporting periods after January 1, 1998.

The Company is a legal entity separate and distinct from its subsidiaries, and the Company's funds for cash distributions to its shareholders are derived primarily from dividends received from the Banks. Each Bank is subject to various general regulatory policies and requirements relating to the payment of dividends. Any restriction on the ability of the Banks to pay dividends will indirectly restrict the ability of the Company to pay dividends.

The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year will exceed the total of its retained net profits for that year combined with its retained net profits for the two preceding years, less any required transfers to surplus. In addition, national banks can only pay dividends to the extent that retained net profits (including the portion transferred to surplus) exceed statutory bad debts in excess of the bank's allowance for loan losses. Further, if in the opinion of the OCC a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), the OCC may require, after notice and a hearing, that such bank cease and desist from such practice. The OCC has indicated that paying dividends that deplete a national bank's capital base to an inadequate level would be an unsafe and unsound banking practice. The Federal Reserve Board, the OCC and the FDIC have issued policy statements, which provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.

In addition to the foregoing, the ability of the Company and the Banks to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under FDICIA, as described above. The right of the Company, its shareholders and its creditors to participate in any distribution of the assets or earnings of its subsidiaries is further subject to the prior claims of creditors of the Company's subsidiaries.

 

As FDIC-insured institutions, the Banks are subject to insurance assessments imposed by the FDIC. Under current law, the insurance assessment to be paid by FDIC-insured institutions is as specified in a schedule required to be issued by the FDIC that specifies, at semi-annual intervals, target reserve ratios designed to increase the FDIC insurance fund's reserve ratio to 1.25% of estimated insured deposits (or such higher ratio as the FDIC may determine in accordance with the statute) in  15 years. Further, the FDIC is authorized to impose one or more special assessments in any amount deemed necessary to enable repayment of amounts borrowed by the FDIC from the United States Department of the Treasury. The actual assessment to be paid by each FDIC-insured institution is based on the institution's assessment risk classification, which is determined based on whether the institution is considered "well capitalized," "adequately capitalized" or "undercapitalized", as such terms have been defined in applicable federal regulations, and whether such institution is considered by its supervisory agency to be financially sound or to have supervisory concerns (see "Capital Adequacy" above). As a result of the current provisions of federal law, the assessment rates on deposits could increase over present levels. Based on the current financial condition and capital levels of the Banks, the Company does not expect that the current FDIC risk-based assessment schedule will have a material adverse effect on the Banks' earnings in 2006.

On October 26, 2001, the President signed the USA Patriot Act of 2001 into law. This act contains the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (the "IMLAFA"). The IMLAFA contains anti-money laundering measures affecting insured depository institutions, broker-dealers and certain other financial institutions. The IMLAFA requires U.S. financial institutions to adopt new policies and procedures to combat money laundering and grants the Secretary of the Treasury broad authority to establish regulations and to impose requirements and restrictions on financial institution's operations. The Company has adopted policies and procedures to comply with the provisions of the IMLAFA.

Interest and certain other charges collected or contracted for by the Banks are subject to state usury laws and certain federal laws concerning interest rates. The Banks' operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act which governs disclosures of credit terms to consumer borrowers, the Community Reinvestment Act requiring financial institutions to meet their obligations to provide for the total credit needs of the communities they serve (which includes the investment of assets in loans to low- and moderate-income borrowers), the Home Mortgage Disclosure Act of 1975 requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, the Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit, the Fair Credit Reporting Act of 1978 governing the use and provision of information to credit reporting agencies, the Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies, and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the Banks also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

From time to time, bills are pending before the United States Congress and in the South Carolina state legislature which in certain cases contain wide-ranging proposals for altering the structure, regulation and competitive relationships of financial institutions. Among such bills are proposals to prohibit banks and bank holding companies from conducting certain types of activities, to subject banks to increased disclosure and reporting requirements, to alter the statutory separation of commercial and investment banking, and to further expand the powers of banks, bank holding companies and competitors of banks. It cannot be predicted whether or in what form any of these proposals will be adopted or the extent to which the business of the Company and its subsidiaries may be affected thereby.

 

Banking is a business that depends largely on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitute the major portion of many banks' earnings. Thus, the earnings and growth of the Company will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The Federal Reserve Board regulates the supply of money through various means, including open-market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve Board, and the reserve requirements on deposits. The nature and timing of any changes in such policies and their impact on the Company cannot be predicted.

 

 

 

 

The Company is exposed to the risk that its customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to assure full repayment. Credit losses are inherent in the lending business and could have a material adverse effect on the Company’s operating results and its ability to meet obligations. The volatility and deterioration in foreign and domestic markets may also increase our risk for credit losses. The Company’s loan portfolio composition, with loans primarily secured by real estate, reduces loss exposure. The Company evaluates the collectibility of its loan portfolio and provides an allowance for loan losses that is believed to be adequate based on a variety of factors including but not limited to: the risk characteristics of various classifications of loans, previous loan loss experience, specific loans that have loss potential, delinquency trends, estimated fair market value of the collateral, current economic conditions, the views of the Company’s regulators, and geographic and industry loan concentrations. If the evaluation is incorrect and borrower defaults cause losses exceeding the allowance for loan losses, the Company’s earnings could be significantly and adversely affected. No assurance can be given that the allowance will be adequate to cover loan losses inherent to our portfolio. The Company may experience losses in its loan portfolios or perceive adverse conditions and trends that may require the Company to significantly increase its allowance for loan losses in the future, a decision that would reduce earnings.

 

 

Commercial real estate, commercial business and construction lending usually involve higher credit risks than that of single-family residential lending. These types of loans involve larger loan balances to a single borrower or groups of related borrowers. Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, as well as the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner. 

 

Risk of loss on a construction loan depends largely upon whether the Company’s initial estimate of the property’s value at completion of construction equals or exceeds the cost of the property construction (including interest) and the availability of permanent take-out financing. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

 

 

 

 

 

Negative conditions in the real estate markets where collateral for the Company’s mortgage loans are located could adversely affect the Company’s borrower’s ability to repay and the value of the collateral. SCBT Financial Corporation is fully exposed to the negative effects of real estate values, which are affected, by various factors, including but not limited to changes in general or regional economic conditions, governmental rules or policies and natural disasters such as hurricanes or floods.

 

 

The banking and financial services industry is very competitive. Legal and regulatory developments have made it easier for new and sometimes unregulated competitors to compete with us. The financial services industry has and is experiencing an ongoing trend towards consolidation in which fewer large national and regional banks and firms are replacing many smaller and more local banks and firms. These larger firms hold a large accumulation of assets. These larger institutions have significantly greater resources and a wider geographic presence or greater accessibility. In some instances, these banks operate without the traditional brick and mortar facilities that restrict geographic presence. Some competitors are able to offer more services, more favorable pricing or greater customer convenience than we do. In addition, competition has grown from new banks and other financial services providers that target our existing or potential customers. As consolidation continues among large banks, the Company expects additional smaller institutions to try to exploit its markets.

 

 

 

 

 

 

 

 

 

 

In January 2003, the Company relocated its executive headquarters to a new four-story facility at 520 Gervais Street, Columbia, South Carolina. The lead branch in the Midlands region of South Carolina Bank and Trust, N.A. also moved into the 57,000 square foot building. The main offices of South Carolina Bank and Trust, N.A. are located at 950 John C. Calhoun Drive, S.E., Orangeburg, South Carolina in a four-story facility with 48,000 square feet of space for operating and administrative purposes. South Carolina Bank and Trust, N.A., which also owns twenty-five other properties and leases eleven properties, all of which are used, substantially, as branch locations or for housing other operational units.

 

South Carolina Bank and Trust of the Piedmont, N.A. owns a 12,000 square foot office building that serves as its main office located at 1127 Ebenezer Road, Rock Hill, South Carolina. The bank owns two additional properties and leases three others, which are used as branches and  loan production offices.

 

Although the properties owned and leased are generally considered adequate, there is a continuing program of modernization, expansion, and as needs materialize, occasional replacement of facilities.

 

(c.) The table below sets forth information regarding the Company’s purchases of its common stock during each of the twelve months in the years ended December 31, 2004 and 2005, respectively:

 

In March 2004, South Carolina Bank and Trust, N.A. sold its Cameron, South Carolina branch, including premises, equipment and certain deposits, to Farmers and Merchants Bank of South Carolina and recognized a pre-tax gain of $782,000.

In April 2005, SCBT Financial Corporation continued its expansion in the western portion of the State of South Carolina with its acquisition of New Commerce BanCorp and its subsidiary, New Commerce Bank, into the Company’s lead subsidiary South Carolina Bank and Trust, N.A. The acquisition provided South Carolina Bank and Trust, N.A. with two new branches in Simpsonville and Greenville, South Carolina, both located in one of the fastest growing markets in the state.

In April 2005, the Company formed SCBT Capital Trust I and SCBT Capital Trust II for the purpose of issuing an aggregate of $20,000,000 of trust preferred securities. In July 2005, the Company formed SCBT Capital Trust III for the purpose of issuing an aggregate of $20,000,000 of trust preferred securities.

In November 2005, SCBT Financial Corporation expanded its footprint farther up the South Carolina coast with the acquisition of Sun Bancshares, Inc. and its subsidiary SunBank, N.A. SunBank, N.A. will act as a third subsidiary of SCBT Financial Corporation until March 24 of 2006 at which time it will be merged into the Company’s lead subsidiary, South Carolina Bank and Trust, N.A. The acquisition will provide South Carolina Bank and Trust, N.A. with two additional branches in Murrells Inlet and Georgetown. SunBank's third property, a loan production office, is located in Myrtle Beach, South Carolina.