2Q2017 Bank M&A Review

M&A

Integrated Legacy Solutions (ILS), the leading provider of image and data conversion and migration technology today released its research on quarterly bank merger and acquisition data for the second quarter of 2017. Drawing from data provided by the Federal Reserve System, the research quantifies all U.S. bank M&A activity occurring between April 2017 and June 2017 to monitor larger trends in the space, such as total mergers and acquisitions, activity by state and region, the asset sizes of acquired and acquiring banks and transaction pricing, among other insights.

The second quarter of 2017 saw 60 total bank mergers and acquisitions across the United States, bringing the total number of M&A transactions up to 125 during the first two quarters of this year. The total year-to-date M&A activity decreased slightly by about 8% from 2016 and even more compared to the five year average (about 17%). The research also shows that the size of acquiring banks is diversifying. The average asset size of acquiring banks continues to decrease, dropping from an average of $19.7 billion in 2013 to $4.6 billion in 2017, suggesting that smaller banks are becoming key players in the mergers and acquisitions space.

Additionally, the size of banks that are being acquired is also on the decline. The average assets of acquired banks has decreased significantly in the past few years, from $874 million in 2014 to $261 million in 2017. During Q2, there were only 9 banks acquired that possessed assets of greater than a billion dollars.

 

“What the data shows is that, contrary to what we might assume, the largest banks aren’t the ones doing most of the acquiring,” said Martin Webster, director of business development for ILS. “In fact, decreases in the asset size of both acquired and acquiring banks demonstrate that M&A activity is becoming an increasingly inclusive and a significant growth strategy for mid-sized banks.”

Other notable insights from the 2017Q2 report include:

  • Acquisition rates rose significantly for the New England FDIC region. Historically, this region averages 1-2 acquisitions per quarter, but there were 5 in the second quarter of this year.
  • The Mid-South and Southwest regions also saw significant increases in M&A activity. Total year-to-date M&A activity for the Mid-South region was up 18% compared to 2016, while the Southwest region was up by 10%.
  • Wisconsin led the U.S. in overall acquisition activity by state, with 6 total acquisitions. Florida, Massachusetts and Texas followed in close second with 5 acquisitions each.
  • The largest acquired bank in 2017Q2 was Bank of North Carolina, with $7.4 billion in assets. The bank was purchased by Pinnacle Bank in Tennessee, which possessed $21 billion in assets.
  • The price of M&A transactions is rising, which could suggest why overall acquisitions dipped slightly this quarter. At the end of 2017Q2, the average was 1.53 times book, up from 1.47 times book from the second quarter of last year.


“Bank stocks are rising, which is likely a significant factor in the growing price of M&A transactions and the overall decline in M&A activity reported this year,” said Kris Bishop, president and founder of ILS. “However, as that evens out and the M&A arena continues to diversify, we should see activity pick back up. Due to extraneous factors, this is just a small bump in the road for an area that has seen tremendous growth and promise over the past few years.”

Integrated Legacy Solutions (ILS) provides industry leading technology for image and data migrations and conversions to the financial industry. ILS’s leadership team has performed data conversion for thousands of financial institutions over their nearly 20 years in the business and has designed innovative ways to “migrate” legacy data more quickly and affordably than other costly and time consuming methods of conversion. For more information, visit www.integratedlegacy.com.