Merger-and-acquisition talks are heating up among banks of all sizes.
Several bankers, in the wake of several large deal announcements, said during quarterly earnings calls that more conversations are taking place. Many expressed an increased interest in M&A because of more clarity about credit quality and economic conditions.
A steady rise in bank stock prices in recent months has put potential buyers in a stronger position to pursue acquisitions.
“From an M&A perspective, I would say our dance card is filling up,” George Makris, chairman and CEO of Simmons First National in Pine Bluff, Ark., said during the $23 billion-asset company’s earnings call.
“We’re definitely looking at opportunities throughout our footprint,” Tyson Abston, chairman and CEO of Guaranty Bancshares in Addison, Texas, said during the $2.9 billion-asset company’s recent earnings call.
“We’re seeing increased conversations,” Abston added. “And we’re definitely in those conversations. … We’re obviously more focused on [M&A] today than we were a year ago, and we think that’ll continue at least for the foreseeable future.”
Banks announced 13 mergers in March after announcing just five a month earlier, according to data compiled by S&P Global Market Intelligence.
Six bank deals with values over $500 million have been announced this year, already matching 2020’s total. Two of those — BancorpSouth Bank’s $2.8 billion proposed purchase of Cadence Bancorp. and Webster Financial’s $5.1 billion pending deal for Sterling Bancorp — were announced in the last 10 days.
This year presents “an opportunity with the economy and everything to possibly do some acquisitions as we go forward,” Abston said. “It does help that we have stock prices stronger, and I think you’ll see some additional activity in M&A throughout our state.”
As momentum builds, more banks are making their intentions known.
“Our appetite, I think, is back,” James Ryan III, chairman and CEO of Old National Bancorp in Evansville, Ind., said during the $23.7 billion-asset company’s earnings call.
“Now we’re in a position, particularly as we get more comfortable with credit, that we could be in a position” to strike a deal, Ryan added. “If one comes along that’s attractive … we would absolutely take a look at it in this kind of environment.”
Home BancShares in Conway, Ark., is in talks with at least three targets and could announce an acquisition at any time, Johnny Allison, the $17 billion-asset company’s chairman, president and CEO, said during a recent earnings call. Home hasn’t completed a bank acquisition in more than four years.
Banks have so far reported solid first-quarter earnings, though the results have largely been supported by unsustainable items such as reserve releases and fees from the Paycheck Protection Program, said Brad Milsaps, an analyst at Piper Sandler.
“You get past those things, and it’s still a tough revenue environment,” Milsaps said. “Bankers are looking to M&A to find growth. I think it’s going to be a strong year for deals.”
“All the drivers for deal activity are firmly in place,” said Damon DelMonte, an analyst at Keefe, Bruyette & Woods.
To be sure, not all banks with the means to pursue deals are ready to make something happen.
Zions Bancorp. in Salt Lake City is among the bank that is more intent to focus on organic growth and internal improvement, at least for now.
“I wouldn’t count anything out, but it’s not something that we’re out actively trying to pursue,” Harris Simmons, the $85 billion-asset company’s chairman and CEO, said during a recent earnings call. Deals are “is not a high priority for us right at the moment.”
Zions would prefer to see the economy gain more traction, and rising interest rates would make executives more receptive to pursuing deals that would expand the company’s balance sheet.
“If we see some modest increase in interest rates, that could put us in a much better position to be thinking about” acquisitions, Simmons said. “That’s how I’d characterize where we are.”
Synovus Financial in Columbus, Ga., is prioritizing organic growth and share repurchases as part of its capital management strategy, said Kevin Blair, the $55 billion-asset company’s president and chief operating officer.
Blair, who will soon become the company’s CEO, said the Southeast is ripe for organic expansion. He added that Synovus has the scale necessary to pursue opportunities without bank acquisitions.
“We also feel that we’ve been very capable in attracting talent and adding new products,” Blair said during the company’s earnings call. “We also feel like a lot of the reasons that people are doing M&A is to just generate efficiency. And we’ve been doing that internally.”
F.N.B. Corp. in Pittsburgh also has a preference for organic growth, Vince Delie Jr., the $38 billion-asset company’s chairman, president and CEO, said during a recent earnings call.
Executives who are open the acquisitions are cautioning that a number of things must line up before M&A accelerates.
“I don’t want to overplay it, overbill it or oversell it, as there are thousands of circumstances that have to come together to make it work,” Terry Turner, president and CEO of Pinnacle Financial Partners in Nashville, Tenn., said during the $35 billion-asset company’s quarterly call.
“But certainly we’re in a different position than we would have been even six months ago as it relates to M&A,” Turner added.
Simmons First has been able to revive talks that idled for most of last year.
“We’re very active in discussions today,” Makris said. “Many of those were ongoing before COVID hit, so we just picked them back up.”
But Simmons is reluctant to join the list of banks announcing mergers of equals.
Those types of deals “are always tough and they don’t happen overnight,” Makris said.
“The social issues associated with something like that are tremendous,” Makris added. “We’ve been a real beneficiary of some of those MOEs in our ability to hire some really good folks who come over and are making a huge contribution at Simmons. … We’re not in a position where we have any reason to believe we need to downsize the Simmons organization through an MOE.”
Paul Davis contributed to this report.
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