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Purchasing a Community Bank in the United States

Posted by: Christian Reeves
Category: United States

We’re often asked about purchasing small community banks in the United States by our offshore bank license clients. Many want a full-service bank with FDIC facilities in the United States.

It’s relatively easy to purchase a US bank with US shareholders. It’s difficult to buy a US bank with certain foreign shareholders. For example, it would be nearly impossible to complete a transaction with Chinese shareholders. It wouldn’t be that hard for UK shareholders to by a US bank if they already have a UK banking license.

– Note that I’m speaking in generalities here and about smaller community bank transactions only.

In this post, I’ll look at the typical time for approval of a purchase assuming US shareholders. Then I’ll list the US bank license acquisitions for the last 30 days. The purpose of the list is to give you an idea of the size of transactions in the US and a sense of comparables. As it’s a list from 30 days, it’s only intended as anecdotal evidence of value.

Typical Merger Time

In the past, bank mergers moved at a snail’s pace through regulatory approval processes, with mergers that drew any adverse comments taking nearly a year to win approval. But one apparent side effect of the move toward easing bank regulation has been to make it easier to merge.

In 2018, for example, the average time to win merger approval that included adverse comments was just four months. Also, these days about 95% of applications are now winning approval – the highest approval rate since the Fed started tracking this statistic in 2011.

The Fed did some analysis of the average amount of time it took for all merger applications to be resolved by regulators. It found it took 71 days back in 2015, but that had declined to only 57 days by 2018 – almost 20% faster. That total is for all mergers, including those with or without adverse comments. The analysis also found the time frames for community banks with assets <$1B were even faster at only 53 days.

The accelerated approval process isn’t just the Fed acting quicker. It has enhanced the pre-application processes, providing information and guidance in meetings to help merger applicants better understand requirements. This helps avoid delays once an application is filed.

Community bank M&A activity in the last 30 days

August 23, 2019

1) OceanFirst Bank ($8.1B, NJ) will acquire Two River Community Bank ($1.1B, NJ) for $182.8mm in cash (25%) and stock (75%) or 1.74x tangible book.

2) OceanFirst Bank ($8.1B, NJ) will also acquire Country Bank ($762mm, NY) for $102.2mm in stock (100%) or 1.51x tangible book.

3) Opportunity Bank of Montana ($970mm, MT) will acquire Western Bank of Wolf Point ($95mm, MT) for %13mm in cash (50%) and stock (50%) or 1.18x tangible book.

4) Happy State Bank ($3.5B, TX) will acquire First State Bank of Mobeetie ($78mm, TX) for an undisclosed sum.

5) Investment banking firm Stifel Financial Corp ($24.3B, MO) will acquire the municipal underwriting business of George K. Baum &amp; Co. (MO) for an undisclosed sum.

 

August 27, 2019

1) Forreston State Bank ($215mm, IL) will acquire The Poplar Grove State Bank ($86mm, IL) for an undisclosed sum.

2) ConnectOne Bank ($6.1B, NJ) will acquire Bank of New Jersey ($925mm, NJ) for $113mm in cash (20%) and stock (80%) or 1.22x tangible book.

 

August 28, 2019

1) Morton Community Bank ($3.9B, IL) will acquire First Trust & Savings Bank of Albany ($183mm, IL) for an undisclosed sum.

2) Newton Federal Bank ($307mm, GA) will acquire Affinity Bank ($308mm, GA) for $40.3mm in cash (100%) or 1.58x tangible book.

3) CorTrust Bank ($894mm, SD) will acquire First Minnesota Bank (352mm, MN) for an undisclosed sum.

4) Wellington State Bank ($385mm, TX) will acquire The First National Bank of Paducah ($44mm, TX) for an undisclosed sum.

5) Capital One ($374B, VA) will acquire M&A advisory services firm KippsDeSanto (VA) for an undisclosed sum. This move boosts Capital One’s advisory business as it expands industry expertise.

6) Indiana Members CU ($2B, IN) will acquire The Commerce Bank ($179mm, IN) for a cash sum (100%) equal to about 1.57x tangible book.

 

August 30, 2019

1) CBI Bank & Trust ($911mm, IA) will acquire Walcott Trust and Savings Bank ($130mm, IA) for an undisclosed sum.

2) First Midwest Bank ($15.8B, IL) will acquire Park Bank ($950mm, WI) for $195mm in cash and stock or 1.67x tangible book.

 

September 6, 2019

1) FCN Bank ($455mm, IN) will acquire Dearborn Savings Bank ($126mm, IN) for an undisclosed sum.

2) The Farmers National Bank of Canfield ($2.4B, OH) will acquire Geauga Savings Bank ($278mm, OH) for $39.6mm in cash (50%) and stock (50%) or 1.20x tangible book.

3) Bank Iowa ($1.3B, IA) will acquire First State Bank of Colfax ($64mm, IA) for an undisclosed sum.

 

September 10, 2019

1) Elevations CU ($2.1B, CO) will acquire Cache Bank and Trust ($122mm, CO) for an undisclosed sum.

 

September 12, 2019

1) BayVanguard Bank ($300mm, MD) will acquire Madison Bank of Maryland ($147mm, MD) for $31mm in cash (100%).

2) Royal Business Bank ($2.8B, CA) will acquire Pacific Global Bank ($223mm, IL) for $32.5mm in cash (100%).

3) First Federal Bank of the Midwest ($3.3B, OH) will acquire Home Savings Bank ($2.9B, OH) for $473mm in stock (100%).

 

September 17, 2019

1) First Community Bank ($2.2B, VA) will acquire Highlands Union Bank ($612mm, VA) for $91.0mm in stock (100%) or 1.52x tangible book.

 

September 20, 2019

1) First Citizens Community Bank ($1.5B, PA) will acquire MidCoast Community Bank ($268mm, DE) for $31mm in cash (25%) and stock (75%) or 1.22x tangible book.

2) Superior National Bank &amp; Trust Co. ($564mm, MI) will acquire Main Street Bank ($284mm, MI) for $42mm in cash (100%).

 

September 23, 2019

1) Third Coast Bank, SSB ($855mm, TX) will acquire Heritage Bank ($290mm, TX) for an undisclosed sum.

2) BankPlus ($2.9B, MS) will acquire State Bank &amp; Trust Co ($1.2B, MS) for $136.5mm in stock (100%) or 1.64x tangible book.

3) First Financial Bank ($8.0B, TX) will acquire The Bank & Trust of Bryan/College Station ($624mm, TX) for $190mm in stock (100%) or 2.72x tangible book.