To successfully negotiate a merger transaction, buyers and sellers normally must bridge the gap between a number of financial, legal, accounting and social challenges. Couple this with significant barriers these days to acquiring another bank—such as gaining regulatory approval— and it’s no wonder that bigger financial deals remained scarce this year. For as much digital ink as was spilled on BB&T Corp.’s $2.5-billion acquisition of Susquehanna Bancshares a few weeks ago, here are three news items that may not have garnered national attention as they should have.
Ford Financial plans to buy up to a 65 percent stake in Mechanics Bank
The $3-billion asset bank will now be used as a platform for other bank acquisitions.
In October, Mechanics Bank of Walnut Creek, California, announced it planned to sell a controlling interest to the Ford Financial Fund, positioning the 109-year-old bank as a platform for other bank acquisitions. The private equity firm Ford Financial, which focuses on financial services, is led by co-managing members Gerald Ford (no relation to the late U.S. president) and Carl Webb. According to a piece in the San Francisco Business Times, Webb acknowledged Ford’s ambitions to use Mechanics Bank as the platform for additional acquisitions: “We’ve always been acquisitive. It’s served us well. As long as you’re growing and creating exponential value, why stop?” So if you’re on the West Coast, I’d keep an eye on Mechanics Bank expansion efforts in 2015.
Sterling Bancorp agrees to buy Hudson Valley
The deal forms a company with slightly more than $10 billion in assets.
Sterling Bancorp. in Montebello, New York, announced a deal in November to buy Hudson Valley Holding Co. in Yonkers, New York. One of the drivers for the deal, according to Jack Kopnisky, president and CEO of Sterling Bancorp. is blending Sterling’s commercial lending expertise with Hudson Valley’s attractive deposit base. As he shared, “the resulting institution will have strong asset generation capabilities, a cost effective funding mix, and a broad footprint in the dynamic marketplace centered on New York City and its surrounding region.” With the deal, Sterling will also cross the $10-billion asset threshold, one most banks seek to avoid. Indeed, banks lose significant interchange income when they hit the mark while adding additional regulatory oversight from the Consumer Financial Protection Bureau. Rather than be deterred by the increased regulatory exposure, it appears the potential value in the combined entity serving small- to middle-market commercial and consumer clients in the New York metro area outweighs the costs. The deal adds 28 branches to Sterling’s 32 and creates the 10th largest bank by deposit market share in the New York area. The deal is expected to generate $34 million in annual cost savings, and be accretive to earnings in the calendar year 2015. Rather than be paralyzed by the $10 billion number, Sterling’s board showed a healthy appetite to grow in both size and potential efficiencies.
United Bankshares completes acquisition of Virginia Commerce Bancorp
United, now with $12.1 billion in assets, has a strong track record of acquiring other banks.
With 46 offices in the greater Washington D.C. market and combined headquarters in D.C. and Charleston, West Virginia, this is one of the stronger regional bank players in the MidAtlantic. Being that D.C.’s economic fortunes have fared considerably better than most, I’d suggest keeping an eye on the acquisitions being done by this financial institution. United has a strong track record of acquiring and successfully integrating other banks into its business and given that its last deal, with Virginia Commerce, closed on January 31, 2014, I wouldn’t be surprised if another deal comes about in the next six to nine months, especially as they compete locally with at least four other strong, growing community banks: Cardinal Financial, Eagle Bancorp, Sandy Spring Bancorp and the Bank of Georgetown.
Certainly, banking acquisitions like these three show a commitment to profitability and efficiency—and reflect solid asset quality and sound capital positions. There is more than one way to grow your bank. These banks are proving it.