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SRM consulting company said it expects a flood of pandemic-delayed mergers this year.

A Memphis consulting company said it expects a flood of pandemic-delayed mergers this year among banks and credit unions.

“Mergers delayed due to the pandemic are now in full force and more complex,” according to a report Monday from Strategic Resource Management, Inc. (SRM).

The consulting company cited data from S&P Global Market Intelligence showing mergers postponed by the COVID-19 pandemic are extending to regional and super-regional banks holding $10 billion to $1 trillion in assets.

“We expect to see even more mergers among these banks in the coming months, which will continue to impact competition in the marketplace,” the SRM report said.

The S&P report released July 8 showed no credit unions met the $314 million threshold for the 20 largest deals announced from January 2020 through June 2021.

However, three credit unions made S&P’s list of the 20 “most expensive” deals over the same 18-month period. The deals are ranked by the value of the deal as a percent of tangible common equity, which measures how much shareholders would receive in liquidation. It is book value minus intangible assets (including goodwill) and preferred equity.

First on the list was Region Financial Corp.’s June 8 announcement that it plans to acquire EnerBank USA of Salt Lake City for $960 million, or 306% of its tangible common equity, and 35% of its deposits. The three credit unions making the list were:

  • No. 9. The June 16 announcement by Lake Michigan Credit Union of Grand Rapids, Mich. ($10 billion in assets, 406,861 members) that it plans to acquire Pilot Bancshares Inc. of Tampa, Fla., for $99.9 million, or 187% of common tangible equity and 19% of deposits.

  • No. 12. The March 31 announcement by VyStar Credit Union of Jacksonville, Fla. ($10.7 billion in assets, 764,701 members) that it plans to acquire Heritage Southeast BanCorp Inc. of Jonesboro, Ga., for $194.4 million, or 183% of common tangible equity and 14% of deposits.

  • No. 15. The April 2020 announcement by Tinker Federal Credit Union of Oklahoma City ($5.6 billion in assets, 425,298 members) that it planned to acquire substantially all of the assets and operations of Prime Bank of Edmond, Okla., for $68 million, or 180% of common tangible equity and 28% of deposits. The deal was completed later that year.


In June alone, 26 deals were announced, the highest monthly tally since September 2019 when 27 deals were announced, according to the S&P report.

In the first half of 2021, 94 deals were announced, including five banks being acquired by credit unions. Fifty deals were announced in the first half of 2020, and 112 for the entire year, including six by credit unions.

The value of deals in this year’s first half was $32 billion, up from $27.8 billion for all of 2020. Half of deals announced in the first half came in with a value-to-tangible common equity ratio 152% or more, compared to a median ratio of 134.8% last year.

Of the 20 largest deals announced in the first half, three were announced in June. Similarly, June alone accounted for a quarter of the 20 most expensive deals announced since the beginning of 2020.

Jim DuPlessis CUTmes

 

 

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