Eight US bank M&A deals worth a combined $342.3 million were announced in February, bringing the 2023 year-to-date total to 14 deals, following the slowest January in 14 years.
Total deal value in the first two months of 2023 was just under 3% of the $14.36 billion recorded in the 30 deals announced over the same period in 2022, according to S&P Global Market Intelligence data. The Toronto-Dominion Bank's $13.67 billion deal to acquire First Horizon Corp. announced February 2022 significantly boosted the total deal value of US bank M&A in the prior-year period.
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The median deal value-to-tangible common equity ratio for deals announced through Feb. 28 was 155.7% — the highest since 2019.
2 MOEs announced in February
On Feb. 22, Camp Hill, Pa.-based LINKBANCORP Inc. and Salisbury, Md.-based Partners Bancorp announced a merger of equals in a $161.3 million deal at a deal value-to-tangible common equity ratio of 132.3%, making it the 19th-largest deal announced since 2022. The merger aims to maximize organic growth in the Northeast region by combining Partners Bancorp's low-cost deposit base with LINKBANCORP's strong loan growth.
Wheeling, W.Va.-based Main Street Financial Services Corp. announced a merger of equals with Wooster, Ohio-based Wayne Savings Bancshares Inc. in a $66.9 million deal at a deal value-to-tangible common equity ratio of 155.7% on Feb. 23.
Blairsville, Ga.-based United Community Banks Inc.'s acquisition of Florida-based First Miami Bancorp Inc. for $114.0 million was also announced in February as it aims to expand its footprint in Miami. At a deal value-to-tangible common equity ratio of 159.5%, the deal is priced below the 186.7% median for Florida bank deals announced since 2021.
Midwest an early pace-setter to a slow year
Of the 14 deals announced year to date through Feb. 28, seven targets are headquartered in the Midwest, followed by three targets in the South Central region. Illinois and Ohio are the most targeted states in the Midwest, while Texas is the most targeted state in South Central, with 2 targets each.
M&A outlook for 2023
Increased regulatory scrutiny on bank M&A has been a cause of frustration especially for large banks, resulting in delays and prolonged closing timelines. In addition to a focus on Community Reinvestment Act ratings, industry experts warn that capital and liquidity will be major factors in M&A review due to regulators' concerns about banks' underwater bond books and the potential for them having to sell those securities at a loss in the event of a liquidity crunch.
The recent failure of SVB Financial Group's bank unit, Silicon Valley Bank, illustrated those concerns after it sold $21 billion worth of securities for a loss of $1.8 billion, which caused depositors to pull $42 billion. The California Department of Financial Protection and Innovation took possession of the bank on March 10, citing inadequate liquidity and insolvency making it the second-largest bank failure in US history.