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These five banks are making deals work in the down economy, but they are tough acts to follow.
July 25
If you are waiting to catch a big deals wave, the latest data was encouraging … yet unsatisfying.
Bank mergers picked up in the second quarter, but they were still slow by historical standards.
Deals accelerated in the western part of the country while slowing in the Southeast, according to data from Keefe, Bruyette & Woods Inc. and SNL Financial.
There were 45 U.S. transactions worth $13.7 billion announced from April to June, up from 35 deals in the first quarter worth a total $2.3 billion.
The increase in aggregate deal values was primarily driven by two transactions: PNC Financial Services Group Inc.'s $3.5 billion purchase of Royal Bank of Canada's U.S. retail bank, and Capital One Financial Corp.'s $9 billion purchase of ING Group NV's online U.S. bank.
Excluding those two big deals, deal values fell about 1%, to about $1.3 billion, from the first quarter to the second. Most mergers involved community bank deals worth less than $50 million.
The numbers were on par with a year earlier but far off pre-crisis levels.In the second quarter of 2010, nationwide there were 53 transactions worth less than $1 billion, according to the KBW and SNL data. In the second quarter of 2007, there were 72 transactions worth $31 billion.
Market momentum shifted from the East Coast to West Coast during the second quarter. Transaction volume rose about 86%, to 13 deals, in California, Colorado, Nevada and other Western states. In the Southeast, meanwhile, total deals declined 42%, to 7 transactions in Florida, Louisiana, Tennessee and other states.
Community bankers say that West Coast institutions seem more willing to sell.
"I'm very encouraged by what I'm seeing from an M&A perspective in California. We continue to have a considerable amount of reverse inquiry into the organization,"Gregory Mitchell, president and chief executive of First PacTrust Bancorp Inc. of Chula Vista, Calif., said in discussing his company's second-quarter results on Monday. "We're certainly having conversations with other institutions that we find to be very interesting."
Deals in the Southeast, meanwhile, are falling through as the rocky housing and jobs markets wreak havoc on stock prices and asset values.
"Over the last several months as we've looked at deals and deal pricing, it's been a little rich. And so we have been hesitant to go very far on looking at those," William C. Losch, the chief financial officer and executive vice president of First Horizon Financial Corp. of Memphis, said during an investor conference on Tuesday. We don't believe that we need to overpay just to put a capital to work."
Activity in other parts of the country remained relatively static. The Northeast's seven deals were on pace with the prior quarter. The region also continued to be the place for most of the larger community banking-related deals, such as Susquehanna Bancshares Inc.'s $340 million deal for Tower Bancorp Inc. of Harrisburg, Penn., or F.N.B. Corp.'s agreement to buy Parkvale Financial Corp. of Monroeville, Pa.
Things did not change much in the Southwest and Midwest, where bankers say things remain relatively slow.
Executives with Prosperity Bancshares of Houston said on Tuesday at a banking conference that they would like to make acquisitions in Texas, but may look to neighboring states such as Oklahoma or Louisiana because there are few sizable banks worth buying.
Banks in the $10 billion-asset class such as Prosperity "really want to move the needle" and achieve "double-digit" accretion in a transaction, David Zalman, Prosperity's chairman and CEO said.
"That's not going to happen doing a $500 million or so [transaction]," he said.
Michael J. Blodnick, president and CEO of Glacier Bancorp in Kalispell, Mont., told investors on July 29 that he expects Midwestern deal activity to remain slow through at least the rest of 2011. Banks in his region remain reluctant to consider their options.
"It hasn't even gotten to the point where we've had enough inquiries to determine whether or not the spread on the bid ask is still wide," he said. "I mean, I read and I hear anecdotally that, that's the case, that there is still a disconnect between sellers and buyers. But … we just haven't had enough conversations and had enough inquiries, where I can really even tell you if that's the case or not."
