The merger and acquisition deals for the financial sector in February continued at a modest pace, similar to the prior month’s deals. That said, two major long-term industry trends continued to play out.
The first long-term trend, of course, has been bank consolidation. Regional banks continue to eat up smaller community-sized banks to expand their branch networks in more regions while boosting their loan volumes — the best way to grow in this low-interest environment.
The other major trend has been complementary business acquisitions that expand a financial company’s service lines. With the goal of becoming one-stop financial shops, major industry players continued to acquire niche financial companies to expand their service lines to move into more, yet similar, kinds of markets (see Arbor Realty Trust’s acquisition below).
With these trends in mind, let’s go through some of February’s highest profile M&A deals:
Citibank Is the New Costco Buddy, American Express Officially Washes Its Hands
American Express’ 16-year relationship with discount warehouse Costco is scheduled to officially end this summer, and so is the credit card portfolio tied to it. That’s because this month Citibank agreed to buy American Express’ Costco co-brand portfolio to net AMEX an expected gain of $1 billion. With Costco deciding to partner with Citibank and Visa for its new co-branded cards anyway, the credit portfolio acquisition will ensure a smoother transition for the current balance-carrying AMEX co-brand cardholders.
Arbor Realty, Fiserv, Midland States Bank Expanding into New Financial Markets
Long Island-based Arbor Realty Trust agreed to buy the agency platform of Arbor Commercial Mortgage for $250 million, moving the REIT beyond its bridge and mezzanine loans businesses by adding government-sponsored loan origination for multifamily real estate projects into its mix of lending products. Arbor Commercial Mortgage currently serves as Arbor Realty Trust’s manager.
Wisconsin’s Fiserv expanded its digital banking product base for community banks and credit unions after agreeing to buy ACI Worldwide’s consumer financial services business for $200 million.
Illinois’ Midland States Bank moved further into the private banking business after it agreed to purchase $400 million in wealth management assets from Sterling National Bank, which would boost its assets under administration by more than 30% to $1.6 billion. Sterling Bank had originally obtained the wealth management assets — which were mostly Special Needs and Settlement Trusts — after buying Hudson Valley Bank.
Regional Bank Merger Frenzy Continues
Hampton Roads Bankshares, with $2 billion in assets, agreed to buy $1 billion-asset Xenith Bankshares for $107.2 million, which would create the second-largest community bank by deposits in the Virginia Beach/Norfolk/Newport News MSA region and the fifth-largest by deposits in Virginia. The combined company would adopt the Xenith Bankshares holding name and the Xenith Bank brand.
Sterling Bancshares and its $865 million-asset subsidiary Sterling Bank finished its acquisition of Bootheel Bancorp and its subsidiary First Community Bank. The deal, which had originated in the summer of 2015, boosted Sterling’s total assets by 64% and increased its branch network to 10 locations in the St. Louis area.
Pennsylvania-based F.N.B. Corporation completed its Metro Bancorp acquisition, adding Metro’s $3 billion in assets and more than 30 Metro Bank branches in south-central Pennsylvania. The deal merges Metro Bank into F.N.B.’s First National Bank of Pennsylvania subsidiary and nearly doubles F.N.B.’s branch network in central and eastern Pennyslvania.
Not to forget the smaller deals, $1.6 billion-asset NASB Financial agreed to buy $119 million-asset Lexington B & L Financial and its B & L Bank subsidiary for $15.8 million. The deal is expected to close by the end of this June.
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Christian Hudspeth is a company analyst for Dun & Bradstreet, researching and reporting on more than 1,000 banks and financial firms for Hoover’s database subscribers. Before joining Dun & Bradstreet, Christian was a managing editor, senior financial writer and analyst for a financial publishing company. His financial articles have been featured on MSN Money, Business Insider, Nasdaq.com, and several other well-known online publications. Before he was an editor, Christian worked in the commercial banking industry for seven years.