Wintrust's bid for Macatawa Bank marks largest US bank deal of 2024

The US banking industry booked its first $500 million-plus deal for 2024, spicing up what is looking like another slow year for bank M&A.

Wintrust Financial Corp.'s proposed acquisition of Macatawa Bank Corp. for $512.4 million represents the largest US bank deal announced so far this year, according to S&P Global Market Intelligence data. It is also the largest US bank deal announced in nearly seven months, since Eastern Bankshares Inc.'s purchase of Cambridge Bancorp in September 2023.

The dearth of US bank M&A activity this year, in which only 28 deals have been announced through April 17, makes the transaction stand out. Its $512.4 million value at announcement is nearly double the size of the second-largest deal announced so far this year, and Wintrust's deal alone makes up nearly one-third of the $1.59 billion in announced deal value so far this year.

The expected US bank M&A wave in 2024 has yet to show and will likely be delayed until 2025, considering "there are still impediments to deals today, namely the still elevated rate environment making deal-math difficult, the increasingly combative regulatory landscape, and fears around a potential credit/economic cycle," Piper Sandler analysts said.

The recent merger-related proposals of the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are also likely to dampen banks' deal appetites further, according to industry experts.

The depressed M&A environment so far this year marks a continuation of slow activity in 2022 and 2023, which saw 159 and 100 deals, respectively. As such, the Wintrust-Macatawa Bank transaction is the fifth-largest US bank deal announced since 2022.

The Wintrust-Macatawa Bank deal is also the only US bank megadeal — a transaction with a value of at least $500 million at announcement — so far this year, while 2022 and 2023 each recorded just two megadeals for a yearly value of $1.92 billion and $1.57 billion, respectively. However, each year is far behind the 23 megadeals in 2021, with a whopping total value of $67.08 billion.

US banks have announced just two deals so far in the second quarter, and only the Wintrust-Macatawa Bank transaction disclosed a deal value.

The largest deal announced in the first quarter of the year was FirstSun Capital Bancorp's pending purchase of HomeStreet Inc. for $284.8 million, followed by Global FCU's proposed acquisition of First Financial Northwest Bank for $231.2 million. The transactions rank 13th and 17th, respectively, among the largest deals since 2022.

Analysts react

The Wintrust-Macatawa Bank transaction holds a deal value to tangible common equity ratio of 177.7%, compared to a median of 155.4% for the 20 largest US bank deals announced since 2022.

The deal's price tag was "somewhat reasonable" given the target's strong profitability metrics, Truist Securities analyst Brandon King said. While the transaction is "not a needle mover" for Wintrust based on expected financial impact, it will provide "some excess liquidity and strong core deposit base," King wrote in a note.

However, Piper Sandler analyst Nathan Race believes the deal is "a small but pricey" one for Wintrust. Jefferies analysts Casey Haire and Ken Usdin also called the price tag "steep."

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With the Macatawa Bank transaction, Wintrust is expanding into Michigan and taking a break from its strategy of consolidating sub-scale banks within its core Chicago footprint, though it does not mark the beginning of a burst in deals, the Jefferies analysts wrote.

"We do not believe this is the start of an M&A spree for [Wintrust] given their favorable positioning within the Chicago marketplace, which has afforded them strong organic growth," they wrote. "Further, [Wintrust] is likely mindful of the [Category] IV threshold at $100 [billion] and will want to keep ample runway."