United Community Banks Inc. of Blairsville, Georgia, has agreed to buy Tidelands Bancshares Inc., the Mount Pleasant parent of Tidelands Bank, in a cash deal that would pay its common shareholders about $2.2 million.

The companies announced the agreement today. Tidelands shareholders would receive 52 cents a share in cash, according to United’s news release.

Most of the money would go to the U.S. Treasury. United has agreed with the Treasury to redeem all of the preferred stock Tidelands sold to the Treasury under the Capital Purchase Program of the Troubled Asset Relief Program, or TARP, plus unpaid dividends, for $9 million, according to the release. United said that represents a 56% discount. In a March 21 letter, the Treasury confirmed it was willing to consent to the redemption for that amount, Tidelands said in a filing with the Securities and Exchange Commission. United’s investor presentation put the deal’s total value at $11.2 million.

Tidelands Bank would merge into United Community Bank and operate under its name. The deal is expected to close in the third quarter.

Two steps into Charleston

United, which has $9.6 billion in assets and 134 offices in Georgia, North Carolina, South Carolina and Tennessee, called the purchase the second step of a plan to grow in coastal South Carolina.

The first step came in the third quarter of 2015, when United hired a group of Charleston-area bankers. Working from a temporary office, they have produced about $85 million in new loans and commitments in five months, Chairman and CEO Jimmy Tallent said in the release.

“The pairing of these lenders and the expected additions thereto, with an in-market bank platform, will greatly accelerate United’s growth opportunities in the coastal South Carolina markets,” Tallent said.

Tidelands has four branches in the Charleston area, two in Myrtle Beach and one on Hilton Head Island, and more than 10,000 customers. At Dec. 31, it reported about $466 million in assets, $421 million in deposits and $325 million in loans.

“In this case, Tidelands brings meaningful market share, a great branch distribution system, and a talented team who successfully managed the bank during challenging times,” said Lynn Harton, United’s president and chief operating officer.

A long struggle

Tidelands Bank opened Oct. 6, 2003, according to the company’s annual report. In December 2008, Tidelands sold $14.4 million in preferred stock to the Treasury. Two years later, the bank entered a consent order with the Federal Deposit Insurance Corp. and the South Carolina State Board of Financial Institutions after an examination.

“The recession took its toll on Tidelands, as it did to so many other community banks in the Southeast,” Tallent said. “Despite their challenges, Tidelands’ bankers were able to build a solid franchise in outstanding markets with loyal customers and a core deposit base.”

Tidelands’ net loss available to common shareholders widened to about $3.5 million in 2015 from $1.8 million in 2014, and shareholders’ equity fell to $1.9 million, the annual report says. The company had 79 full-time and three part-time employees at year-end.

Pressure was building. On March 8, the trustee for two issues of Tidelands’ trust preferred securities sent notices of default after a five-year deferral of interest payments ran out, Tidelands said in an SEC filing. It said it owed $18.3 million in principal and unpaid interest on the securities as of March 1.

Under the merger agreement, United would assume those obligations. The holder of the first issue has agreed to waive the defaults, according to the agreement.

Terms and approvals

United’s presentation projected about $5 million in cost savings and $5.7 million in one-time costs before taxes. It marked Tidelands’ loans down 5% and its foreclosed real estate down 50%, for a total credit mark of $22.7 million.

United expects the deal to add 9 to 10 cents a share to its 2017 earnings once all savings are realized.

The merger needs approval from Tidelands shareholders and regulators. Tidelands would owe United a $1 million fee if the deal is terminated under certain circumstances. Thomas H. Lyles is Tidelands’ president and CEO.

Sandler O’Neill + Partners advised United, and Bank Street Partners advised Tidelands and gave a fairness opinion.