US bank M&A continued at a subdued pace in October with only five deal announcements.

The last time only five whole-bank deals were announced in a month was in March when the failures of Silicon Valley Bank and Signature Bank sent the industry reeling. However, on a deal value basis, October's total of $444.2 million already surpassed the first-quarter total of $432.8 million and the second-quarter total of $175.9 million.

The 86 deals announced year to date through Oct. 31 had an aggregate deal value of $3.81 billion, compared to $7.30 billion from the 135 deals announced over the same period in 2022, according to S&P Global Market Intelligence data.

Meanwhile, the median deal value-to-tangible common equity ratio for bank deals continued to drop in October; however, only two of the deals announced deal values.

5th-largest deal of the year

On Oct. 26, Evansville, Ind.-based Old National Bancorp announced the acquisition of Nashville, Tenn.-based CapStar Financial Holdings Inc. for $344.4 million with a deal value-to-tangible common equity of 114.8%, marking the fifth-largest US bank M&A deal so far this year.

Among its 11 bank deals since 2010, CapStar is Old National's fourth-largest by deal value and second-largest by total assets at $3.26 billion.

Old National CEO Jim Ryan aims to expand the bank's presence in Tennessee with the deal.

"This earnings-accretive partnership is a much cheaper, less dilutive and significantly faster way for us to build scale in this dynamic footprint," Ryan said during a call with investors. "We really felt like this was a perfect opportunity. It's small enough to be easier to integrate, but yet it's big enough to matter."

2 Calif. deals inked in October

Two deals were announced in California last month.

Orange County, Calif.-based investment company PCB Financial Inc. announced Oct. 5 that it would acquire Monterey, Calif.-based Northern California Bancorp Inc. and subsidiary Monterey County Bank in a deal expected to close before the end of 2023.

In addition, on Oct. 10, Fresno, Calif.-based Central Valley Community Bancorp announced the acquisition of Goleta, Calif.-based Community West Bancshares for $99.8 million with a deal value-to-tangible common equity of 88.0%. The deal will likely close in the second quarter of 2024, and the combined company will have approximately $3.6 billion in total assets.

The Golden State has had three banks targeted this year, tying it with Washington as the most-targeted state in the West.

Bank deals by region, state

The Midwest still leads as the most-targeted region, with a total of 37 target banks, accounting for 43% of all M&A transactions announced this year.

On Oct. 24, Glencoe, Minn.-based Security Bank & Trust Co., a subsidiary of Security Bancshares Co., announced the acquisition of Cambridge, Minn.-based Cambridge State Bank. Upon completion of the deal, Security Bancshares will then be acquired by Eden Prairie, Minn.-based Flagship Financial Group Inc.

Meanwhile, the Southeast added two bank targets in October. On Oct. 17, Belzoni, Miss.-based Guaranty Capital Corp. announced the acquisition of Oxford, Miss.-based Lafayette Bancorp Inc. in a deal expected to close in the first quarter of 2024. The combined company is projected to have about $2.6 billion in assets with 39 branches across Mississippi and Tennessee.

The Southeast had 19 target banks as of Oct. 31, making it the second-most-targeted region, followed by the West with 14 targets.

– Access the S&P Capital IQ Pro M&A summary page for US financial institutions. – Access a list of pending and completed M&A deals announced since Jan. 1, 2022. – Read more M&A news.

Bankers hopeful M&A will heat up in 2024

High interest rates and long regulatory approval timelines may still be making it hard to get deals across the finish line, but some in the industry expect M&A to rebound next year.

According to Ameris Bancorp's CEO H. Palmer Proctor Jr., high interest rates will continue to pressure banks' earnings power, and they will need to merge in order to build their deposit bases and diversify asset generation.

The same sentiment has been echoed by multiple bankers as they believe those same factors will soon lead to a wave of consolidation in 2024 as banks will be forced to pair up to better deal with intensifying headwinds.