Columbia Banking System, Inc. ( COLB Quick Quote COLB - Free Report) has announced a merger deal with Sacramento, CA-based Bank of Commerce Holdings , the holding company for Merchants Bank of Commerce. The all-stock deal, valued at nearly $266 million or $15.72 per share, is expected to close in the fourth quarter of 2021. Since the announcement last week, shares of Columbia Banking and Bank of Commerce have rallied nearly 1% and 7.6%, respectively. The transaction has been approved by board of directors of both the companies. It is still subject to approvals of Bank of Commerce’s shareholders and the regulators. The deal marks Columbia Banking’s foray into California market and will be accretive to its earnings. Clint Stein, the company’s president and CEO, said, “We are delighted to welcome Merchants Bank of Commerce clients and employees into the Columbia Bank family, extending our footprint beyond the Northwest and into California.” Additionally, president and CEO of Bank of Commerce and Merchants Bank of Commerce, Randy Eslick stated, “We are pleased to embark on the next chapter for Merchants Bank of Commerce in partnership with Columbia. Our companies share a common set of cultural values that serve as the foundation of our commitment to our clients and the communities we serve.” Deal Terms & Financial Benefits
Under the terms of the transaction, Bank of Commerce shareholders will receive 0.40 shares of Columbia Banking common stock for each share of Bank of Commerce. Thus, following the closure, Bank of Commerce shareholders will own roughly 9% of the combined company.
Also, the combined company will have more than 150 branches and $19 billion in assets as well as $10.7 billion in loans across Washington, Oregon, Idaho and California. All locations will continue to operate under the Merchants Bank of Commerce brand name and as a division of Columbia Banking following the merger. Notably, Eslick will continue to lead the division as president. Now talking about the financial benefits, the deal is expected to be 3% accretive to Columbia Banking’s earnings in 2022 and 4% in 2023. Additionally, it is projected to result in $10.6 billion of pre-tax run-rate cost savings. Of this, 70% is expected to be achieved in 2022 and 100% thereafter. Further, the one-time merger cost of $19.1 million is anticipated to be incurred. Our Take
At the time when low interest rates continue to hurt banks’ revenue growth, inorganic expansion efforts seem to be right choice. Further, over the years, Columbia Banking has expanded through acquisitions. These have not only led to top-line improvement, but also expanded footprint and supported diversification.
Over the past six months, shares of Columbia Banking and Bank of Commerce have gained 15.1% and 53.7%, respectively, compared with the industry’s rally of 37.3%. Six-month Price Performance Image Source: Zacks Investment Research
Currently, Columbia Banking carries a Zacks Rank #2 (Buy) and Bank of Commerce has Zacks Rank of 3 (Hold). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Other Banks Taking Similar Steps
Given the tough operating backdrop and rise in technology costs, mergers have been on the rise.
Farmers National Banc Corp. ( FMNB Quick Quote FMNB - Free Report) has entered into a merger agreement with Cortland Bancorp Inc. for $124 million. The cash-cum-stock deal is expected to close in fourth-quarter 2021. In an effort to become a premier agriculture lender in Wisconsin, Nicolet Bankshares, Inc. ( NCBS Quick Quote NCBS - Free Report) has entered into an agreement to acquire County Bancorp, Inc. for $219 million. Closing of the deal, subject to shareholder and regulatory approvals, and other customary closing conditions, is expected in fourth-quarter 2021. Bitcoin, Like the Internet Itself, Could Change Everything
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