The bank merger-and-acquisition parade got a little longer with a deal in Minneapolis' affluent western suburbs.
The $4.7 billion-asset
The deal would create a nearly $5 billion-asset bank with $4 billion of deposits and $3.9 billion of loans and leases. The combined bank would have nine branches spanning the Twin Cities metropolitan area, Bridgewater said in a news release late Wednesday.
"We are very pleased to add a high quality and complementary Twin Cities community bank through a transaction that aligns with and accelerates our strategic priorities," Baack said in the release. "First Minnetonka City Bank brings a granular core deposit base that creates balance sheet optionality" — to fund loans or pay down debt — "and a loan mix that increases the diversification of our loan portfolio. In addition, the bank's investment advisory platform will allow us to offer a more complete product set to our client base."
Bridgewater did not provide a total price. It estimated the acquisition would generate earnings per share accretion of 15% in 2025, boosted by cost savings of about 30% of the seller's expense base. Bridgewater expects to earn back tangible book value dilution of 5% within three years.
The acquisition is also expected to reduce Bridgewater's commercial real estate concentration by adding a loan portfolio focused on one- to four-family loans and leases, and to diversify its revenue mix by adding fee income via First Minnetonka's advisory platform, according to an investor presentation.
The buyer estimated its cost of deposits would decline from 3.46% to 3.34% after the deal closes. First Minnetonka's cost of deposits was just 1.34% for the second quarter.
U.S. Eagle Federal Credit Union said it plans to acquire Southwest Capital Bank in a transaction slated to close next year. It would help the buyer expand its cannabis banking operation.
Hovde Group analyst Brendan Nosal said the deal is a relatively "small, low-risk transaction that fills in Bridgewater's existing Twin Cities footprint" and "lacks anything that will spook investors."
The Twin Cities deal comes on the heels of the fifth-largest bank acquisition announced this year:
More than 70 banks have announced plans to sell so far in 2024, putting the year on track to eclipse last year's total of 100. M&A in 2023 was held in check in large part by surging interest rates that spiked deposit costs, curbed loan demand and raised the specter of recession. Bank buyers grew reticent, said Jacob Thompson, an investment banker at Samco Capital Markets.
But the economy proved resilient this year and the Federal Reserve has indicated it is poised to begin
While community bank sellers are driving the trend, the average deal size this year is larger than in 2023. Thompson said a recovery in bank stocks in 2024 enabled more banks to use their shares as currency to pursue bigger, more expensive transactions.
Through July of this year, bank M&A deals had an aggregate deal value of $9.25 billion, above the $4.15 billion for all of last year, according to S&P Global Market Intelligence.
Winter Haven, Florida-based
Kansas City-based UMB Financial's April plan to purchase Heartland Financial USA in Denver in an all-stock transaction valued at just under $2 billion was a close second.
