Guaranty Bancshares in Addison, Texas, is in a buyer’s frame of mind.
The Lone Star State is rife with merger-and-acquisition talk “and we are in those discussions,” Guaranty Chairman and CEO Ty Abston said Monday on a conference call with investment analysts.
While $2.9 billion-asset Guaranty “is going to be pretty selective with how we approach” potential deals, the company is interested in banks with $200 million to $600 million of assets that do business in its Central and East Texas footprint, Abston said.
“We’ve had lots of conversations,” Abston added. “Let’s see if that develops into an actual transaction.”
M&A has been a popular topic of conversation on bank earnings calls this month. More than 100 acquisitions have been announced already in 2021 — including eight in the past two weeks — and investment analysts have been eager to hear CEOs' thoughts on their M&A prospects in this year’s second half.
Judging by bankers’ responses, the second half of 2021 is likely to be just as busy as the first. While some CEOs bemoaned high asking prices, others revealed they were close to sealing deals.
“We're very active on M&A,” Johnny Allison, the chairman, president and CEO at Home BancShares in Conway, Arkansas, said on an earnings call Thursday. “We’re probably further along an M&A deal, at this point in time, than we've been in sometime.” Earlier this year, Allison said the $17.6 billion-asset company was
The $38.4 billion-asset FNB Corp. in Pittsburgh is also eyeing acquisitions, even though it just recently announced that it is acquiring the $2.6 billion-asset Howard Bancorp in Baltimore. On a call with analysts Tuesday, however, Vincent Delie, FNB’s chairman, president and CEO, said that he would consider another deal as long as the price is right.
“Opportunistically, there may be opportunities that come off, but we're going to be keenly focused on tangible book value dilution as a governor,” Delie said. “I wouldn't rule it out if it works within our strategy.”
The $418 million in stock FNB is paying for Howard is equal to 160% of the seller’s tangible book value. That’s line with the 158% average for deals so far in 2021 and 157% in 2019, according to Laurie Havener Hunsicker, director of research for Compass Point. (The pandemic depressed deal activity in 2020, so the average price-to-tangible-book-value ratio fell to 135%.)
Most second-half M&A transactions are likely to involve community banks and smaller regional institutions, as a recent policy shift by the Biden administration is expected to chill activity among the industry’s heavyweights.
Transactions that create banks with less than $100 billion in combined assets “are likely safer from enhanced” regulatory review, Hunsicker wrote Tuesday in a research note.
Such deals “will still face scrutiny and the same procedural headwinds, but they are far better positioned from an M&A perspective versus the super regionals and globally significantly important banks,” she added.
While
“We want to be disciplined and have been opportunistic when it comes to M&A, and any deal that we would look at would need to make strategic and financial sense and consistent with our guidelines,” Cecere said Thursday on a conference call with analysts.
“I think the executive order will mean there will be additional attention for bank M&A, but we believe ultimately decisions will be driven by what's best for all stakeholders,” Cecere added.
Some observers have speculated that, in the short-term, President Biden’s executive order might prompt an increase in bank M&A activity, as buyers and sellers seek to move before the details of the new policy are fleshed out. If that’s the case, this year could end up being almost as active as 2019, when 261 deals were announced.
Through Friday, the deal count stood at 107.
Sellers are starting to receive prices that are in line with higher, pre-pandemic levels, a fact that is frustrating some potential buyers.
On a conference call with analysts Tuesday, Ed Wehmer, the CEO of the $46.7 billion-asset Wintrust Financial Corp. in Chicago, said inbound calls from potential sellers are more frequent, but the asking prices have been too high.
“We don't like giving up two years' worth of earnings to grow where we can grow organically,” Wehmer said.
Though Wintrust has been an active acquirer, completing 15 deals over the past decade, it is growing loans organically at a 15% annualized rate, so pursuing deals is “probably less of a focus these days,” according to analyst Nathan Rice, who covers Wintrust for Piper Sandler.
Still, Wehmer said, “That doesn't mean that if we have a good deal come along we won't do it."
