Bank merger activity in November continued the up-and-down monthly pattern that has played out for most of 2022. As before, the bank M&A marketplace is by no means ‘closed for business’ as 2022 has seen more than 160 transactions announced to-date.
By contrast, transaction pricing continued its steady course through November. The median price-to-tangible book and median price-to-earnings (LTM) multiples for 2022 year-to-date through October were 1.57x and 15.1x, respectively, virtually unchanged relative to 2021. Monthly pricing in November was varied as only 3 of the transactions announced in the month publicly disclosed pricing with the price-to-tangible book value (“P/TBV”) on those transactions ranging from as high as 2.03x for a seller in North Carolina to as low as 0.97x for a California-based thrift with a mortgage-focused business model.
In fact, on a monthly median basis, pricing has generally traced an upward trajectory over the course of 2022, at least in terms of P/TBV. This is due, in large part, to the appreciation in the market multiples of publicly-traded banks particularly in Q4 2022.
From here, as market and economic conditions clarify over time, we anticipate significant consolidation in the banking industry in the coming quarters…and years. A backlog of pent-up already-contemplated transactions will play out. Additionally, we anticipate difficult competitive conditions will spur an elevation of both supply and demand: acquirer appetites will increase as a means of offsetting declining margins, tightening loan-to-deposit ratios, and flat-to-flagging loan growth. On the other hand, we suspect seller supply will swell for similar reasons along with the traditional catalysts of liquidity needs and CEO succession.
Finally, on November 9th, Savanna-Thomson State Bank agreed to merge with Fidelity Bank (party advised by Olsen Palmer indicated in bold).
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