OceanFirst and Partners Bancorp call off merger, blaming regulatory delays

OceanFirst Financial and Partners Bancorp have called off their merger, saying it was taking too long to get regulatory approval.

OceanFirst, in Red Bank, New Jersey, in November of last year announced its agreement to buy Partners, in Salisbury, Maryland, for $186 million. Both sides said at the time that they expected to close the deal in the first half of 2022.

But "everything has just dramatically slowed down," Patrick Barrett, the chief financial officer of the $12.7 billion-asset OceanFirst, said in an interview Wednesday. "The environment for M&A is just more challenging."

There were no specific complications with the deal itself, according to Barrett. Instead, the approval process was protracted, with responses from regulators during various phases simply taking much longer than in the recent past, he said. The Office of the Comptroller of the Currency is OceanFirst's chief federal regulator.

Lloyd Harrison, CEO of the $1.7 billion-asset Partners, declined to comment beyond a press release announcing the deal termination. Partners' banking units are supervised by the Federal Reserve Board and regulators in Delaware and Virginia.

While the two companies had hoped to close the deal by June 30, their agreement afforded a customary one-year period to secure regulators' nod and finalize the transaction. That deadline was Nov. 4 — last Friday. From there, the two companies would have had to agree to extend the process to a later date, but both sides agreed there was too much uncertainty to do so, Barrett said. By killing the deal now, he added, neither side was left on the hook to pay termination fees to the other.

"It just wasn't in the best interest" of either company "without a clear line of sight on a conclusion," Barrett said.  

Barrett added that OceanFirst had closed seven acquisitions in recent years — without complication. "We had no reason to think the Partners acquisition would be any different" when the deal was coming together last year, he said.

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Bank M&A activity remains weak through third quarter

October 13, 2022 1:09 PM

President Biden in 2021 issued an executive order calling for closer examination of mergers, specifically including bank combinations, as part of a broader effort to promote more competition in financial services, technology and other sectors. The Fed, Federal Deposit Insurance Corp. and OCC — key supervisors of bank deals — have since responded with more intensive reviews of bank mergers.

Some banks also have cited staffing shortages at the regulatory agencies — symptomatic of the broader labor market crunch — as a reason for the slower reviews.

Dozens of banks over the past year have encountered regulatory delays of acquisitions, and others have moved to the merger-and-acquisition sidelines to avoid such challenges. As a result, the pace of bank M&A has slowed in 2022. 

Banks announced 37 deals in the third quarter, well below the 64 in the third quarter of 2021, according to Raymond James analysts. The analysts also examined the number of deal announcements in the past quarter as a percentage of the number of institutions at the beginning of the year. At 3.06% annualized for the third quarter, activity fell notably short of the 5.12% reported in the third quarter last year.

OceanFirst CEO Christopher Maher, in an interview after posting third-quarter earnings in late October, did not provide specifics on the Partners deal but said M&A prospects broadly had dimmed. For the foreseeable future, he said, the company would focus on organic growth.

He also noted that rising interest rates and festering inflation had clouded the economic outlook and made it more difficult to assess the health of would-be targets.

"The regulatory process is significantly extended, and that translates into risk," Maher said. "We're very guarded until we get more certainty on the regulatory and economic environments."