Wisc. bank deal is latest sign of a summer M&A surge

In the latest sign that bank mergers are heating up this summer, Bank First Corp. in Manitowoc, Wisconsin, has agreed to pay $174.3 million to acquire an in-state competitor, Centre 1 Bancorp in Beloit.

The all-stock deal, which is expected to close early next year, would push the $4.4 billion-asset Bank First into Northern Illinois while boosting its 2026 earnings by more than 30%.

Centre 1 is the $1.5 billion-asset holding company for the 143-year-old First National Bank & Trust Company, which operates 17 branches in Southern Wisconsin and Northern Illinois. First National reported loans of $1 billion and deposits of $1.3 billion at the end of the second quarter.

The opportunity to put First National’s low-cost excess deposits to work was a prime factor in Bank First’s decision to proceed with the acquisition. The deal, which was announced Friday, is the buyer’s first since it acquired the $654 million-asset Hometown Bancorp in Fond du Lac, Wisconsin, for $124 million in February 2023.

“The combination of our organizations enhances our ability to serve customers across Wisconsin and northern Illinois with greater capabilities and expanded resources,” Bank First Chairman and CEO Mike Molepske said in a press release. 

Coming on the heels of a number of other transactions announced since the start of July, the deal provides another sign that earlier concerns about the disappointing pace of bank M&A are fading. Indeed, in a recent survey conducted by the New York Stock Exchange and the Oliver Wyman Forum, a think tank operated by New York-based management consulting firm Oliver Wyman, more than half of the financial services CEOs queried indicated that they were pursuing acquisitions to build scale. 

A case in point: Home BancShares CEO John Allison said Thursday that his $22.7 billion-asset, Conway, Arkansas-based company intends to pursue a deal to push its annual earnings past the $500 million threshold. “We need to acquire some more assets to get that done,” Allison told analysts. 

“We are presently looking at several opportunities, and we will pick the best of the line to keep the forward progress moving in the positive direction,” Allison said. “The intention is to hopefully have an announcement before the next quarter’s report.”

Home completed its last deal — for the $6.8 billion-asset Happy Bancshares in Amarillo, Texas — in April 2022. A short time later, a sharp increase in interest rates sidelined most acquirers, resulting in a steep drop-off in M&A activity in 2023 and 2024. 

Earlier this year, heightened levels of economic uncertainty, stemming largely from the impact of higher tariffs, appeared poised to frustrate a much-anticipated rebound that was tied to the Trump administration’s less restrictive regulatory posture. But those headwinds have largely dissipated as institutions have grown more comfortable with the administration’s import duty scheme.

July has seen a notable pickup in dealmaking activity. Baton Rouge, Louisiana-based Investar Holding Corp. began the month by announcing plans to buy the $1.5 billion-asset Wichita Falls Bancshares in Wichita Falls, Texas, for $83.6 million in cash and stock. Business First Bancshares, also in Baton Rouge; Sandusky Ohio-based Civista Bancshares; and First Community Corp. in Lexington, South Carolina, also unveiled deals this month.

July’s biggest bank merger came on July 14, when the $202.7 billion-asset, Columbus, Ohio-based Huntington Bancshares struck a $1.9 billion deal to acquire the $13 billion-asset Veritex Holdings in Dallas. The $38.8 billion-asset Prosperity Bancshares in Houston said Friday that it plans to acquire $2.5 billion-asset American Bank Holding Co. in Corpus Christi, Texas, for $321.5 million. 

Banks are growing more comfortable with prevailing economic conditions and appreciate more regulatory flexibility, but the biggest driver behind the gathering spike in M&A is more likely a drive for scale, Brett Mastalli, senior partner and banking practice leader at New York-based West Monroe, told American Banker. 

“A lot of banks are realizing they cannot continue operating with 60%, 65% efficiency ratios,” Mastalli said Monday. “I think there’s a lot of argument around modernization, data, technology and the need to spread out those fixed costs around a larger asset base. Banks are realizing they have to do something, and they haven’t done anything for two years.”

“There’s still 4,000 banks in the U.S.,” Mastalli added. “I wouldn’t be surprised if we get to half that number in the next 10 years.”

For Bank First, the deal announced Friday would result in a $5.4 billion company with $4.6 billion of loans and $4.9 billion of deposits. It would move Bank First from No. 10 in Wisconsin deposit market share to No. 7.

Centre 1 Chairman and CEO Steve Eldred is slated to join the merged company’s board when the transaction closes.

“Joining forces with Bank First allows us to build on a legacy of trust and service while expanding opportunities to care for the communities we serve,” Eldred said in a press release.