US bank branch deals surge to 3-year high

US bank branch deals announcements in 2024 have reached a three-year high, with $3.61 billion in deposits slated to be transferred and 62 branches set to be acquired as of Sept. 30.

The number of deals so far in 2024 is tied with those announced in 2022 at 20, according to S&P Global Market Intelligence data.

Buyers tend to like branch deals because they typically bring more deposits than loans to the purchaser, and that can help add liquidity to a bank's balance sheet, said Stephens Inc. Managing Director Brian Branson, who was speaking about the deals in general and not specific transactions.

"I would expect that we would continue to see a high degree of interest from potential buyers if more branch deals come to market," Branson said in an interview.

Bank branch deals are often used to create density in a current market rather than expand into a new one, Branson said.

"You'll see the buyer already in a particular market and a branch deal gives them a fairly efficient and lower cost way to grow their presence in a particular geography," Branson said.

Deepening a footprint

The transaction ranking as the largest bank branch deal of the year in terms of deposits slated to be transferred was announced Sept. 23. Zions Bancorp. NA's subsidiarity, California Bank & Trust, announced a transaction to acquire four branches in California's Coachella Valley region from FirstBank Holding Co. unit FirstBank, transferring $730 million in deposits and $420 million in loans.

The deal was relatively small for Zions as the targeted deposits would represent 1% of the buyer's deposit base, according to Market Intelligence data.

With the purchase of FirstBank's four California branches, California Bank & Trust deepens its market presence in California, where the bank has an established presence. California Bank & Trust will have a 7% market share in the Coachella Valley if the deal closes, according to the deal announcement.

Similarly, in a bank branch deal announced in August, Old Second Bancorp Inc.'s subsidiary Old Second National Bank announced its planned purchase of five Illinois branch locations from First Merchants Corp.'s subsidiary, First Merchants Bank, deepening its market share in Chicago.

The branches are located in the Southeast Chicago Metropolitan Statistical Area, according to the deal announcement.

The sellers in both the California Bank & Trust-FirstBank and Old Second National Bank-First Merchants Bank deals will exit the markets, California and Chicago, respectively, if the deals close.

Leaving a market

In the current interest rate environment, banks are looking to optimize both sides of their balance sheet and be selective about what markets they invest or divest in to ensure growth, Branson said. If a bank is subscale in a market that requires a larger share to help facilitate growth, bank executives may divest in that market and reinvest that capital into other core markets or core business lines, Branson said.