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United Community Banks looking to catapult growth with back-to-back M&A deals

United Community Banks Inc. is bullish on its future growth following two whole-bank acquisition announcements in two months and the prospect of future deals in the Southeast.

The company's announced acquisition of Brentwood, Tenn.-based Reliant Bancorp Inc. comes on the heels of its May 27 announcement that it plans to acquire Cornelius, N.C.-based Aquesta Financial Holdings Inc. The consecutive deals will push United Community into two attractive, high-growth markets Nashville, Tenn., and Charlotte, N.C. — moves that both equity analysts and Chairman, President and CEO Lynn Harton believe will propel the company's organic growth.

"M&A, I like to call it, it's wholesale acquisition of customers and talent. So as long as that's available to me, I want to take advantage of it," Harton said in an interview. "There's a limited number of high-quality banks in high-quality markets with leadership teams that you want.

"When you have that opportunity to say, 'Hey, instead of growing 5,000 customers a year or whatever, we can grow by 50,000 customers overnight,' let's take that opportunity if it's a great market," Harton said.

Moreover, Harton suggested that Reliant Chairman and CEO DeVan Ard Jr.'s connections could open the door for more M&A discussions for the seasoned acquirer in the future.

"He's got great contacts there in Tennessee and potentially in Alabama as well," Harton said. "We've both got relationships throughout those markets. So certainly, that's an opportunity. We continue to look at banks in the Carolinas, banks in Georgia, banks in Florida. ... There continues to be attractive companies that I think would be great fits for United."

Ard believes more bank M&A in Tennessee could bolster United's growth in the state.

"Certainly, partnering up with other banks in our market will give us an opportunity, I think, to build a great organization in Tennessee, something that Lynn will be very proud of," he said.

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The two deals mark United Community's sixth and seventh whole-bank acquisition announcements since 2016. Both the Aquesta and Reliant deals were all about geographic expansion, Harton said.

"We were subscale in the Tennessee market, and we were looking for not only an additional company in the market, but leadership that would help us continue to grow," Harton said. "You'd be hard-pressed to find a much better market in the Southeast than Nashville."

According to data gathered by Nielsen, the Nashville-Davidson-Murfreesboro-Franklin, Tenn., metropolitan statistical area is expected to grow its population by 5.9% from 2021 to 2026, above the national rate of 2.9%. Median household income in the metropolitan area is projected to grow by 11.4% during the same period, compared to the national rate of 9.0%.

"There's a tremendous opportunity for us ... to build something remarkable here in Tennessee," Ard, who will become United's Tennessee state president upon deal closing, said in an interview.

Reliant ranked No. 10 in deposit market share in the Nashville MSA at June 30, 2020. Jumping into Nashville and Charlotte, N.C., with acquisitions will catapult the company's organic growth in those markets, Harton said.

"It's so much easier to recruit great commercial bankers, in particular, after an acquisition and after you have some scale. ... Both Charlotte and Nashville and the broader Tennessee market, this helps us to recruit bankers for organic growth," he said. "People overlook that piece of what an acquisition does."

Analysts are also bullish on the organic growth opportunities that the move into Nashville could provide.

"The deal fits within its stated M&A criteria and provides [United Community] entry into another fast growing Southeastern market where it can build upon [Reliant]'s existing reputation while leveraging its scale to drive increased market share in Nashville," Raymond James analyst Michael Rose wrote in a July 14 note.

D.A. Davidson analyst Kevin Fitzsimmons applauded United Community's move into the MSA, given that "ways for banks to enter this market in a sizable way were getting increasingly scarce, with considerable consolidation in the market over the years," Fitzsimmons wrote in a July 15 note.

Keefe Bruyette & Woods analyst Catherine Mealor labeled the deal as "franchise enhancing" and "additive to [United Community's] already relatively strong growth story."

With two pending whole-bank deals on hand and one recently closed nonbank acquisition of investment advisory firm FinTrust Capital Partners LLC, Harton said the company will turn its immediate attention to integration.

"You shouldn't expect to see new announcements from us in the next few weeks," he said.