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UMB Financial (UMBF) to Buy Heartland Financial in $2B Deal
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UMB Financial Corporation (UMBF - Free Report) and Heartland Financial, USA Inc. (HTLF - Free Report) entered a definitive merger agreement for UMBF to acquire Heartland Financial in an all-stock transaction valued at around $2 billion.
Per UMBF management, “While we have maintained an outstanding pace of organic growth during the past decade, this compelling combination with HTLF marks a truly momentous expansion of all our core services in both existing and new markets. This synergy, along with a like-minded culture and customer approach, is an ideal fit for our business model, our credit and risk profiles, and our associates, customers and communities.”
HTLF is headquartered in Denver, and had $19.4 billion in assets, $16.2 billion in total deposits and $12.1 billion in total loans as of the first-quarter 2024 end. The deal will create a preeminent regional banking company with a 13-state branch footprint.
The deal is expected to result in $215 million of pre-tax one-time restructuring charges.
Deal Terms
Per the terms of the merger agreement, HTLF stockholders will receive 0.55 shares of UMBF’s common stock for each share of HTLF common stock held. This values the deal at $45.74 per share based on UMBF’s closing price of $83.17 on Apr 26, 2024.
With this, former HTLF stockholders will have ownership in around 31% of the combined company. The transaction is subject to customary closing norms, including regulatory approvals and consent by UMB shareholders and HTLF stockholders. The deal is expected to close in first-quarter 2025.
UMBF also plans to raise $210 million in common equity, priced at $75 per share.
Transaction Rationale
UMBF management has noted that the buyout further diversifies its business, adding scale to its consumer and small business capabilities. Also, the deal will add California, Minnesota, New Mexico, Iowa and Wisconsin to UMBF’s existing footprint, thereby creating a presence in the Midwest and Southwest markets. It also strengthens the company’s presence in its existing markets.
This will result in UMBF having $64.5 billion in assets, and increase its retail deposit base by double and private wealth management’s AUM/AUA by 31% to $21.2 billion.
The CET1 ratio is expected to be 10% at the close of the transaction, while cost savings of 27.5% of Heartland Financial’s expense base is expected.
Our Take
The company’s net loan and deposits growth in the last three years (2020-2023) was compounded annual growth rate (CAGR) of 13% and 9.8%, respectively. Also, the rising trend continued in first-quarter 2024. While UMBF’s organic growth story is impressive, the deal is a strategic fit and positions the company well for growth.
This deal will scale the wealth management business, provide meaningful revenue and cost synergies, and create a robust retail banking franchise.
Over the past year, UMBF shares have jumped 43.7% compared with the industry’s rally of 25.3%.
Fulton Financial Corporation (FULT - Free Report) announced the acquisition of substantially all assets and deposits of Republic First Bank (“Republic Bank”) from the Federal Deposit Insurance Corporation. The transaction has been completed following the necessary regulatory approvals.
Republic Bank was seized by U.S. regulators on Apr 26 as it struggled amid a high interest rate regime. This adversely impacted its balance sheet and market valuation, given its high exposure to commercial real estate loans.
For FULT, this strategic move is in sync with the growth plan of doubling its presence in the Philadelphia market. As part of the deal, the company bought assets of $5.2 billion, which includes an investment portfolio of approximately $2 billion, and loans and leases worth $2.9 billion.
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UMB Financial (UMBF) to Buy Heartland Financial in $2B Deal
UMB Financial Corporation (UMBF - Free Report) and Heartland Financial, USA Inc. (HTLF - Free Report) entered a definitive merger agreement for UMBF to acquire Heartland Financial in an all-stock transaction valued at around $2 billion.
Per UMBF management, “While we have maintained an outstanding pace of organic growth during the past decade, this compelling combination with HTLF marks a truly momentous expansion of all our core services in both existing and new markets. This synergy, along with a like-minded culture and customer approach, is an ideal fit for our business model, our credit and risk profiles, and our associates, customers and communities.”
HTLF is headquartered in Denver, and had $19.4 billion in assets, $16.2 billion in total deposits and $12.1 billion in total loans as of the first-quarter 2024 end. The deal will create a preeminent regional banking company with a 13-state branch footprint.
The deal is expected to result in $215 million of pre-tax one-time restructuring charges.
Deal Terms
Per the terms of the merger agreement, HTLF stockholders will receive 0.55 shares of UMBF’s common stock for each share of HTLF common stock held. This values the deal at $45.74 per share based on UMBF’s closing price of $83.17 on Apr 26, 2024.
With this, former HTLF stockholders will have ownership in around 31% of the combined company. The transaction is subject to customary closing norms, including regulatory approvals and consent by UMB shareholders and HTLF stockholders. The deal is expected to close in first-quarter 2025.
UMBF also plans to raise $210 million in common equity, priced at $75 per share.
Transaction Rationale
UMBF management has noted that the buyout further diversifies its business, adding scale to its consumer and small business capabilities. Also, the deal will add California, Minnesota, New Mexico, Iowa and Wisconsin to UMBF’s existing footprint, thereby creating a presence in the Midwest and Southwest markets. It also strengthens the company’s presence in its existing markets.
This will result in UMBF having $64.5 billion in assets, and increase its retail deposit base by double and private wealth management’s AUM/AUA by 31% to $21.2 billion.
The CET1 ratio is expected to be 10% at the close of the transaction, while cost savings of 27.5% of Heartland Financial’s expense base is expected.
Our Take
The company’s net loan and deposits growth in the last three years (2020-2023) was compounded annual growth rate (CAGR) of 13% and 9.8%, respectively. Also, the rising trend continued in first-quarter 2024. While UMBF’s organic growth story is impressive, the deal is a strategic fit and positions the company well for growth.
This deal will scale the wealth management business, provide meaningful revenue and cost synergies, and create a robust retail banking franchise.
Over the past year, UMBF shares have jumped 43.7% compared with the industry’s rally of 25.3%.
Image Source: Zacks Investment Research
Currently, UMBF sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Inorganic Growth Move by Another Bank
Fulton Financial Corporation (FULT - Free Report) announced the acquisition of substantially all assets and deposits of Republic First Bank (“Republic Bank”) from the Federal Deposit Insurance Corporation. The transaction has been completed following the necessary regulatory approvals.
Republic Bank was seized by U.S. regulators on Apr 26 as it struggled amid a high interest rate regime. This adversely impacted its balance sheet and market valuation, given its high exposure to commercial real estate loans.
For FULT, this strategic move is in sync with the growth plan of doubling its presence in the Philadelphia market. As part of the deal, the company bought assets of $5.2 billion, which includes an investment portfolio of approximately $2 billion, and loans and leases worth $2.9 billion.