Red Bank, New Jersey-based OceanFirst Financial and Salisbury, Maryland-based Partners Bancorp agreed to terminate their planned $186 million merger “after careful consideration ... and the progress made” toward the deal, the banks said in a joint statement Wednesday.
Patrick Barrett, OceanFirst’s CFO, cited regulatory delays for the disintegration of the deal, which the banks announced in November 2021 and initially expected would close by June 2022.
"Everything has just dramatically slowed down," Barrett told American Banker. "The environment for [mergers and acquisitions] is just more challenging."
OceanFirst and Partners wouldn’t be the first banks to call off their transactions this year. Virginia-based Blue Ridge Bank and FVCB called off their tie-up in January, months after the Office of the Comptroller of the Currency (OCC) said it found “certain regulatory concerns with Blue Ridge.” Neither bank, however, attributed the deal’s failure to the OCC findings.
Patriot National Bank and the neobank American Challenger Development Corp. terminated their merger agreement in July, citing “the parties’ expected inability to satisfy certain of the closing conditions to the merger and recapitalization.”
Jacksonville, Florida-based VyStar Credit Union and Georgia-based community bank Heritage Southeast agreed in June to end their merger plans after extending the timeline three times.
More often, time appears at least partially to blame when deals fall apart.
Georgia-based First Century Bank’s parent company in May terminated its proposed merger with Indiana-based First Internet Bank. In that case, the Federal Reserve approved the transaction just ahead of an April 30 deadline, but the banks “could not arrive at a mutually agreeable increased purchase price in exchange for an extension,” First Internet’s CEO said.
As with the First Century-First Internet deal, OceanFirst’s proposal to acquire Partners passed its one-year deadline.
"It just wasn't in the best interest" of either company "without a clear line of sight on a conclusion," Barrett told American Banker, adding that OceanFirst had closed seven acquisitions since 2015. "We had no reason to think the Partners acquisition would be any different," Barrett said.
President Joe Biden in last year ordered regulators to give bank mergers “more robust scrutiny.” The cost to merging banks has been lengthened timelines. That hasn’t stopped several deals from crossing the finish line.
New York Community Bank’s $2.6 billion merger with Flagstar Bank received final approval this month. As did the $5.2 billion transaction between Columbia Banking System and Umpqua Holdings.
Regulators last month approved tie-ups between U.S. Bank and MUFG Union Bank and FNB Corp. and UB Bancorp.
The proposed merger between Allegiance Bank and Community Bank of Texas received Fed approval in September, three weeks after the banks extended their deadline to close.
A tie-up with Partners would have expanded OceanFirst into the D.C. suburbs and given OceanFirst an additional $1.7 billion in assets.
“It was in our best interest to take the risk off the table and focus on our business," OceanFirst CEO Christopher Maher told S&P Global Market Intelligence.
"Our latest conversations indicated that the process would at best likely stretch into 2023," Maher said. "Given the amount of time that we've been working on this ... to take on the additional risk and uncertainty of going through potentially another couple of months of the process, we didn't think it was right for us."
Maher said the bank will now shift its focus from “tactical M&A” and concentrate on expanding its business lines, including commercial lending and corporate treasury accounts. It is also turning its attention to increasing consumer deposits and residential lending, he said.
Partners CEO Lloyd Harrison declined to comment apart from Wednesday’s press release.