By James T. Hammond
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Wachovia Corp.’s woes have caused a flight of deposits to community banks across South Carolina, as depositors seek protection for their cash in FDIC-insured accounts and stable local institutions.

A survey of community banks revealed millions of dollars flowing their way.

For individual institutions, the amounts are not so large that they would threaten an $800 billion behemoth like Wachovia, based in Charlotte, N.C. But in the aggregate, the flight has forced Wachovia to seek a buyer.

Wachovia foundered on its 2006 purchase of Golden West Financial Corp., a troubled West Coast mortgage lender.

As a result, Citigroup of New York and Wells Fargo of San Francisco are locked in a legal battle over their attempts to acquire Wachovia at a fire-sale price. Citigroup initially offered $1 a share in a government-brokered deal. Wells Fargo followed with a $7-per-share offer that Wachovia’s board accepted.

Citigroup marshaled its legal team to try to block the Wells Fargo raid, but all three companies agreed Monday to a legal cease-fire until noon Wednesday so negotiators could work toward an agreement.

Wachovia’s share price, which has gyrated from a 52-week high of $52 to a low of 75 cents, closed Monday at $5.78.

Ashley Houser, president and CEO of Columbia-based BankMeridian, said his bank received $3.2 million in new deposits just in the first three business days of October.

“A significant portion of that, $2.8 million, came in on Friday. It was a very big day,” Houser said.

Former Gov. David Beasley, who is a senior adviser to Carolina Bank and sits on its board, said the Darlington-based community bank also has seen its deposits increase by “millions of dollars” recently.

Hugh Lane, president and CEO of the Bank of South Carolina, confirmed that his Charleston-based bank has seen deposits jump by millions of dollars as the national banking crisis has unfolded.

Meanwhile, Wachovia confirmed to the Charlotte Observer that the bank saw people with large deposits withdrawing cash last week to get their Wachovia account balances below the Federal Deposit Insurance Corp. insurance limit of $100,000.

And some of those funds likely ended up in these S.C. banks.

“Folks generally are looking for a relationship with a bank they can reach out and touch, and they certainly can do that with us,” Houser said. “We do see it as an opportunity for our bank to grow.”

Total deposits for his bank, which opened its doors for business in May 2006, were $199.6 million as of Monday, he said.

“There have been nine banks started in South Carolina since 2006, and we are the largest in that group in total assets,” Houser said. “We’ve had some deposits above $100,000. I think many smaller banks will benefit from the FDIC raising its insurance limit to $250,000, which will last through the end of next year.”

The movement of capital to community banks represents a search for confidence as well as the FDIC insurance, Houser said.

“The last couple of weeks, it’s been more new money from new clients,” he said. “We think we can hold on to those deposits,” he said. “We have a pretty good record of retaining business.”

BankMeridian is trying to meet the needs of its existing clients first, Houser said, and to respond to new customers as well. But the bank has tightened requirements for new loans.

“We’re still lending. Obviously this is a very tough credit cycle. We’re looking closely and trying to be make loans where we can. When we can’t, we’re telling folks what it would take to get to a ‘yes.’”

Bank of South Carolina’s Lane said small, “well-run institutions” excel in harder times.

“When we started the year, we knew it (the economy) was going to be difficult, but no one knew it would be this tough. From a business development standpoint, we felt like this was the time for us to really improve the footprint of our bank,” he said.

“In the first half of the year, we had pretty decent loan growth, about 10%. In the second half of this year, the withdrawal of the big banks from lending has given us additional loan growth.”

Lane said the big banks have no liquidity.

“We wanted to arrange some secondary liquidity for our bank,” Lane said. “We went to a major Southeastern bank that holds our securities. They hold $17 million of our securities. They came back and said, ‘We don’t have money.’ If you can’t borrow on government securities, there’s a significant message in that.”

The new deposits “significantly improve” his bank’s ability to make loans, Lane said. “Deposits are the basic raw material for a community bank,” he said.

The Bank of South Carolina has not changed its criteria for making loans, Lane said, because its standards for lending have always been conservative.

“Our customer base is almost exclusively local businesses, the people who own and operate those businesses, and professionals and individuals who want a much higher level of service,” he said. “It’s business as usual at the Bank of South Carolina. This is a fabulous opportunity for community banks.”