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Bank M&A pricing up in January

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity

Street Talk Episode 70 - Banks' Liquidity Conundrum Could Fuel M&A Activity

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Bank M&A pricing up in January

Overall bank M&A activity since the election in November has slowed compared to the same period in recent years, but President Donald Trump's first week in office saw a surge of deals and pricing is up.

Forty-four deals with $6.23 billion in deal value have been announced since Nov. 8, 2016, through Jan. 25. That compares to 58 deals with $4.99 billion in deal value announced during the same period beginning Nov. 8, 2015, and 53 deals with $9.78 billion in deal value for the period beginning Nov. 8, 2014.

However, bank stocks have climbed since Trump was elected, and pricing on deals is up as buyers' rich stock prices provide valuable currency. The deals announced from the start of 2017 through Jan. 25 have had a median price to tangible book ratio of 215.9%, compared to 126.7% in the same period a year ago and 167.4% in January of 2015. Recent pricing is also above the median 187.5% ratio seen this past December, and the 132% for the full year 2016.

Nashville, Tenn.-based Pinnacle Financial Partners Inc. announced Sunday, Jan. 22, that it would acquire High Point, N.C.-based BNC Bancorp for $1.76 billion. SNL values the deal at a hefty 269.7% of tangible book value.

The sale of BNC Bancorp marks the largest bank deal since August 2016, when Florida's EverBank Financial Corp agreed to sell to the bank unit of TIAA for $3.83 billion. It also ranks as the highest price relative to tangible book value of all deals above $1 billion since the beginning of 2016.

In all, there were six bank deals announced after Trump's inauguration through Jan. 25, with an aggregate of $2.35 billion in deal value and a median of 215.9% of tangible book. First Texas BHC Inc. announced Jan. 23 that it would sell to serial acquirer Simmons First National Corp. for $461.95 million. That evening, Korean-American regional bank Hope Bancorp Inc., formerly known as BBCN Bancorp Inc., strengthened its Korean-American market share with the $48.84 million purchase of Lynnwood, Wash.-based U & I Financial Corp.

Tuesday, Jan. 24, saw tiny First National Bank and Trust Co. of Rochelle in Illinois announce a sale to Central Bank Illinois. On Wednesday, Jan. 25, Muncie, Ind.-based First Merchants Corp. said it agreed to acquire Upper Arlington, Ohio-based Arlington Bank for $75.8 million. Also on Wednesday, a small rural bank was scooped up for $4.5 million by Little Rock, Ark-based Southern Bancorp Inc.

A notable deal termination was announced during the week as well, when Investors Bancorp Inc. called off its $155.4 million deal with Princeton, N.J.-based Bank of Princeton due to lack of timely regulatory approval.

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But a flurry of M&A activity was typical in January during recent Obama years as well. January 26, 2016, saw the double whammy of both the $3.44 billion sale of FirstMerit Corp. to Huntington Bancshares Inc. and the $1.09 billion merger of Talmer Bancorp Inc. with Chemical Financial Corp. announced on the same day.

January 2015 included the $5.33 billion deal between City National Corp. and Royal Bank of Canada.

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The data in this article was compiled using SNL's mergers & acquisitions dataset, branch dataset and SNL's Mortgage Analytics. A recorded webinar on how to use Mortgage Analytics can found here.