The rebound in bank M&A activity on display through the first three quarters of 2021 relative to the COVID-induced trough in 2020 has been nothing short of substantial. Back in July the cumulative count of annual transactions in 2021 surpassed that of the entire year of 2020. If the current run rate of monthly announcements continues through the rest of the year, 2021 will see more than twice the number of deals of 2020.
A number of challenges continue to drive robust M&A activity. In addition to the “deposit glut” discussed in this space last month, elevated loan competition is also driving consolidation. Both anecdotal and empirical evidence points to excessive competition for quality credits, from banks and non-banks alike. Indeed, non-banks have been increasing their market share of C&I loans over time and now have all but the same share of the market as do banks.
Deal pricing in September was essentially stable month-over-month. The median price-to-tangible book multiple came in at 1.56x in September, slightly above the August median but virtually equal to the year-to-date median. The median price-to-earnings (last-twelve-months) multiple ticked up to 12.1x in the month of September, below the year-to-date median of 15.4x. That said, to refresh an illustrative note, median P/E multiples are temporarily low in optics only, a function of temporarily elevated earnings over the last twelve months (e.g., PPP fees, mortgage revenue, reserve releases, etc.).
Finally, on September 8th, Two Rivers Bank agreed to be acquired by First State Fremont, Inc.; on September 14th, University National Bank agreed to be acquired by Great American Bank; and on September 30th, Dupaco agreed to acquire Home Savings Bank (party advised by Olsen Palmer indicated in bold). Olsen Palmer remains one of the top 3 bank M&A advisors nationwide according to S&P Global, based on the total number of transactions advised upon since 2019.
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