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Commerce Bancshares in Kansas City, Mo., has struck a deal for Summit Bancshares of Tulsa that would nearly double its asset base in Oklahoma.
May 16 -
Renasant's willingness to pay a premium for First M&F, a small bank in the Deep South, indicates just how hungry banks are to put capital to use.
February 7 -
CrossFirst Holdings in Leawood, Kan., has agreed to buy Tulsa National Bancshares in Oklahoma.
April 18 -
Volatile industries such as energy and agriculture are fueling strong results in states such as North Dakota and Iowa.
March 22 -
Prosperity Bancshares (PB) in Houston has agreed to buy Coppermark Bancshares in Oklahoma City, Okla., for $193.9 million in cash and stock.
December 10
Oklahoma banks are attracting more interest from outsiders that are drawn to the state's energy and agricultural sectors.
Commerce Bancshares in Kansas City, Mo.,
The deal is the latest involving a seller in the Sooner State. Last month, CrossFirst Holding in Leawood, Kan.,
The state is finally getting serious looks after years of steady growth and relatively clean credit quality, says Steven Austin, president and chief executive of Yorktown Financial Holdings in Tulsa. Austin led an investor group that bought and rebranded CNBO Bancorp last fall.
"We didn't get the wild swings in our real estate values," Austin says, adding that high-end homes in Tulsa often sell for the same price as lots in Dallas. "There's some solidity to entering the market."
At 4.9%, Oklahoma had one of the nation's lowest unemployment rate last month, according to the U.S. Bureau of Labor Statistics. National unemployment was 7.6% in March.
Still, the state's biggest industries energy and agriculture
For the $22 billion-asset Commerce, the Summit deal ended a lengthy courtship that involved loan participations between the banks, says Kevin Barth, Commerce's head of commercial banking. The lending relationship helped Commerce determine that Summit was the best Tulsa bank to buy.
Commerce has loan participation with banks in Dallas and Denver, and Barth says those relationships could eventually evolve into deals. He adds that having a prior relationship increases Commerce's comfort about targeting a bank.
Participations "help you understand how they do underwriting, structuring and documenting," Barth says. At Summit, "there were no loan quality surprises."
Commerce's last acquisition took place in July 2007 when it bought Commerce Bank of Aurora, Colo. Earlier that year, it entered Oklahoma by acquiring South Tulsa Financial.
The company could again rev up its acquisition machine, says Stephen Scinicariello, an analyst at UBS Securities. Summit shows that the company wants to expand in healthy markets like Oklahoma City and Tulsa. "It's a small acquisition but it's a smart acquisition," he says.
Commerce agreed to pay a premium equal to roughly 170% of Summit's tangible book value, says John Rodis, an analyst at FIG Partners.
Though it was a steep premium
At Dec. 31, Summit had a return on assets of 1.45% and a return on equity of 15.7%. Nonperforming loans made up less than 1% of the company's total assets; 91% of its deposits were core deposits.
"You have to remember that Commerce is trading at 185% of tangible book," Rodis says. "I'm not going to be too critical of a deal when you're paying less than where you're currently trading."
Future acquisitions for Commerce would likely mimic the Summit deal, Rodis says. "Small, bite-sized deals make sense," he says, with targets likely ranging from $100 million to $500 million in assets.
Acquisitions could take place in markets that are adjacent to Commerce's existing operations, including cities such as Tulsa, Dallas, Denver, Indianapolis and Cincinnati, industry experts say.
Those cities are appealing because "they are growing faster than some of Commerce's home markets," Scinicariello says.
Roughly a fifth of Summit's $207 million loan portfolio is tied to the energy sector, though Barth says he expects Commerce will grow that business "cautiously and deliberately."
Oklahoma City offers an opportunity to make more commercial-and-industrial loans to middle-market companies, Barth says. Commerce already has corporate customers around Oklahoma City, but it does not have exposure to midsize clientele.