It was a slow month for M&A until ...

May 8, 2019 9:30 PM

For most of April, it seemed bank consolidation would be as sluggish as it has been for most of the year. Only six deals were announced though the first half of the month.

But a flurry of activity occurred in the final week, as seven banks — and a credit union — announced acquisition agreements. BancFirst in Oklahoma City said it had agreed to buy Pegasus Bank and enter Texas, while Teachers Credit Union in Indiana said it would buy New Bancorp in Michigan.

First Citizens created some drama, agreeing to buy Entegra Financial in western North Carolina even though Entegra had already planned to merge with SmartFinancial in Tennessee.

Hancock Whitney in New Orleans, on the last day of the month, agreed to buy MidSouth Bancorp, a Lafayette, La., company that has lost nearly $50 million in the past two years as it grappled with bad loans.

The spurt wasn't enough to boost year-over-year deal numbers.

The number of bank mergers announced in the first four months of 2019 fell 15% from a year earlier to 70, according to data compiled by Keefe, Bruyette & Woods and S&P Global Market Intelligence. The average premium for those deals fell by 9 basis points, to 163% of a seller's tangible book value.

Here is a more in-depth look at those four deals and a few others among the 14 that were announced last month.

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Glacier to enter Nevada with Heritage deal

Glacier Bancorp in Kalispell, Mont., would pick up its first branches in Nevada when it buys Heritage Bancorp in Reno, Nev.

The $12.1 billion-asset Glacier said on April 3 it had agreed to pay $241 million for the $830 million-asset Heritage. The deal is expected to close in the third quarter.

Heritage was priced at 239% of its tangible book value. The acquisition should be immediately accretive to Glacier’s earnings per share, excluding merger-related expenses. It should take a little more than a year for Glacier to earn back any dilution to its tangible book value.

“This is a rare opportunity to expand our presence into northern Nevada, a fast-growing market with a diverse economy,” Randy Chesler, Glacier's president and CEO, said in a press release. “Reno’s convenient positioning near the San Francisco Bay Area has created a natural migration of residents seeking a lower-cost, business-friendly location.”

Add another to the list of credit union-bank combos

It was the fifth deal in 2019 in which a bank agreed to be sold to a credit union.

Teachers Credit Union in South Bend, Ind., is buying New Bancorp in New Buffalo, Mich., for $21.3 million in cash. The price for the $120 million-asset parent of New Buffalo Savings Bank could increase to $23.4 million if regulators allow the credit union to assume a liquidation account maintained by the thrift.

If the deal closes as planned in the second half of this year, New Bancorp would become the first federal thrift since the financial crisis to convert to stock ownership then sell to a credit union.

In all four of the other credit union-bank deals announced this year the seller was based in Florida.

First Citizens breaks up an MOE

Entegra Financial in Franklin, N.C., has agreed for the second time this year to be sold.

The $1.6 billion-asset company found a buyer in January as part of a $158 million merger with the similarly sized SmartFinancial in Knoxville, Tenn.

But Entegra walked away from that deal on April 24 into the arms of the much larger First Citizens BancShares for $220 million in cash. The deal is expected to close in the second half of this year.

First Citizens also agreed to pay Entegra’s $6.4 million termination fee to SmartFinancial.

First Citizens’ offer priced Entegra at $30.18 a share, or 35% more than the value of the all-stock deal with SmartFinancial. SmartFinancial and Entegra had a clause in their merger agreement that allowed Entegra to hold discussions with First Citizens.

First Citizens shares “many core attributes with Entegra, including a commitment to service excellence and relationship banking,” Frank Holding Jr., First Citizens’ chairman and CEO, said in the release.

“We look forward to building on the solid foundations both banks have established so that, together, we can better serve even more individuals and businesses," Holding said.

BancFirst is Texas bound

BancFirst in Oklahoma City is crossing the border into Texas with an agreement to buy Pagasus Bank in Dallas.

The $7.6 billion-asset BancFirst said on April 24 that it agreed to pay $122 million for the $639 million-asset Pegasus Bank in Dallas. The deal is expected to close in August.

Pegasus, which has three branches in Dallas and a loan production office in Plano, Tex., would operate under a separate Texas charter and remain an independent unit of BancFirst governed by its existing board.

BancFirst said in a regulatory filing that it would provide "an appropriate amount of capital" to allow Pegasus to approve bigger loans and add more assets.

Hancock Whitney ends MidSouth's turnaround bid

Hancock Whitney in Gulfport, Miss., has agreed to buy MidSouth Bancorp in Lafayette, La.

The $28.2 billion-asset Hancock announced on April 30 that it would pay $213 million for the $1.7 billion-asset MidSouth. The deal, which is expected to close in the third quarter, priced MidSouth at 140% of its tangible book value.

The acquisition would provide Hancock with its first branches in Dallas.

“The merger fits perfectly with our stated strategies of adding scale and enhancing value through in-market, financially accretive, low-risk transactions that strengthen our current franchise and provide opportunities for future growth,” John Hairston, Hancock’s president and CEO, said in a release.

MidSouth had been working on a turnaround since it abruptly fired founder and CEO Rusty Cloutier in April 2017. The company raised capital, unloaded energy credits and sold and closed branches.

The moves came at a huge cost. Since firing Cloutier, MidSouth has lost more than $46 million, excluding losses tied to tax reform; it has been in the red in seven of its last eight quarters.

Two community bank deals in the Diamond State

A pair of banks in Arkansas found instate buyers in April.

Tyronza Bancshares in Marked Tree announced April 18 that it had agreed to be sold to Big Creek Bancshares, the parent of Armor Bank, in a deal expected to close in the second quarter. The companies did not disclose the price Big Creek would pay for Tyronza, the parent of Big Delta Bank.

Tyronza “has a longstanding tradition of being a true community banking partner in the markets that they serve,” Chad May, Armor’s president and CEO, said in a news release.

Armor has $91 million in assets, while Big Delta has $60 million in assets.

Less than a week later, Bank of Dardanelle Bankshares said it had agreed to be sold to Chambers Bancshares. The deal would merge the last two banks based in Yell County — Chambers Bank and River Town Bank.

The companies did not disclose the price of the deal, which is expected to close this summer. River Town has $135 million in assets, while Chambers has more than $800 million in assets.

“Chambers Bank is a respected and financially sound community bank,” Blake Tarpley, River Town’s president and CEO, said in a release. “We believe that the commitment the organization has shown to its employees, customers and the communities it serves in Arkansas will be positive for River Town employees and our customers."

Illinois banks announce merger

Midland States Bancorp in Effingham, Ill., is buying HomeStar Financial Group in Manteno, Ill., for $10 million in stock.

The $5.6 billion-asset Midland said the final consideration for the $375 million-asset HomeStar could change based on the seller’s shareholders’ equity at closing.

Midland would also pay $23.5 million in cash to redeem HomeStar’s outstanding trust-preferred securities, generating an expected gain of roughly $12 million. Prior to closing, HomeStar would sell its interests in an insurance agency and a title company.

The deal, which is expected to close in the third quarter, “is consistent with our strategy of partnering with institutions that have attractive deposit bases and a proven commitment to their local customers," Jeff Ludwig, Midland’s president and CEO, said in a press release.