M&A pace slowed this year

Relatively high interest rates in 2024 resulted in a slower pace of merger and acquisition transactions, but several large deals were still announced. .As of the end of October, 106 whole bank deals had taken place, far fewer than the 250 deals completed annually from between 2012 and 2019, noted Kirk Hovde, managing principal of the Hovde Group. This year's numbers came after a slow 2023 in which only 96 deals were announced, according to S&P Global Market Intelligence. That was the lowest number since at least 2000 and just more than half the 161 deals finalized in 2022..The number of deals featuring credit union buyers, however, was up. Ballard Spahr Partner Scott Coleman attributed the record number of such acquisitions to credit unions feeling emboldened and desiring a larger asset base. .Three CU-bank deals were announced in January alone in the Upper Midwest. Oshtemo, Mich.-based Advia Credit Union announced its plan to further expand in Illinois by acquiring Chicagoland-based NorthSide Bank. The nearly $3 billion Advia Credit Union is already in the top 3 percent of largest CUs in terms of asset size and has been steadily growing in recent years. .Wabash, Ind.-based Beacon Credit Union announced its pending acquisition of Salem, Ind.-based Mid-Southern Savings Bank. The acquisition, announced in late January, is Beacon's first of a community bank and continues its recent expansion into southern Indiana. Also, Moline, Ill.-based Empeople Credit Union announced its pending acquisition of Lomira, Wis.-based TSB Bank..In April, Sioux Falls, S.D.-based Levo Credit Union announced its plan to acquire a bank branch in Sioux City, Iowa, from Spicer, Minn.-based Heritage Bank. In early June, Grand Blanc, Mich.-based ELGA Credit Union announced its pending acquisition of Florida-based Marine Bank & Trust. .Credit union-bank purchases have been more limited in Minnesota and Iowa due to interpretation of state law that bans CUs from acquiring state-chartered banks, said John Reichert, a shareholder at Milwaukee-based law firm Reinhart. Activity has not slowed significantly in other states. .Regional banks were also active M&A players. In April, Kansas City, Mo.-based UMB Financial announced its pending acquisition of Denver-based Heartland Financial in a $2 billion stock deal. The deal, which is expected to close in the first quarter of 2025, will enable UMB to grow to $64.5 billion with branches in 13 states. UMB's footprint will expand to include California, Minnesota, New Mexico, Iowa and Wisconsin in addition to its existing eight-state coverage area — Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas. .Rosemont, Ill.-based Wintrust Financial Corp., announced its acquisition of Holland, Mich.-based Macatawa Bank Corp., in a $510 million, all-stock transaction. Champaign, Ill.-based First Busey Corp., is expected to grow to a $20 billion bank after its merger with Leawood, Kan.-based CrossFirst Bancshares in a $916 million stock deal. California Bank & Trust, a division of $87 billion, Salt Lake City-based Zions Bancorporation, announced its pending acquisition of four Colorado branches from Lakewood, Colo.-based FirstBank in September. .Coleman described M&A conditions as "choppy" in 2024. He said high interest rates are causing potential buyers and sellers to proceed with more caution. There has been concern in some markets that the commercial real estate market could implode, or whether loans could continue performing in a high interest rate environment..Coleman noted transactions continue to take longer in the negotiation and regulatory approval process. Coleman said the FDIC and OCC have taken a closer look at M&A competitive issues along with safety and soundness concerns. Termination agreements that were sometimes as short as six months have stretched out to nine months. .One deal impacted by regulatory delays this year is Denver-based FirstSun Capital Bancorp's planned acquisition of Seattle-based HomeStreet, Inc. Announced in January, the deal was called off after the Federal Reserve and Texas Department of Banking asked the companies to withdraw their merger applications. .High interest rates on balance sheets created marks on bank securities and loan portfolios, causing a spread on the difference between the price buyers can pay and sellers will accept. Until recently, bank stocks had not been trading at valuations that would have allowed them to use their currency to pay higher premiums..Bank buyers are "few and far between," Reichert noted, but the environment is improving. High interest rates have caused extensive unrealized portfolio losses while many historic buyers either sold or were interested in acquiring their own stock through stock buyback programs rather than pursuing an acquisition..The underpinnings of M&A — succession challenges, burgeoning technology costs and fraud along with achieving scale and shareholder liquidity — were unchanged in the first 10 months of the year, Reichert said. M&A demand remains strong on the sell side, Reichert added. The price of acquiring a bank, though still expensive, is falling because of an excess of sellers..Reichert said four of the last six bank deals they have worked on have involved non-traditional buyers such as broker dealers, mortgage companies or private equity firms with significant resources wanting to secure a bank charter. California mortgage banker Christopher George announced in August that he planned to acquire Lake Mills, Wis.-based Greenwoods Financial Group and subsidiary Greenwoods State Bank. Sioux Falls-based Pathward Financial announced the planned sale of its commercial insurance premium finance business to Delaware-based finance company AFS IBEX Financial Services. Albert Lea, Minn.-based loan servicing company AmeriNational Community Services announced in early October that it had secured approval to acquire Palatine-based Northwest Bancorporation of Illinois and its subsidiary, First Bank & Trust Co. of Illinois.