UMB Financial seals largest US bank deal since end of 2021 with Heartland buy

UMB Financial Corp.'s $1.99 billion bid for Heartland Financial USA Inc. marks the first $1 billion-plus deal of the year and the largest deal since the end of 2021.

The tie-up of the two regional banks is the biggest announced US bank deal since Bank of Montreal announced its acquisition of Bank of the West for $16.30 billion on Dec. 20, 2021, according to S&P Global Market Intelligence data. The deal is just one of a handful of sizable transactions announced in April that have enlivened US bank M&A.

So far in the second quarter, 12 deals have been disclosed through May 1 — just one month into the quarter — compared with just 26 deals in the first quarter.

Of the 10 largest US bank deals announced so far this year, four were announced in April. Those deals helped boost the quarter's deal value to its highest point since the third quarter of 2023. Total US bank deal value through May 1 stood at $2.70 billion, just shy of the third quarter of 2023's $2.76 billion, putting the quarter on pace to see the highest quarterly deal value since the fourth quarter of 2021.

With the uptick in activity, 72% of the year's total deal value was announced in April.

However, analysts do not believe the announcements indicate an improving M&A environment.

2024 will likely be a muted year for M&A, though "conversations remain prevalent and deal volume could pick up from 2023 lows," Piper Sandler analyst Stephen Scouten wrote in an April 30 note. Similarly, Raymond James analysts said while M&A talks are continuing, activity levels will remain subdued but could improve later this year and into 2025.

Bank executives expressed a similar sentiment on first-quarter earnings calls, saying deal headwinds remain and make large bank deals tough.

Depressed M&A environment

The UMB-Heartland deal is the first bank deal valued at above $1 billion at announcement since the PacWest Bancorp-Banc of California Inc. reverse merger, the only $1 billion-plus deal of 2023.

2022 also saw only one $1 billion-plus bank deal: Provident Financial Services Inc.-Lakeland Bancorp Inc.'s $1.26 billion deal, announced in September 2022.

Large bank deals have become "very difficult" to execute given the more stringent regulatory approval process, Piper Sandler Cos. Chairman and CEO Chad Abraham said on an earnings conference call. Industry experts also believe regulators' merger-related proposals will likely dampen banks' deal appetites further.

UMB's proposed purchase of Heartland is the second 2024 US bank deal valued at above $500 million at announcement, with the first being Wintrust Financial Corp.'s proposed acquisition of Macatawa Bank Corp. for $512.4 million. The two deals have a total value of $2.50 billion, making up 66% of the year's total announced deal value so far.

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With the two $500 million-plus deal announcements so far this year, 2024 is on pace to surpass both 2022 and 2023. Each of those years had two such deals: 2022 with a yearly value of $1.92 billion and 2023 with $1.57 billion. On the other hand, 2021 booked 23 such deals, valued at $67.08 billion in total.