Los Angeles-based RBB Bancorp and Oakland, Calif.-based Gateway Bank FSB's termination of their planned M&A deal is the fourth largest in the US banking sector in 2023 and the 13th largest since 2021.
The companies announced the termination of the $22.9 million deal Sept. 28.
"Neither party has or will have any liability or pay any penalty to the other party as a result of the termination," RBB said in a news release.
The news release did not provide a reason for the termination, but the closing of the deal — originally expected to occur in the second quarter of 2022 — had been pushed back multiple times.
RBB had faced some headwinds, including the April 2022 resignation of its President and CEO Alan Thian after an internal investigation identified violations of company policies and procedures.
In July, RBB disclosed that the US Securities and Exchange Commission requested information about certain company policies and procedures, expenditures, and former officers and directors. The SEC's request also encompasses the officers and directors' roles and relationships and the circumstances relating to their departures, including potential violations of laws and/or regulations.
In May, Paul Lin resigned from the boards of the company and its unit Royal Business Bank, citing disagreements with respect to governance and policy matters, including the boards' independence determinations and the conduct, pace and timing of the boards' investigation mentioned in a May 16, 2022, regulatory filing.
As of Sept. 28, RBB's stock had dropped 50.8% since the deal was announced on Dec. 28, 2021, while the S&P US BMI Banks Index fell 30.5% during the same period.
Other recent terminations
The total value of bank M&A deal terminations has jumped in 2023, and that was largely driven by the nixing of Toronto-Dominion Bank's $13.67 billion deal to purchase Memphis, Tenn.-based First Horizon Corp. Months later, TD disclosed that it was facing a US Justice Department probe regarding its Bank Secrecy Act (BSA) and anti-money laundering (AML) practices, confirming a prior report by The Wall Street Journal on May 8 that regulators were concerned about TD's AML practices.
So far this year, seven bank deals have been terminated, following 13 in 2022. In 2021, there were only four terminations, following 18 in 2020, mostly in the second quarter after the COVID-19 pandemic started, and 14 in 2019.
Credit unions' acquisitions of banks face a higher termination rate. Since 2011, credit unions have announced 91 bank acquisitions, but 14 of those, or over 15%, fell apart. During the same period, the rate was much lower for deals between two banks, with just 3.8% of the more than 2,700 announcements being terminated.
Similar to traditional bank deals, some recent collapses have been the result of the macroeconomic environment in which interest rates have risen rapidly and distorted deal math, advisers said. Regulatory hurdles could also be the culprit for some terminations, as multiple advisers also noted that regulators' reviews of these deals have become more stringent.
