This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

10 Community Bank M&A Targets, Revisited

Stocks in this article: BXS FMBI TCBI SBCF PNFP MBFI CFNL GBNK OKSB BAC STI RF COF WFC

NEW YORK ( TheStreet) -- The pace of banking industry consolidation has lagged this year. This is no surprise, since so many banks are trading below book value.

According to SNL Financial, there were 105 bank and thrift deals announced this year through Tuesday for a total value of $16.3 billion. While the pace of deals trailed the 207 announced deals in 2010, last year's total value of announced deals was lower, at $12.1 billion. Among deals for which the underlying detail is available, the average purchase price this year has been 110% of the targets' tangible book value, declining slightly from 111% last year.

FBR Capital Markets analyst Brett Scheiner says that "in the near term, whole bank M&A of community banks at big prices is either going to be relatively slow or on hold entirely, as management teams attempt to firm-up their confidence on both their own and potential acquired loan books' credit."

Over the long term, however, it seems likely that the industry's remarkable consolidation over recent decades will continue.

V. Gerard Comizio -- the chair of the Paul Hastings Banking and Financial Institutions practice, in firm's the Washington, D.C., office -- says that "a large number of banks are in strategic planning mode," with major considerations including Basel III capital requirements, which Comizio says are facing increasing resistance from the industry and "the aggregate regulatory compliance burden of the Dodd-Frank Act, which hasn't yet to be felt."

Comizio says "many community banks have determined the regulatory and capital burdens are too much for them," and hints that much larger deals may be coming. Every bank with over $50 billion in assets will be required to submit to the Federal Deposit Insurance Corp. a contingency plan for a quick, orderly liquidation in the event of failure, while bank holding companies are required to submit similar plans to the Federal Reserve. "If the regulators don't accept your living will submission, you could be asked to raise capital or divest assets," he says.

The largest deal announced so far during 2011 is Capital One's (COF - Get Report) agreement to acquire ING Direct from ING Groep (ING), valued at $9 billion, or just over tangible book value. The deal is facing opposition from consumer groups, and after a request from Rep. Barney Frank (D., Mass.), the senior Democrat on the House Financial Services Committee, the Federal Reserve agreed to extend the public comment period preceding the regulator's approval of the deal.

The second-largest largest deal announced this year is PNC Financial Services Group's (PNC) agreement to purchase RBC Bank (USA) from Royal Bank of Canada (RY), for $3.45 billion in cash and stock, which is just below RBC Bank (USA)'s tangible book value, according to SNL.

This year's third-largest announced bank deal was Comerica's (CMA) acquisition of Sterling Bancshares (SBIB), valued at $1 billion, or 230% of tangible book value. The deal closed in July.

The next largest 2011 deal was People's United Financial's (PBCT) agreement to acquire Danvers Bancorp for $489 million in cash and stock. SNL values the deal at 184% of Danvers Bancorp's tangible book value. The deal was completed in July.

Earlier this year, when so many bank stocks were trading much higher, several analysts helped us identify a group of 10 community banks that could be likely targets for acquirers. For the three potential targets identified by Scheiner, the analyst now says "at the current valuations, I can't image that they'd be in a hurry to sell."

The following are updated looks at the 10 community bank targets, by ascending asset size:

1 of 11

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs