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Georgia bank M&A off to fastest start in 6 years

Bank M&A in Georgia is off to its hottest start in six years as attractive demographics, stellar bank performance and many small banks draw in out-of-state and credit union buyers.

Atlanta Postal CU's announced acquisition of Affinity Bank marks the fourth deal targeting a Georgia-based bank so far this year, already surpassing the three deals seen in full year 2023 and marking the first time the state has seen so many deal announcements in the first half of the year since 2018, according to S&P Global Market Intelligence data. With attractive growth demographics and many small but financially strong bank targets, the state is attractive to out-of-state and credit union buyers alike, industry experts said.

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Of the four buyers in Georgia bank deal announcements this year, two are headquartered out of state. Similarly, 10 of the state's 20 most recent deals involved out-of-state buyers.

In addition to out-of-state buyers, credit unions are making up a larger share of M&A in the state. In the last 12 months, a credit union was the buyer in three of seven deals, compared to three out of 14 deals between 2021 and 2022.

Part of the reason for the interest in the Peach State is attractive growth demographics. The state's population is expected to grow by 3.67% between 2024 and 2029, above the 2.4% projection for the US.

"Georgia has been in a pretty strong growth mode, so if you're a bank, this is where you want to be," said Lee Bradley, senior managing director at Community Capital Advisors, who advises on bank deals in the Southeast. "A lot of these out-of-state banks want to get in on the action."

Georgia community banks also largely outperform their peers across the country. Georgia-based banks with less than $10 billion in assets in the first quarter reported a median 15.31% return on average equity, a median 4.22% net interest margin and a median efficiency ratio of 61.32% for the 12 months ended March 31 compared to 10.28%, 3.37% and 67.26%, respectively, for all US community banks. They also reported higher year-over-year growth for both loans and deposits than their US peers.

The state's growth prospects and high-performing banks make it attractive to out-of-state and credit union buyers, particularly in the Atlanta and Savannah metropolitan statistical areas, according to Jeff K. Davis, managing director of Mercer Capital's Financial Institutions group.

"It's just been a good growth market for banks to go to," Davis said, speaking of Atlanta.

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The many small banks in the state also makes it more ripe for out-of-state and credit union buyers, as the amount of in-state, traditional bank buyers that would be interested in smaller transactions is narrow, said Robert Klingler, a Nelson Mullins partner advising financial institutions.

Of the 20 most recent deals in Georgia, 17 of the sellers had less than $1 billion in total assets and only one of the four sellers in 2024, Piedmont Bancorp Inc., had total assets greater than $1 billion. Affinity Bank is the second-largest target of any bank deal announced in the state this year at $869.6 million in total assets.

Of 135 community banks in Georgia, 122 had less than $1 billion in total assets as of March 31, according to Market Intelligence data. At the same time, there are only 13 banks headquartered in Georgia with between $1 billion and $10 billion and only two of those have assets greater than $3 billion.

"Most acquirers aren't going to be interested in doing a deal where they are buying less than 10% of themselves," Klingler said. "You're more likely to be looking at kind of out-of-state buyers filling that need just from a pure asset size perspective."

Michael Bell, who leads the financial institutions practice at Honigman LLP and advised on the Atlanta Postal CU deal, said he expects more credit unions to strike bank deals in Georgia before year-end.

"We've been buying banks and we're going to keep buying banks," Bell said in an interview. "No question about it."

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