Wintrust swiftly finalizes Michigan acquisition

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Wintrust Financial in Rosemont, Illinois, closed its half billion-dollar acquisition of Macatawa Bank Corp. in Holland, Michigan, within four months.

It was significant given recent challenges to finalize bank deals in timely fashion.

In the wake of elevated regulatory scrutiny ordered by President Biden in 2021 and a surge in interest rates the following year, several bank acquisitions were delayed for months and others were nixed entirely. This included the planned merger of TD Bank Group and First Horizon. That deal was called off in May 2023 with both companies citing insurmountable regulatory hurdles. The First Horizon deal, valued at $13.4 billion when it was announced in February 2022, was originally expected to close in the fall of the same year.

Wintrust, which targeted closing by the end of this year when it announced the Macatawa transaction in mid-April, said Tuesday it finalized the deal well within its time frame and without complication. It secured Federal Reserve approval in June and had awaited only a Macatawa shareholder vote that was scheduled for late July.

Wintrust paid $510.3 million in stock to buy Macatawa. It was the fifth-largest deal announced this year so far.

The Fed's sign-off "was quick in today's environment — about 50 days from application," President and CEO Timothy Crane said on the company's earnings call in late July.

Crane did not respond to an interview request Tuesday. But on the earnings call, he said the quick approval process reflected "the relative strength of both organizations and our strong track record regarding acquisitions."

Wintrust navigated the low-rate environment of the past two years without any significant bruising. High rates crimped its net interest margin some, but it continued to grow loans and generate strong profits last year and through the first half of 2024.

Macatawa, which serves the greater Grand Rapids market in Western Michigan, did so similarly, Crane said. "They have solid credit quality, a low loan-to-deposit ratio and a very attractive low-cost deposit book," he said.

Investment banker Jacob Thompson said in an interview that a "four-month process for a sizable deal like this is just not something we've been seeing in this environment. I'm impressed."

Thompson, a managing director at Samco Capital Markets, noted that Wintrust has an experienced team of senior dealmakers that has a reputation for maintaining healthy relationships with regulators. Wintrust has closed more than a dozen bank deals over the past decade.

"That is absolutely critical," Thompson said. "My educated guess is that regulators knew this deal was coming, knew what it looked like, got a prescreen of sorts before it was announced. That gives them a chance to raise any red flags early or merely to provide constructive feedback. This is not uncommon, but the best buyers have the relationships to make pretty darn sure that they've greased the wheels for a smooth approval" process.

"That goes a long way," Thompson added. "You never want to surprise regulators. You certainly won't win an argument with them."

Macatawa operated a network of 26 branches throughout Kent, Ottawa and northern Allegan counties in western Michigan, including the Grand Rapids market. It had $2.7 billion of assets, $2.4 billion of deposits and $1.3 billion of loans when the deal was announced. It joined the $56 billion-asset Wintrust's group of 15 community banks in the Midwest. Wintrust has more than 170 banking locations.

Broadly on the M&A front, regulatory headwinds discouraged some deal discussions, with acquisitive banks reluctant to commit to a transaction that might get mired in a protracted, expensive review.  

In addition, high interest rates over the past two years spurred worry about an economic downturn and curbed some buyers' appetites. Recessions often hinder borrowers' ability to repay loans, causing higher credit losses for banks. This includes possible sellers; as a result, many would-be buyers tapped the brakes on M&A plans.

There were 100 deals announced all of last year – half the level of stronger years this decade – and most of those combinations involved small banks.

But the tide appears to be turning this year.

Through the first seven months of this year, 67 banks announced plans to sell, according to S&P Global Market Intelligence. Those transactions had an aggregate deal value of $9.25 billion, far surpassing the $4.15 billion for all of last year.

The biggest combination so far in 2024 was Winter Haven, Florida-based SouthState Corp.'s $2 billion, all-stock plan to acquire Independent Bank Group in McKinney, Texas.

Thompson said that, despite a recent slump in bank stocks and a pending presidential election that could cause some uncertainty, deal discussions are ongoing across the banking sector, and he expects momentum to continue into 2025.

"You never know when everything is going to come together and things get signed and announced, but the level of discussions out there right now is higher than it was a year ago," Thompson said.