Wisconsin leads U.S. in bank acquisitions

Six acquisitions completed in second quarter

There were 60 U.S. bank mergers and acquisitions completed in the second quarter of 2017, and Wisconsin accounted for 10 percent of them. That put the state in the top spot nationally for bank acquisitions, according to a new study from financial data conversion firm Integrated Legacy Solutions.

Coins stacked

ILS analyzed Federal Reserve System data to track all U.S. bank M&A activity between April 2017 and June 2017, during which time there were 6 bank acquisitions in Wisconsin. Florida, Massachusetts and Texas tied for second, with five acquisitions each.

However, overall bank M&A activity is down. There have been 125 bank acquisitions nationwide in the first half of 2017, down from 136 in the first six months of 2016.

And the size of banks involved in the transactions has decreased. The average asset size of acquiring banks has fallen sharply from $19.7 billion in 2013 to $4.6 billion in 2017. Acquired banks also have gotten smaller, falling from average assets of $874 million in 2014 to $261 million in 2017.

“What the data shows is that, contrary to what we might assume, the largest banks aren’t the ones doing most of the acquiring,” said Martin Webster, director of business development for ILS. “In fact, decreases in the asset size of both acquired and acquiring banks demonstrate that M&A activity is becoming an increasingly inclusive and a significant growth strategy for mid-sized banks.”

A July report by S&P global Market Intelligence indicated Midwest banks are leading the way in acquisition activity this year.

The middle portion of the country has more small community banks, so it makes sense that Wisconsin, Texas and Florida would lead the way in community bank consolidation, said Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association.

“Calendar year 2016 was a record year for merger and acquisition activity in Wisconsin from the standpoint of announced merger and acquisition activity,” with 21 deals announced and several of those being completed early this year, Oswald Poels said. “This calendar year, 2017, we are at a slower pace and only have five (announced) so far through September.”

The factors driving increased M&A activity in Wisconsin over the past several years have been mostly related to the higher costs associated with advancing banking technology and increased banking regulation, she said.

“Technology costs are really high, consumers want to see and access their bank in any way they choose, so that means banks not only have to be offering online banking on a website, but also mobile banking, P2P banking,” Oswald Poels said. “It’s expected for banks to buy all of that or develop it. Those costs are really growing with no great offset on the revenue side.”

Another factor is aging bank shareholders, she said.

“You’re talking about community banks, typically where you have an aging shareholder base and shareholders are reaching a point where they want to get their money out of the bank,” Oswald Poels said.

She projects between 10 and 12 bank acquisitions will be completed in Wisconsin this year.

There were 60 U.S. bank mergers and acquisitions completed in the second quarter of 2017, and Wisconsin accounted for 10 percent of them. That put the state in the top spot nationally for bank acquisitions, according to a new study from financial data conversion firm Integrated Legacy Solutions.

Coins stacked

ILS analyzed Federal Reserve System data to track all U.S. bank M&A activity between April 2017 and June 2017, during which time there were 6 bank acquisitions in Wisconsin. Florida, Massachusetts and Texas tied for second, with five acquisitions each.

However, overall bank M&A activity is down. There have been 125 bank acquisitions nationwide in the first half of 2017, down from 136 in the first six months of 2016.

And the size of banks involved in the transactions has decreased. The average asset size of acquiring banks has fallen sharply from $19.7 billion in 2013 to $4.6 billion in 2017. Acquired banks also have gotten smaller, falling from average assets of $874 million in 2014 to $261 million in 2017.

“What the data shows is that, contrary to what we might assume, the largest banks aren’t the ones doing most of the acquiring,” said Martin Webster, director of business development for ILS. “In fact, decreases in the asset size of both acquired and acquiring banks demonstrate that M&A activity is becoming an increasingly inclusive and a significant growth strategy for mid-sized banks.”

A July report by S&P global Market Intelligence indicated Midwest banks are leading the way in acquisition activity this year.

The middle portion of the country has more small community banks, so it makes sense that Wisconsin, Texas and Florida would lead the way in community bank consolidation, said Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association.

“Calendar year 2016 was a record year for merger and acquisition activity in Wisconsin from the standpoint of announced merger and acquisition activity,” with 21 deals announced and several of those being completed early this year, Oswald Poels said. “This calendar year, 2017, we are at a slower pace and only have five (announced) so far through September.”

The factors driving increased M&A activity in Wisconsin over the past several years have been mostly related to the higher costs associated with advancing banking technology and increased banking regulation, she said.

“Technology costs are really high, consumers want to see and access their bank in any way they choose, so that means banks not only have to be offering online banking on a website, but also mobile banking, P2P banking,” Oswald Poels said. “It’s expected for banks to buy all of that or develop it. Those costs are really growing with no great offset on the revenue side.”

Another factor is aging bank shareholders, she said.

“You’re talking about community banks, typically where you have an aging shareholder base and shareholders are reaching a point where they want to get their money out of the bank,” Oswald Poels said.

She projects between 10 and 12 bank acquisitions will be completed in Wisconsin this year.

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