Large bank acquisitions dominated the third quarter of 2013. The number of whole-bank deals announced in the third quarter was lower than in any other quarter this year, but the aggregate deal value shot-up to $6.8 billion—more than twice that seen in the second quarter.
For the nine months ended Sept. 30, 166 whole-bank deals were announced with an aggregate deal value of $11.9 billion. There were 192 deals announced with a total spending of $11.7 billion in the third quarter of 2012.
Update on whole bank deals
It's not just the aggregate deal value that shot up; the quarter also witnessed deals priced at a high premium. In the third quarter, the average price-to-tangible book ratio stood at 159.5%, the highest since the third quarter of 2008, which had an average price-to-tangible book ratio of 164.3%. Among 2013's top 10 most expensive combinations, with a deal value greater than or equal to $25 million, six deals were announced in the third quarter. With a price-to-tangible book ratio of 284.1%, San Antonio-based Cullen/Frost Bankers Inc.'s acquisition of Odessa, Texas-based WNB Bancshares Inc. was the most expensive deal announced in the third quarter. Cullen/Frost Chairman, President and CEO Richard Evans Jr. told SNL that it is a fair price, given WNB Bancshares' financial health and the attractive markets where it operates.
Branch deal update
The third quarter witnessed a surge in branch deal announcements from the first two quarters of 2013. There were 27 branch deals announced in the third quarter involving 148 branches, while the first two quarters saw 15 branch deals each, covering 55 and 38 branches in the first and second quarters, respectively. However, so far this year, the pace of branch deals has been slower than in 2012, which had 82 branch deals encompassing 341 branches for the nine months ended Sept. 30, 2012. Bank of America Corp. led the sellers pack in 2013 with the divestment of 118 branches in six deals.
There were five FDIC-assisted deals announced in the third quarter of 2013. The acquisition of Edinburg, Texas-based First National Bank, with an asset size of $3.1 billion, by Dallas-based PlainsCapital Bank, a unit of Hilltop Holdings Inc., is the largest FDIC-assisted transaction since 2011. Hilltop President and CEO Jeremy Ford said the transaction is expected to be immediately accretive to earnings.
Seattle-based HomeStreet Inc., the busiest acquirer in the first nine months of 2013, announced the acquisition of Seattle-based Fortune Bank and Yakima, Wash.-based YNB Financial Services Corp. on July 26, with an aggregate spending of $37.3 million. HomeStreet also announced July 1 the acquisition of two retail deposit branches from Spokane, Wash.-based AmericanWest Bank, a unit of Seattle-based SKBHC Holdings LLC. The acquisition of the two banks, along with the branch deal, would increase the net number of HomeStreet retail deposit branches to 29.
The third quarter brought a couple of large deals valued at $2.0 billion and more. With a deal value of $2.3 billion, the acquisition of Los Angeles-based CapitalSource Inc. by Los Angeles-based Pacific Western Bank, a unit of PacWest Bancorp, is the largest deal announced this year and ranked fifth since 2010. According to PacWest, the transaction is expected to be 9% accretive to earnings per share in 2014 and 18% the following year owing to the significant cost savings.
However, a group of community organizations, led by California Reinvestment Coalition, have called for the postponement of this deal due to concerns not limited to poor CRA evaluations and overlapping of branches potentially resulting in closures.
The second-largest deal of 2013 was also announced in the third quarter, when Portland, Ore.-based Umpqua Holdings Corp. unit Roseburg, Ore.-based Umpqua Bank agreed to acquire Spokane, Wash.-based Sterling Financial Corp. in a cash-and-stock deal valued at $2.0 billion. The deal is projected to have 30% cost savings by 2015 resulting in 12% accretion to the operating earnings in the same year.
Mapping the trend
Continuing the trend of past some years, the Midwest retains its title of the busiest region in terms of the number of announced bank acquisitions. There were 52 deals announced in the Midwest for the nine months ended Sept. 30. The two largest deals of 2013 helped put the West in first place by aggregate deal value.