24th April 2024

Better business. Better community

Business Industry and Financial

Q4 2023 Regional Financial Services Mergers & Acquisitions Update

Bank mergers and acquisitions (M&A) continued to be slow through the fourth quarter of 2023, wrapping up a historically quiet year for bank M&A. The challenges for bank M&A started early in 2023, with the unexpected liquidity crisis that led to multiple large bank failures. Concerns over the U.S. economy soon took over as the Federal Reserve continued to battle inflation by increasing interest rates, which led to significant unrealized losses on many bank balance sheets.

While the Federal Reserve appears to have pushed inflation lower for the time being—which signals a likely end to rapidly rising interest rates—there continues to be some ambiguity regarding the direction of the U.S. economy in the months to come.

Transaction activity in 2023 was down significantly from the prior year. 2023 saw a total of 92 announced transactions nationwide, which is significantly lower than the 168 transactions announced in 2022.

Pricing for whole bank and thrift transactions in 2023 was lower compared to 2022, with an average price to tangible book value (P/TBV) of 128% in 2023, compared to 155% in 2022. Pricing in 2023 also was lower than the pricing seen pre-pandemic of 158% P/TBV in 2019.

Even after a broad market recovery in the fourth quarter of 2023, stock prices for banks continued to be nearly flat for the year. The Dow Jones U.S. Banks Index (DJUSBK) was up 6.63% at $489.79 for the 12-month period ended December 29, 2023, while the KBW Nasdaq Bank Index (BKX) was down 4.79% at $96.02 in the same period.

While 2024 bank M&A activity is expected to be higher than 2023, a number of factors will have to line up in order to see a recovery at or near the number of transactions seen just a few years ago. Below, we move from the national perspective to a regional look at M&A activity in 2023.

West Region

In the West Region, there have been 11 announced transactions in 2023, which is in line with the 11 transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 170% in the West Region in 2022. Based on the four transactions with pricing data available, P/TBV averaged 108% in the West Region in 2023.

Mid-Atlantic Region

In the Mid-Atlantic Region, there were six announced transactions in 2023, which is less than the 18 transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 127% in the Mid-Atlantic Region in 2022. Based on the five transactions with pricing data available, P/TBV averaged 121% in the Mid-Atlantic Region in 2023.

Midwest Region

In the Midwest Region, there were 39 announced transactions in 2023, which is less than the 71 transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 150% in the Midwest Region in 2022. Based on the seven transactions with pricing data available, P/TBV averaged 130% in the Midwest Region in 2023.

Northeast Region

In the Northeast Region, there were four announced transactions in 2023, which is less than the six transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 149% in the Northeast Region in 2022. Based on the one transaction with pricing data available, P/TBV averaged 116% in the Northeast Region in 2023.

Southeast Region

In the Southeast Region, there were 18 announced transactions in 2023, which is less than the 33 transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 173% in the Southeast Region in 2022. Based on the seven transactions with pricing data available, P/TBV averaged 137% in the Southeast Region in 2023.

Southwest Region

In the Southwest Region, there were 14 announced transactions in 2023, which is less than the 26 transactions announced in 2022. Based on transactions with pricing data available, P/TBV averaged 172% in the Southwest Region in 2022. Based on the three transactions with pricing data available, P/TBV averaged 145% in the Southwest Region in 2023.

If you have any questions or need assistance, please reach out to a professional at FORVIS.

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