The month in M&A: Fifth Third's solar play, UBS snags robo advisor

February 1, 2022 12:10 PM

It’s been a quiet start to the year for bank M&A, and that may be no surprise given the signals Washington policymakers have been sending about applying more scrutiny to bank mergers. Until regulators provide more clarity on what their updated merger review policies might look, M&A activity is likely to be tepid, bankers and other industry watchers say.

Only a handful of bank mergers have been announced since Jan. 1, and most were so small that they didn’t even show up in Securities and Exchange Commission filings. The largest was announced on Jan. 19, when Bank First in Manitowoc, Wisconsin, said it is buying Denmark Bancshares in Denmark, Wisconsin, for $119.5 million.

Still, some big names did make merger news in January. It wasn't a bank acquisition, but Fifth Third Bancorp announced that it’s buying a consumer lender that finances solar panels and other home improvement projects at the point of sale. Meanwhile, a fintech backed by Walmart said it is buying two other fintechs that, together, will help the retail giant further expand its reach into financial services. Here’s a look back at the month’s most noteworthy deals.

Bank First in Wisconsin buying in-state rival

Continuing its roll-up of small Wisconsin banks, Bank First in Manitowoc has struck a deal to acquire Denmark Bankshares for $119.5 million in cash and stock.

The deal, announced Jan. 19, would be the fourth for the $2.9 billion-asset Bank First since 2017. Its most recent acquisition was in May 2020, when it bought Timberwood Bank in Tomah, Wisconsin.

Denmark Bancshares, the parent of Denmark State Bank, has $688 million of assets, $479 million of loans and seven branches in northeast Wisconsin. Bank First has 23 branches across nine counties in central and eastern Wisconsin.

The purchase price is equal to 175% of Denmark’s book value. Hovde Group and Alston & Bird advised Bank First. Piper Sandler and Godfrey Kahn advised Denmark.

UBS acquiring Wealthfront for $1.4 billion

Arguably the highest-profile deal struck in January was UBS Group’s announced acquisition of the robo advisor Wealthfront.

The Swiss banking giant announced on Jan. 26 that it is paying $1.4 billion for Wealthfront, which was founded in 2008 and now has some $27 billion of assets under management and about 470,000 clients in the U.S. It would be the first major acquisition for CEO Ralph Hamers, who took the helm in September 2020.

"Wealthfront complements our core business in the U.S., providing wealth management to high net worth and ultra-high-net-worth investors through trusted relationships with financial advisors, and will enhance our long-term ambition to deliver a scalable, digital-led wealth management solution to affluent investors,” Hamers said in a news release announcing the deal.

The sale is expected to close in the second half of this year.

Fifth Third buying solar energy lender

U.S. banks largely stayed on the sidelines in January. An exception was Fifth Third Bancorp, which announced on Jan. 19 that it is buying the renewable energy lender Dividend Finance.

Founded in 2013, Dividend Finance works with contractors to offer point-of-sale loans for solar panels and other home improvement projects. It primarily targets borrowers with prime or superprime credit scores.

The deal would continue a trend of banks buying point-of-sale lenders focused on home improvement. In recent months, Goldman Sachs struck a deal to acquire the fintech GreenSky, Truist Financial purchased Service Finance Co., and Regions Financial bought EnerBank USA.

Walmart-backed startup acquiring two fintechs

It was only a matter of time before Walmart made a big splash in financial services.

Over the past year, the retail giant struck a partnership with a venture fund that invests in fintechs and brought former Goldman Sachs executive Omar Ismail to run its financial services arm, all with an eye toward developing more financial products and services.

Then last week Hazel, a fintech backed by Walmart, announced that it is buying two California fintechs that primarily target low- and moderate-income consumers. Sacramento-based One Finance offers payments cards, savings tools and financial education to customers while Even Responsible Finance, based in Oakland, offers early wage access.

Both deals will allow Walmart to quickly ramp up its financial services offerings for employees and customers.

The companies did not disclose terms of the deals, which are expected to close in the first half of the year. Hazel will eventually be rebranded as One, the companies said.

Civista bulking up in northwestern Ohio

Civista Bancshares in Sandusky, Ohio, is expanding in the northwestern part of the Buckeye State with a deal to buy the parent company of The Henry County Bank for roughly $50.2 million in stock and cash.

The $3 billion-asset Civista would gain seven branches and expand its commercial banking business into the Toledo market. Comunibanc Corp., the $329 million-asset parent of The Henry County Bank, has roughly $276 million of core deposits and $165 million of total loans.

The deal, announced Jan. 10, is expected to close in the second quarter.

Two of Baltimore's oldest banks combining

In what would be just the second bank acquisition in its 114-year history, Rosedale Federal Savings & Loan Association in Baltimore has struck a deal to acquire hometown rival CBM Bancorp for $64.4 million in cash.

The deal, announced Jan. 28, would create a bank with roughly $1.3 billion of assets and 14 branches in and around Maryland’s largest city.

It would also combine two of Baltimore’s oldest financial institutions. The $1.1 billion-asset Rosedale was founded in 1908, while CBM’s banking unit, Chesapeake Bank of Maryland, was founded in 1913.

Rosedale, which made its first-ever acquisition just five years ago when it purchased Midstate Community Bank in Baltimore, could be eyeing other deals as well. “Evaluating opportunities in our marketplace has been part of our strategic plan for some time; now we have the opportunity to seize on an interesting time for local banks,” President and CEO Kevin Benson said in a news release.

The sale is expected to close in the first half of this year.

Performance Trust Capital Partners LLC is serving as Rosedale’s financial advisor, and Luse Gorman is its legal counsel. Piper Sandler is serving as CBM’s financial advisor, and Jones Walker is its legal counsel.