Scrutiny or Not, Big Bank Merger Approved

Scrutiny or Not, Big Bank Merger Approved

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The long awaited acquisition of 4-Star MUFG Union Bank, N.A. (also known simply as Union Bank) by U.S. Bancorp finally closed in December. The combination of the two banks (Union Bank into 4-Star U.S. Bank, N.A.) will still take several months and is currently expected to take place over Memorial Day weekend.

As of June 30, 2022, U.S. Bancorp was already the 8th largest bank holding company in the U.S. with $591 billion in consolidated assets. MUFG Union Bank, with total assets of $125 billion was ranked at #34.

That transaction was on hold after the Biden administration called upon both bank regulators and the Justice Department to more closely scrutinize mergers involving large  and regional banks (JRN 39:01). Others like it were on hold as well.

U.S. Bank and Union Bank passed the added scrutiny, even though the two compete directly in 25 markets (in AZ, CA, OR and WA). Three of the overlapping markets in California will see branches disappear as U.S. Bank has said it will divest one branch in each to mitigate “any potential anticompetitive effects”.

Both U.S. Bank and Union Bank are “well-capitalized” and both have Outstanding CRA ratings, so that part of the approval was easy.

Prior to this merger, the largest bank acquisitions of 2022 included:

E*Trade Bank, Arlington, VA with its $79 billion in assets, which was acquired by 4-Star Morgan Stanley Private Bank, NY;

The $63 billion asset People’s United Bank, Bridgeport, CT merged into 4-Star Manufacturers and Traders TC, Buffalo, NY; and

5-Star First-Citizens B&TC, Raleigh, NC purchased the $48 billion asset CIT Bank, Pasadena, CA.

These three can be found on page 7 along with all other 2022 mergers that increased the acquiring bank’s total asset size by 19% or more. Aside from the three we just mentioned, some others may catch your eye.

Liberty Bank, N.A., Irvine, CA with its 242% asset growth, for example, could raise some eyebrows. 5-Star Liberty Bank, South San Francisco, CA (cert #23754) was actually acquired in August by California First NB, Irvine, CA (cert #35331).

California FNB had already been experiencing robust growth organically, more than doubling in size in the 12 months ended June 30, 2022. When it acquired Liberty Bank, it grew by another 74%, also impressive, but less so than the organic growth. It also took on the Liberty Bank name, adding N.A. to the end. The original charter and FDIC certificate # of California First NB remain unchanged.

5-Star Tompkins Community Bank, Ithaca, NY also stands out for having asset growth of  more than 200%. On January 1, 2022, the holding company of the former Tompkins Trust Company, Tompkins Financial Corporation, merged all four of its member banks together. The survivor, Tompkins Trust, was simultaneously renamed Tompkins Community Bank as its assets grew from $2.5 billion to about $7.8 billion.

The three acquired affiliate banks were:

4-Star Bank of Castile, Castile, NY;

4-Star Mahopac Bank, Mahopac, NY; and

4-Star VIST Bank, Wyomissing, PA.

However, in spite of the name, Tompkins is not, by any definition, a community bank at all. Neither were any of the three affiliates it acquired. Assets of the acquired banks ranged from $1.5 billion - $1.9 billion.

In one day, Tompkins Community Bank’s branch network grew from 12 to 65 and its assets increased from $2.5 billion to $7.8 billion—a 212% increase.

One other curiosity on page 7 that we’d like to point out is 5-Star Seacoast NB, Stuart, FL. Seacoast NB had just 7% growth in its asset size during the first nine months of 2022. Yet, we said the list included all those with 19% or more growth 2022.

Seacoast NB ended calendar 2021 with assets of approximately $9.7 billion. In January 2022 it acquired two small community banks in the state (one across the peninsula and the other just up the road a ways). They were:

Sabal Palm Bank, Tampa, FL with $426.5 million in assets; and

Florida Business Bank, Melbourne, FL, with its $189 million in assets.

Those accounted for the 7% growth.

Then in October, Seacoast acquired two more Florida community banks—each boasting just over $1 billion in assets. They were:

5-Star Apollo Bank, Miami, FL; and

5-Star Drummond Community Bank, Chiefland, FL (near Gainesville).

With these additions, Seacoast now has 92 branch offices up and down the Sunshine state. And while we do not have year-end numbers yet, we do know these acquisitions qualify Seacoast National Bank as one of the top acquirers of 2022.

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