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Both sides of a bank deal need to meet with their regulators well ahead of announcing it in today's complicated world.
May 14 -
While the failure pace is slowing, regulators are relying on another avenue to resolve troubled banks: mergers.
July 14
When Gregory Mitchell's bank announced plans last summer to make two acquisitions — its first ever — he expected to complete them within six months.
Instead, the chief executive of First PacTrust Bancorp (BANC) in Irvine, Calif., needed slightly more than 10 months to close one deal —
In contrast, four other banks last week wrapped up deals four months or less after announcing them.
The difference? The quick movers were serial buyers seasoned in getting applications approved.
"The first transaction for people is taking longer than it has historically," says Mitchell, who took over First PacTrust in 2010 after investors recapitalized the $1.3 billion-asset franchise. "Once regulators have become comfortable with acquirers, the process should run much more smoothly."
Straightforward mergers often took about 90 days to complete before the financial crisis. Veteran acquirers can still close deals that fast today, but untested buyers may face a longer wait as the recovery drags on, experts say.
With one notch in his M&A belt and another imminent, Mitchell hopes to move faster in closing future deals.
The M&A veterans who closed those four deals last week validate that hope. Three involved well-capitalized players buying profitable depositories that have solid loan portfolios and operate in familiar territory. The other was a line-of-business deal.
In other words, they were the type of transactions that do not spook regulators.
"If two banks are not that well capitalized are trying to get together and they possibly have some credit quality issues as well, regulators are probably going to look at that very hard," says Wesley Grace, an investment banker with Wunderlich Securities in Memphis, which advised First PacTrust in the Beach transaction. "If it is a healthy bank acquiring a fairly healthy bank, there is nothing to slow down the process."
The three whole-bank deals were textbook examples.
The $2.5 billion-asset AmericanWest Bank of Spokane, Wash., bought its fourth small bank — and second in San Diego — since private investors recapitalized the roll-up vehicle two years ago.
The $5.5 billion-asset Cadence Bancorp closed its third purchase since raising $1 billion for acquisitions in 2010.
Prosperity Bancshares (PB) of Houston on July 2 finalized its
Prosperity closed on two other Texas banks this year and announced the purchase of another in late June. The only stain in its track record of swift closings involves
The $24 billion-asset City National (CYN) of Los Angeles bought Rochdale Investment Management, a New York asset manager.
It followed City National's purchase of an equipment financier in April. In 2011, it bought a failed bank in Nevada and a stand-alone branch in California.
First PacTrust's deal for Gateway has taken longer than expected because regulators have been concerned about Gateway's financial problems, Mitchell said.
Meanwhile the Beach acquisition was contingent on First PacTrust's conversion from a thrift holding company to a bank holding company, which the Federal Reserve approved last month. The folding of the Office of Thrift Supervision into the Office of the Comptroller of the Currency last year complicated the approval process, Mitchell says.
Its June 3, 2011, purchase agreement for Gateway was initially scheduled to close by the end of 2011. It agreed to buy Beach on Aug. 31 and initially aimed for a closing in the first quarter of 2012.
"We thought it would come together sooner than it did," he says.
