KBRA Financial Intelligence

Slow Start to the Year for Banking M&A

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The number of banking deals has slowed so far this year amid rising interest rates and concerns over a looming recession. Only seven deals have been announced through January 27, well below the pace of about 15-20 deals a month over the last five years.

Bank executives are carefully watching how the aggressive increase in interest rates by the Federal Reserve affects their bottom line. The Fed has raised interest rates by more than 4% since last March and is signaling more rate hikes this year. The higher cost of money is slowing growth across the U.S.

"It’s a buyer’s market,’’ said Lee Burrows, Vice Chairman of Investment Banking at Performance Trust Capital Partners. "Acquirers are going to be much more discriminating about their targets’’ because of the uncertain economic outlook.

The biggest tie-up this month was Louisiana-based First Guaranty Bancshares, Inc.’s purchase of Houston-based Lone Star Bank in an all-stock deal. First Guaranty Bank, which announced the agreement on January 9, will issue shares of its common stock worth $23.67 per share to Lone Star, or about 1.5 x its tangible book value subject to certain adjustments, according to an SEC filing. The combined lender will have $3.2 billion in total assets. FGBI, which has the majority of its 36 branches in Louisiana, picks up Lone Star’s four locations in Texas.

The second largest deal by assets involved Citizens Alliance Bank agreeing to buy Montana-based Granite Mountain Bank. Minnesota-based Citizens Alliance, which has $1.2 billion in assets, announced the acquisition on January 15, picking up about $135 million in total assets. The banks’ representatives expect regulatory approval to be granted this quarter and to close the transaction later this year. Financial terms were not disclosed.

KFI 2022 YEAR-END RECAP

KBRA Analytics recaps 2022 with product highlights, enhancements, and new features for KFI. View our year-end recap here.