Only four US bank M&A deals were announced in March, the lowest monthly tally since May 2020, when one deal was announced.
The entire first quarter was fairly slow on the M&A front, as there were just 19 US bank deals announced during the period, according to S&P Global Market Intelligence data. That marks the lowest quarterly total since the second quarter of 2020, which saw only nine deals announced.
Deal valuations slip
The median deal value-to-tangible common equity ratio for deals announced in the 2023 first quarter was 146.9% — below the 152.2% and 154.3% marks for full year 2021 and 2022, respectively, but higher than the 135.3% seen in 2020.
Massachusetts mutuals to merge
Dedham, Mass.-based 1831 Bancorp MHC, the mutual holding company of Dedham Institution for Savings, and South Weymouth, Mass.-based South Shore Bancorp MHC, the mutual holding company of South Shore Bank, on March 14 announced a merger of mutuals. The combined mutual holding company will have more than $4 billion in total assets, computed as of year-end 2022, and an expanded footprint in Massachusetts.
Midwest the most targeted region
Of the 19 deals announced in the first quarter, 10 had targets headquartered in the Midwest. Illinois, Kansas and Ohio were the most targeted states in the region, with two targets each.
Wisconsin opened its account for 2023 as a target state when Mattoon, Ill.-based First Mid Bancshares Inc.'s announced acquisition of Beloit, Wis.-based Blackhawk Bancorp Inc. on March 21. The deal is worth $90.3 million and has a deal value-to-tangible common equity ratio of 138.1%.
First Mid Bancshares' pending acquisition of Blackhawk Bancorp, along with its completed acquisitions of LINCO Bancshares Inc. in 2021 and Delta Bancshares Co. in 2022, will push the bank's total assets to approximately $8.1 billion. The company will likely pursue smaller, nonbank deals now that it is nearing the asset threshold of $10 billion, Piper Sandler analyst Nathan Rice said.
Slower pace to persist
The weaker pace of M&A activity will likely continue as banks weather the storm of recent events, such as bank failures and liquidity concerns. However, some analysts believe that increased regulation will be one of the main factors that will drive a surge of M&A at some point in the future as banks will be encouraged to gain scale and pursue deals to become systemically important.
In the meantime, banks can expect tougher and greater deal scrutiny from regulators which will further a bank M&A logjam.