The five largest bank M&A deals that were called off in 2022

December 29, 2022 4:52 PM

This year saw a decline in announced bank mergers, but an uptick in the number of terminated agreements.

Delayed approval from regulators and worsening macroeconomic conditions prompted banks to terminate at least 10 deals in 2022, compared with a total of three last year. This year marked the first annual increase in abandoned bank deals since 2020.

One of the final deals to be called off this year, State Street's proposed acquisition of Brown Brothers Investor Services, was the largest canceled transaction since Texas Capital Bancshares's $3 billion bid for Independent Bank Group soured during the early months of the COVID-19 pandemic.

Here is a closer look at the five biggest bank deals called off this year, according to the value of the proposed transaction.

State Street’s acquisition of Brown Brothers Harriman Investor Services

Transaction value: $3.5 billion

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More than a year after announcing the deal, State Street said in November that it would abandon the merger, citing difficulties in gaining regulatory approval. The deal would have created the country's largest custody bank, pushing it ahead of JPMorgan Chase and Bank of New York Mellon.

But pushback from regulators made it clear to State Street that to gain approval, the Boston-based bank would have had to make changes that made the transaction less appealing, executives said.

"It is disappointing that State Street's inability to secure regulatory approval precluded the compelling vision that they brought to us," Bill Tyree, managing partner at Brown Brothers Harriman, said in a statement last month.

Brown Brothers said it has no plans to find a new acquirer.

FVCBankcorp’s merger with Blue Ridge Bankshares

Transaction value: $306.9 million

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The Virginia banks announced in January that they would abandon the deal to create a bank with more than $5 billion in assets.

In late 2021, FVC and Blue Ridge had warned investors that unspecified concerns from the Office of the Comptroller of the Currency could delay the deal until the second or third quarter of 2022.

In the wake of the deal announcement, consumer advocates expressed concerns about Charlottesville-based Blue Ridge's student lending program, which has offered income-share agreements. Advocates alleged the bank had avoided consumer lending protections by failing to classify the income-share agreements as a form of credit.

After the deal was scuttled, Blue Ridge told the OCC that it would improve its oversight of fintech partners and better its money-laundering prevention controls. The agreement requires the $2.8 billion-asset bank to institute and adhere to a written program that assesses and manages the risks posed by its fintech partnerships.

It's unclear whether the agreement is related to FVC's abandonment of its bid for Blue Ridge.

VyStar Credit Union’s bid for Heritage Southeast Bancorp

Transaction value: $194.4 million

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In June, Jacksonville, Florida-based VyStar called off its bid to join the ranks of credit unions that have acquired banks. The deal would have been the largest in which a bank was sold to a credit union.

The credit union delayed the deal for Jonesboro, Ga.-based Heritage three times after failing to secure approval from regulators including the Federal Deposit Insurance Corp., the National Credit Union Administration, the Georgia Department of Banking and Finance and the Florida Office of Financial Regulation.

"We have mutually agreed that moving forward separately is the prudent decision," VyStar CEO Brian Wolfburg said when the deal was called off.

OceanFirst’s deal for Partners Bancorp

Transaction value: $186 million

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In November, delays in regulatory approval convinced the two banks to call off the deal, which was originally expected to close in the first half of 2022.

The merger would have added almost $2 billion of assets to Red Bank, New Jersey's OceanFirst, which has about $12.7 billion of assets.

Responses from regulators were taking much longer than expected, OceanFirst Chief Financial Officer Patrick Barrett told American Banker last month. Barrett said there were no complications with the deal itself.

OceanFirst has successfully closed seven acquisitions in recent years.

"We had no reason to think the Partners acquisition would be any different," Barrett said in the interview.

Patriot National Bancorp’s acquisition of American Challenger Development Corp.

Transaction value: $119 million

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When the two companies announced the deal in 2021, executives billed it as a way to accelerate the neobank American Challenger's path to market. Under the deal's terms, Stamford, Conn.-based Patriot National would have had to raise at least $875 million to fund the neobank's business plan.

But the banks cited "the parties' expected inability to satisfy certain closing conditions" of the merger when they nixed the deal in July. After the deal was scuttled, American Challenger said it had hired Citigroup to determine whether a sale to a different institution might be on the table.

A month before calling off the deal, Patriot had received conditional approval from the OCC.