With its $2.5 billion acquisition of Susquehanna Bancshares, announced on Wednesday, BB&T is taking a significant step to bolster its presence in the Mid-Atlantic region.
But the transaction is also a marker that the lender is willing to turn to acquisitions to help improve its growth, an unusual step given that most larger banks have avoided big deals since the financial crisis. From October of 2008 through last year, the volume of bank mergers has stayed below $51 billion nearly every year except for 2010, a sharp drop from 2004 until the fall of 2008, according to data from Thomson Reuters.
Behind that relative paucity of significant acquisitions are new capital rules imposed by regulators that are meant to ensure that lenders can survive another shock to the broad financial system. Those restrictions have reduced many larger banks’ desire to test regulators’ willingness to approve deals.
Some transactions have been held up by regulatory review. M&T Bank Corporation’s proposed acquisition of Hudson City Bancorp has been delayed by two years, for example.
Yet BB&T, which is based in Winston-Salem, N.C., and oversees $187 billion in assets, has proved willing to turn to acquisitions. It has struck five takeovers so far this year, according to Standard & Poor’s Capital IQ, including the $363 million purchase of Bank of Kentucky Financial announced in September.
But the Susquehanna deal is one of the largest bank acquisitions since the crisis, giving BB&T an additional $18.6 billion in assets and branches in Pennsylvania, Maryland, New Jersey and West Virginia.
On Wednesday, BB&T executives professed little worry that regulators would hold up their latest transaction, despite some objections by the Federal Reserve last year. The lender’s chairman and chief executive, Kelly S. King, told analysts on a conference call that his bank had more than enough capital to underpin its operations even after closing the Susquehanna deal.
“This will not cause us to go backward with regard to our commitment to our regulators with regard to ongoing enhancements,” he said.
Mr. King added that talks with Susquehanna began several months ago, as the smaller bank was shoring up its own capital base and investing in its operations. Those expenses, he suggested, prompted the firm to seek out a bigger partner.
Yet the deal may not necessarily augur a string of other acquisitions by BB&T. Mr. King said on the conference call that any new takeover by his firm would probably not come in the next several months, and potentially not within the next two or three years.
Under the terms of the deal, BB&T will pay 0.253 of one of its own shares and $4.05 in cash for every share of Susquehanna. As of Tuesday’s closing price, the offer is worth about $13.75 a share.
When the deal closes, William J. Reuter, Susquehanna’s chairman and chief executive, and Christine Sears, a director, will join BB&T’s board. BB&T also said it planned to create a $10 million fund to support economic development in Lancaster, Pa., near Susquehanna’s hometown, Lititz.
The deal is expected to ring up about $250 million in one-time costs for BB&T, though it is also expected to result in about $160 million in annual cost savings. Mr. King said that he expected the transaction to close in the third quarter of next year.