June 15, 2013

Top 10 banks by assets. Profit & M&A recap.

June 15, 2013

Top 10 banks by assets. Profit & M&A recap.

Let’s take a look at some bank news in recent weeks. Although there have been plenty of mergers, the pace is down relative to recent history—primarily because banks are so flush with cash they’re buying their own stock, or paying dividends. Here’s a rundown.

– Union First Market Bank ($4.0B, VA) is buying StellarOne Bank ($3.0B, VA) for about $445mm or a 20% premium to its closing stock price at that date, creating the largest community banking institution in the Commonwealth of Virginia.

– Citizens and Farmers Bank ($987mm, VA) will buy Central Virginia Bank ($387mm, VA) for $855,000 in cash plus pay off $3.3mm in TARP preferred stock.

– First Bank ($6.5B, MO) said it will sell its subsidiary that provides homeowner association services to Union Bank ($96B, CA) for an undisclosed sum.

– NexTier Bank ($516mm, PA) will buy Farmers & Merchants Bank of Western Pennsylvania ($396mm, PA) for an undisclosed sum.

– The parent of Commerce Bank ($22.0B, MO) will buy the parent of Summit Bank ($265mm, OK) for $40.6mm in stock.

– Umpqua Bank ($11.5B, OR) will buy Financial Pacific Holding Corp. for $158mm. Financial Pacific offers equipment lease financing (avg. lease is about $25,000) to small businesses nationwide (vehicles/trailers, medical, computer systems, restaurant and construction) and the portfolio is about $279mm.

– The holding company of Rockland Trust ($5.8B, MA) will buy the holding company of Mayflower Co-operative Bank ($255mm, MA) for $37mm in cash (30%) and stock (70%).

– Wilshire State Bank ($2.8B, CA) will buy BankAsiana ($207mm, NJ) for about $32.5mm.

– Texas Regional Bank ($165mm, TX) will acquire the Border Capital Bank ($162mm, TX) for an undisclosed sum.

– Bank of North Carolina ($2.9B, NC) will acquire Randolph Bank & Trust ($302mm, NC) for $10.4mm in cash and stock.

– The parent company of Mills County State Bank ($225mm, TX) will buy the parent company of The First National Bank of Hico ($46mm, TX) for an undisclosed sum.

But not everything has been rosy lately in bank deal land…

– Oxford Bank ($266mm, MI) said it has terminated its agreement to be acquired by Level One Bank ($519mm, MI) due to an improving financial picture and regulatory delays in the process.

– Regulators closed another of Capitol Bancorp’s banks, shuttering 1st Commerce Bank ($20.2mm, NV) and sold it to Plaza Bank ($438mm, CA). Plaza gets 1 branch, assumed all deposits and entered into a loss share transaction on $12.2mm of assets.

– Regulators also closed Mountain National Bank ($437mm, TN) on Friday and sold it to First Tennessee Bank ($25B, TN). First Tennessee gets 12 branches, assumed all deposits except brokered and bought most assets at a discount without a loss share.

– Old National Bank ($9.4B, IN) will close 18 branches, as it seeks to improve efficiencies.

– The holding company of Whitney Bank ($13.2B, LA) and Hancock Bank ($6.6B, MS) will close about 17% of its 258 branches, as it seeks to adapt to customer changes and reduce expenses.

– And here’s the FDIC’s failed bank list, much smaller than crisis peak years.

As you can see, there is jockeying in the banks, and the FDIC reported that ccommercial banks and savings institutions insured by it reported aggregate net income of $40.3 billion in the first quarter of 2013, a $5.5 billion (16%) increase from the $34.8 billion in profits that the industry reported in the first quarter of 2012.

This is the 15th consecutive quarter earnings have registered a year-over-year increase.

Increased noninterest income, lower noninterest expenses, and reduced provisions for loan losses accounted for the increase in earnings from a year ago.

Half of the 7,019 insured institutions reporting financial results had year-over-year increases in their earnings. The proportion of banks that were unprofitable fell to 8.4% from 10.6% a year earlier.

Pacific Coast Bankers Bank reports that at the end of 2012, there were 7,083 banks in the U.S. vs. 9,354 at the end of 2002 according to the FDIC (a decline of about 24% over the 10Y period). During the same period, cash balances jumped 70%, securities climbed 46% and loans increased 34%.

SNL Financial reports that as of Q1 2013, the top 10 largest banks and thrifts in the US by assets in order were:

1. JPMorgan Chase ($2.4T)
2. Bank of America ($2.2T)
3. Citigroup ($1.9T)
4. Wells Fargo ($1.4T)
5. Bank of New York Mellon ($356B)
6. US Bank ($356B)
7. HSBC North America ($305B)
8. PNC ($301B)
9. Capital One ($300B)
10. TD Bank US ($223B)

But rates have run up, and analysts are very interested in the impact on banks’ balance sheets. While many assume higher rates will be a positive for the industry some institutions could suffer adverse effects by the actual increase, especially if a particular bank is heavily dependent on mortgage operations for its profits.

Stay tuned
Follow the banks: