Snapshot for week beginning 14 march. US financial institutions are banking on dealmaking—banking mergers and acquisitions, divestitures, and alternative banking M&A methods—as a recovery strategy from the Covid-19 crisis.
Deal activity in the banking sector slumped 2020, both in volume and reported size. But 2021 is showing light at the end of the tunnel, with the roll out of several Covid-19 vaccines and growing consumer confidence.
Go deeper with GlobalData
Banks are now looking ahead with new-found optimism. This trend is gaining real momentum in the US where banking consolidation is coming back into fashion.
After last week’s WSFS-Bryn Mawr Bank merger, this week’s featured deal is about a bank holding company buying up a community bank to expand its market.
Deal of the week: UBA buys TCNB to gain new market
United Bancorporation of Alabama in Atmore has agreed to buy Town-Country National Bank in Camden, Ala.
The $994 million-asset United said in a press release Tuesday that it will pay $28.5 million in cash for the $126 million-asset Town-Country, with a portion of the consideration paid as a special dividend before the deal is completed.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAs a result of the transaction, TCNB will rebrand as Town-Country United Bank and operate as a separate banking subsidiary under United’s holding company.
Based on TCNB’s December 31, 2020 financials, the transaction represents a Price / Tangible Book Value (adjusted for special dividend) of 1.52x and a Price / Earnings of 15.9x (tax-adjusted).
Expected to close in early third quarter 2021, the transaction remains subject to customary closing conditions including the approval of TCNB shareholders and the receipt of all necessary regulatory approvals.
Adapting to the new normal
As banks recover from the pandemic’s financial and operational impacts, some will need time to reset and reimagine their inorganic growth strategies for the next normal.
Pent-up demand is very high, and the primary drivers for dealmaking remain intact: the pursuit of scale efficiencies, desire to enhance product portfolios, and the need to bolster digital capabilities.
Industry players with a strong reputation and balance sheet and increased asset accumulation in fee-based businesses should be well-prepared to reengage in strategic buying, investing, or partnering opportunities.
Moving forward in 2021
The basic rationale for banking M&A in 2021 may remain the same as in recent years. However, pandemic economics have changed the complexion of the catalysts and the inhibitors.
The most obvious difference is that banks, globally, will likely need to counter strong headwinds to profitability given compressed net interest margins (NIM) from lower rates and lower demand for loans.
Forecasts by global consulting company Deloitte indicate that in the United States, both revenues and net income for US commercial banks won’t bounce back to pre-pandemic levels until 2022.
