August 12, 2010

Merger, acquisition applications rise

The number of Kansas bank mergers and branch acquisition applications this year has exceeded the total number in 2009.

The number of Kansas bank mergers and branch acquisition applications this year has exceeded the total number in 2009.

According to mergers and acquisitions application data from the Kansas Office of the State Bank Commissioner, there were seven applications for bank mergers or branch acquisitions as of July.

That compares with six in all of 2009, according to the same data.

Industry experts said the numbers reflect what generally happens during a bank industry crisis: mergers and acquisitions activity increases.

The reasons for the increase can be many, Rick LeCompte, finance professor at Wichita State University, said.

Some can be driven by regulators gently pushing banks with weak capital to merge with another bank that has stronger capital. In other instances, mergers can occur because a bank's owners no longer want to deal with a new round of regulation that typically comes after a banking crisis begins.

"The regulatory burden on these small banks is onerous," LeCompte said.

Then there are the bank failures that drive mergers and acquisitions such as Thunder Bank in Sylvan Grove, which failed in July and was closed by the bank commissioner. Thunder's branches and assets were acquired by Bennington State Bank in Salina.

That acquisition was not included in the 2010 list.

A bank with borderline capital or troubled loans generally means that the acquiring bank will pay less for the acquisition.

But during a crisis, even healthy banks will command less of a premium in their asking price, said Chuck Marshall, manager of the financial institutions group at accounting and consulting firm Kennedy and Coe.

"I would say reasonable prices but certainly not anything approaching previous highs," Marshall said.

The seven mergers and acquisitions applications for 2010 are:

* Wilson State Bank in Wilson acquiring Hoisington National Bank in Hoisington

* Bank of Commerce in Chanute acquiring First State Bank of Thayer in Thayer

* First Security Bank in Overbrook acquiring the Paola branch of Garnett-based Patriots Bank in Garnett

* The Riley State Bank of Riley acquiring The Farmers & Merchants State Bank in Wakefield

* The Bank of Commerce in Chanute acquiring the Erie, Kan., branch of the Eastern Colorado Bank of Cheyenne Wells, Colo.

* The Citizens State Bank of Gridley acquiring the First National Bank of Le Roy

* The Bank of Protection in Protection acquiring Coldwater Native Bank in Coldwater.

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