pundits and industry executives for decades have all but promised that a
consolidation wave would occur and forever alter the competitive
landscape. While not considered a “wave,” there were 280 whole bank and
thrift deals announced in 2015 compared with 283 transactions in 2014.
However, 83 transactions were announced during the fourth quarter of
2015, which marks the second highest quarterly total since the
pre-recession first quarter of 2007. Perhaps more compelling is that
the deal volume for 2015 represents potential elimination of more than
four percent of all banking companies operating since the beginning of
the year. At this rate of consolidation, the number of commercial banks
could decline by as much as 25 percent over the next five years.

Austin Associates continues to remain active in the community bank M&A space. In 2015, Austin Associates ranked sixth nationally for announced transactions among 82 investment banking firms, based on data compiled by SNL Financial. The firm’s 14 deals (13 whole bank and one branch) occurred in nine states and represented a wide swath of sellers’ asset sizes, ranging from $2.8 billion (American Chartered Bancorp) to $22 million (Sidell Bancorp). Austin Associates continues to be experienced in both buy-side and sell-side transactions.

Among other industry M&A takeaways from the deals announced in 2015 are the following:

  • The average price to tangible book value was 144 percent and the median price to last 12 months net income was 22.7. These multiples are modestly higher from 2014 levels.
  • Banking companies with assets greater than $1 billion received higher price to tangible book multiples (190 percent) than sellers with total assets less than $1 billion (136 percent). This premium differential reflects the ongoing impetus to build more scalable business models.
  • Earnings and asset quality continue to be drivers for higher multiples among sellers. Sellers with NPAs of less than one percent attained a median price to tangible book of 159 percent; in addition, sellers with ROEs greater than 10 percent attained median price to tangible book multiples of 189 percent. Both are substantially greater than average multiples for 2015.

If you wish to discuss M&A trends or have any questions about the attached data, contact Austin Associates’ investment banking team.