We Made it Through 2020, What’s Next?

We Made it Through 2020, What’s Next?

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As we say good-bye (and good riddance) to 2020 and look forward with hope for a brighter and healthier 2021, we remember 2020 as a year of loss. We’ve lost a great number of lives, jobs, and freedoms in the past ten months, but the human spirit is resilient. We have faith that we will emerge from this as we have from every other tragedy that has come before. We extend our deepest sympathies to all who are grieving the loss of a loved one.

In no way do we want to make light of the lost lives, but there is something else that we lost in 2020 that is more our area of expertise.

Only four banks failed in 2020, but during the year we lost more than 160 (mostly community) banks to merger or acquisition. Over 37% had just one or two offices. Many had been around for decades or longer. Some were established in the 19th century, serving generations of their neighbors and friends for well over a century. They survived the Great Depression, two World Wars, and the Great Recession, but saw a merger as the best way to make it through 2020.

Of course, they weren't all community banks. Nor were they all pandemic-related. 4-Star First Horizon Bank, Memphis, TN, for example, announced its intention to acquire Iberiabank Corp. in Louisiana in November 2019. Iberiabank was NOT a community bank, but it was established in 1887. The transaction included $31.7 billion in assets and 192 branch locations and was completed in July.

Other large mergers that did NOT involve a community bank include:

5-Star Southside Bank, NA, Winter Haven, FL acquired South State Bank, Columbia, SC adding over $20.5 billion and 168 branches;

5-Star CIT Bank, NA, Pasadena, CA acquired Mutual of Omaha Bank, NE with over $8 billion in assets;

5-Star Pacific Premier Bank, Irvine, CA acquired Opus Bank also of Irvine, another $8 billion asset bank;

5-Star United Bank, Fairfax, VA bought Crescom Bank, Charleston, SC $6 billion in assets and 74 new branches to its growing empire.

When community banks find like minded merger partners, it’s generally a win-win, unless there are overlapping branch offices, which could result in branch closing and job losses. Here are just a few community banks actively on the acquisition trail:

5-Star Sandy Spring Bank, Olney, MD’s roots go back to the turn of the last century (1900) when it was known as simply First National Bank. In 1972 it took on its first acquisition—Savings Institution of Sandy Spring and changed its name. It made two more community bank acquisitions in the 1990s and then stayed quiet until 2007. Since then, it has made five more acquisitions, including Revere Bank, Laurel, MD this past April.

While Sandy Spring has grown considerably from its humble beginnings, it is still a community bank focusing on DC and the surrounding areas.

Until recently, 5-Star City National Bank of Florida, Miami, kept pretty quiet. However, after acquiring TotalBank, also in Miami, in June of 2018, it took over Executive NB (also in Miami) in October 2020.

City NB of Florida, which touts itself as “Florida’s Big Bank Alternative”, recently sold its downtown Miami headquarters and relocated to Orlando. Already the third largest bank in the state, City NB makes no secret of its plan for continued growth. While it is still a community bank now, all bets are off for the future.

And for our final example, we picked 5-Star Happy State Bank, Happy, TX ...because we like the name and want it to be a Happy New Year. Originally chartered in 1908 as First State Bank, Happy State Bank survived for 96 years without any activity at all. That all changed in 2004—with a new name and two acquisitions. It was a busy year. Between 2006 and 2013 it made three more purchases. Then it went quiet.

Fast forward to 2020 and it acquired two more community banks: the $77 million asset First State Bank in Mobeetie in January and then the $874 million asset Centennial Bank in Lubbock in July. Today, Happy State Bank operates through 59 branch offices scattered across the Lone Star State.

When a community loses its local bank due to an acquisition by a Big Bank, it is apt to suffer consequences. The branch could be divested and familiar faces may be replaced.

However, it may also gain benefits. For example, the struggling 1-Star Gwinnett Community Bank, Duluth, GA, merged its three branches into 5-Star First-Citizens Bank and Trust in February and immediately gained the health of its acquirer. It also became the last in a long line of acquisitions.

Will its three branches get the same attention now that they are part of a coast to coast Mega bank with over 500 other branches and $40 billion in assets? Too soon to tell, but Gwinnett Community Bank had limited options due to a supervisory enforcement action that required it to shape up. It really had no choice.

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