Three Ohio community banks have been targeted in M&A deals announced in June, bringing this year's deal tally to four, compared to just one deal announced in 2020 and five in 2019.
Most recently, on June 23, Canfield-based Farmers National Banc Corp., holding company of the state's fifth-largest community bank by assets, announced it would acquire Cortland Bancorp for $124.0 million. Farmers National's deal is expected to close in the fourth quarter and should push the company above $4 billion in assets, moving it up to the No. 4 spot among community banks in the state. It was the largest Ohio bank deal announced since September 2019 when Defiance-based Premier Financial Corp., formerly known as First Defiance Financial Corp., announced it would buy Youngstown-based United Community Financial Corp. for $475.0 million, combining the state's then third- and fourth-largest community banks by assets to create the state's second-largest community bank.
The two other deals in June — Circleville-based Savings Bancorp Inc.'s acquisition of Lancaster-based SSNB Inc; and Double Bottomline Corp.'s acquisition of Caldwell-based Community Savings Bancorp Inc. — were much smaller, with deal values of $17.5 million and $9.5 million, respectively.
On fundamental banking performance, the state's community banks lagged the broader industry during the first quarter in five of the six major metrics. The state's median return on average equity was 7.36%, compared to 10.68% for the nation's community banks, according to data from S&P Global Market Intelligence. Similarly, the median net interest margin among Ohio's community banks was 18 basis points lower than the national metric.
The only metric where Ohio outshined the national median was credit quality. As of March 31, the state's median 0.38% nonperforming assets ratio was 5 basis points lower than the Midwest median and 7 basis points lower than the national median.
One of the state's largest community banks recently looked beyond the state for its M&A target. Marietta-based Peoples Bank and its parent company, Peoples Bancorp Inc., the No. 3 community bank in Ohio, on March 29 announced a deal down the Ohio River, picking up Huntington, W.Va.-based Premier Financial Bancorp Inc., which has roughly $2 billion in assets, for $292.4 million. The deal is expected to close this September.
The deal will also give Peoples Bank significantly more exposure to West Virginia and Kentucky and bring the bank into Virginia, Maryland and Washington, D.C., with a handful of branches.
And Premier Bank, Ohio's second-largest community bank under $10 billion in assets, may be on the hunt for more M&A targets, according to a first-quarter 2021 earnings call transcript from its parent company, Premier Financial. During the call, Gary Small, president and CEO of Premier, said the bank has enough capital to pursue fee business opportunities as they arise, and he said the company will be involved in the increased M&A activity across the U.S. and in the Upper Midwest.
The state's largest community bank, Newark, Ohio-based Park National Bank, posted stronger profitability ratios than both the state and national community bank medians, but its deposit growth and credit quality were slightly below the mark. Park's 1.31% nonperforming assets ratio was more than 3x the state median and its 15.4% year-over-year deposit growth was below the state median of 19.9%.
Premier Bank
Banks closed 66 branches in Ohio in the first quarter and opened only 12 as banks look to cut costs and consumer banking increasingly moves online. Huntington Bancshares Inc. was responsible for over one-third of the branch closures, shuttering 24 branches in the first quarter, followed by U.S. Bancorp, which closed 15. In June, Huntington closed on its acquisition of TCF Financial Corp., which had a modest presence in Ohio.
Over the last 12 months to March 31, banks opened 44 new branches in Ohio and closed 193.
To access a spreadsheet containing first-quarter 2021 financial information for Ohio community banks, click here.