COVID-19 has impacted no less that four mergers in the banking sector. In addition, a few others have reportedly been restructured with lower prices or postponed.
Notably, the deal between Texas Capital and Independent was far and away the banking industry’s largest transaction to be cancelled because of COVID-19. However, the crisis also halted the proposed mergers of Nicolet Bankshares and Commerce Financial Holdings in Wisconsin; Suncoast Credit Union and Apollo Bank Miami; and Beach Community Bank and First City Bank of Florida, both in the Sunshine State.
While the companies gave various reasons why the deals were called off, all are linked to the coronavirus pandemic’s impact on the economy.
Observers believe that additional deals will likely fail, with concerns about COVID-19 thwarting new mergers. As a result, it may be some time before any of these affected banks find new partners.
The $3.3 billion pending merger between the $36 billion-asset Texas Capital in Dallas and the $16 billion-asset Independent Bank Group in McKinney, Texas has recently been shut down. Texas Capital saw a first-quarter loss that reflected a large loan-loss provision to cover two energy loans and borrowers’ potential problems in the pandemic.“Due to the unprecedented impact of the COVID-19 pandemic, both companies’ boards … believe it is in the best interests of our employees, clients and all of our shareholders to focus on managing our business during this time,” Larry Helm, Texas Capital’s chairman, said in a press release announcing the termination.
The deal would have formed a $50 billion regional bank in Texas. David Brooks, Independent’s chairman and CEO, was named to lead the combined company.
The banks said that no termination fees will be assessed.
The impact of the COVID-19 crisis has created uncertainty in the energy sector, which has hurt banks that work primarily in that area. Texas Capital lost $19 million in Q1 after recording a $96 million loan-loss provision. The bank earmarked $55 million for two energy loans and $30 million to address possible issues arising from the pandemic.
Keith Cargill resigned as president and CEO of Texas Capital but will stay on as vice chairman until the end of 2020 to help with the transition. Texas Capital said it is working with an executive search firm to find candidates to succeed Cargill. Cargill was planning on giving up day-to-day management of the combined bank if the merger had closed, before COVID-19 cancelled the deal.
Texas Capital said Helm will serve as interim CEO until a permanent leader is brought on. The 72-year-old Helm is a former regional executive for Bank One.“As part of our focus on succession planning, the board believes that it is the right time for a transition in leadership as the company executes a strategy to achieve enhanced operational focus and profitable, long-term value creation,” Elysia Ragusa, chairman of the company’s governance and nominating committee, said in a press release.