Midwest banks are leading the way in mergers and acquisition activity in 2017, according to data from S&P Global Market Intelligence.
There are about 41 banks for sale in the Midwest right now, which accounts for 35 percent of U.S. M&A deals. The total Midwest deal value is about $1.4 billion. On average, the selling banks have $245 million in assets.
This is driven by several factors, including the fact that Midwestern states simply have more bank charters than other areas of the country. Wisconsin has 215 bank charters, while Virginia has 80 and California has 176, for example.
Wisconsin banks have completed four transactions this year, according to S&P. In the Midwest, Wisconsin was surpassed by six deals each in Illinois and Nebraska and five in Missouri. Minnesota has also completed four bank M&A deals so far. Kansas, Ohio, Iowa, Michigan, Indiana, Kentucky, South Dakota and North Dakota have each completed three or fewer transactions in 2017.
“There is more consolidation in the Midwest just because there’s more banks,” said Peter Wilder, an attorney in the banking and financial institutions practice group at Godfrey & Kahn S.C. in Milwaukee. “Some people see that as just sort of right sizing the number of charters.”
According to SNL Financial, Midwest bank M&A is particularly hot in metropolitan areas.
“More of the M&A activity is happening in urban areas, so Milwaukee and Madison and that kind of thing,” he said. “A lot of the smaller banks in the rural areas are getting left out this year.”
According to S&P, there were 17 bank deals completed in Wisconsin last year, and 10 in 2015. There has been a rapid increase
in the number of M&A deals among Wisconsin banks
“Banks without good succession plans for executive management, that’s been a piece of it,” Wilder said. “Another piece has been the regulatory burden that’s out there. A third has been the interest rate environment. It’s tougher to make money.”
But in 2017, bank deals have not been happening at the same breakneck pace in Wisconsin.
“Wisconsin and the Midwest, we are sort of leading the way, I’m sure nationally, in the number of transactions. It’s just not as many transactions as the last year or two,” Wilder said. “I think that maybe the banks that really wanted to sell in the current environment have sold already, so there’s just not as many sellers out there.”
In addition, some banks are taking a wait and see approach to the current presidential administration, the potential for regulatory relief and rising interest rates, which can improve their margins, he said.