US bank deal terminations slow while M&A picks up

The first US bank deal termination of 2024 arrived more than five months into the year, as regulatory holdups continue to plague deal-closing processes.

Morgan City, La.-based MC Bancshares Inc. and Covington, La.-based Heritage NOLA Bancorp Inc. mutually terminated their all-cash deal on June 14, just shy of a year since they announced the transaction.

The single deal termination in 2024 through June 14 marked a slowdown in terminations from 2023, when there were six terminations as of the same date, according to S&P Global Market Intelligence data. Full year 2023 had 15 US bank deal terminations, the most since 18 in 2020.

MC Bancshares' now-canceled acquisition of Heritage NOLA Bancorp was valued at $26.6 million at the time of its announcement in July 2023. Heritage NOLA Bancorp's CEO cited uncertainties in the regulatory environment and merger approval process as factors in the termination.

MC Bancshares' President and CEO Christopher LeBato said in a June 18 email to Market Intelligence that his duty to protect the company's capital was a factor in the decision to terminate. MC Bancshares remains "very strong and well-capitalized," and the company plans to pursue other M&A deals in the future, LeBato said.

The slowdown in deal terminations follows a weak year for US bank deal announcements in 2023: There were 48 transactions announced in the first six months of 2023, compared to 77 in the first half of 2022. In 2024, through June 14, 54 deals were announced, signaling a possible rebound in merger activity. But buyers and sellers are still struggling with regulatory demands and the interest rate environment.

"The current interest rate environment continues to painfully weigh on merger math," Laurie Havener Hunsicker, a senior analyst at Seaport Research, wrote in a June 17 newsletter. "When rates eventually ease, and interest rate marks decline, we believe that there is substantial pent-up demand for M&A and expect a jump in deal activity, potentially beginning in early 2025."

The regulatory approval process was cited as a factor in the termination of Toronto-Dominion Bank's planned acquisition of First Horizon Corp. in 2023. That transaction's size, roughly $13.67 billion at announcement, made it an outlier among other recent canceled deals and dwarfed recent years' terminated deal value totals.

Before the MC Bancshares-Heritage NOLA Bancorp deal, the most recent US bank deal termination was in November 2023, involving a transaction in which Forest Holdings LLC planned to acquire West Valley National Bank. Instead, Avenir Financial FCU, formerly known as A.E.A. FCU, agreed to acquire substantially all West Valley National Bank's assets and liabilities on Nov. 1, 2023.