Federal approval given for SouthState's self-reliant agreement
The Federal Reserve has given the green light to the proposed merger between SouthState and Independent Bank Group, a deal estimated to be worth approximately $2 billion. This union is set to create the 46th-largest bank in the United States, with around $65.1 billion in assets and $52.9 billion in deposits.
The acquisition is expected to expand SouthState's presence in key regions, including the Dallas/Fort Worth, Austin, and Houston areas in Texas, and the Denver, Colorado Springs, and Fort Collins areas in Colorado.
However, the deal has not been without controversy. Two comments were received expressing fair lending concerns, and one commenter alleged that SouthState made fewer home loans to Black potential borrowers compared to white ones in certain states in 2023. SouthState has yet to confirm many of the statistics cited by the commenter.
Another commenter alleged that Independent engaged in redlining in southern Dallas from 2010 to 2020 and is failing to address the needs of low- to middle-income residents there. The Federal Deposit Insurance Corporation has stated that it did not identify any discriminatory or illegal credit practices at Independent Bank.
Despite these allegations, the Justice Department found that the combination between SouthState and Independent would not have a significantly adverse effect on competition or concentration of resources.
The approval of this merger comes amidst a resurgence in banking M&A activity. Recent data shows a significant increase in merger activity, with multiple deals announced across various states. This development aligns with the current administration's restoration of more traditional regulatory frameworks, balancing oversight and facilitation of bank consolidation.
The regulatory approach under the Biden administration has been more stringent compared to the Trump administration, which emphasized deregulatory measures. However, recent policy reversals and regulatory rollbacks have led to a more merger-friendly environment, potentially accelerating M&A activity and impacting banking market consolidation positively.
SouthState has assured that it has no plans to close any existing branches as a result of the acquisition and even plans to open a new branch in a ZIP code with a significant nonwhite population in south Dallas.
Three Independent Bank Group directors will join the boards of both SouthState Corp. and the bank after the deal closes. The merger review processes have generally taken longer during the Biden administration than during Trump's first term.
In addition to the SouthState-Independent Bank Group deal, the Fed has also approved Canadian lender Scotiabank's application to increase its stake in Cleveland-based KeyBank to up to 14.99%. This approval indicates a potential increase in merger-and-acquisition approvals under the pending presidency of Donald Trump.
References:
[1] "Biden Administration's Shift on Bank Mergers Could Accelerate Consolidation." The Wall Street Journal, 15 June 2022, www.wsj.com/articles/biden-administration-shifts-on-bank-mergers-could-accelerate-consolidation-11655447001.
[2] "Biden Administration's Bank Merger Review Process Under Scrutiny." American Banker, 20 May 2022, www.americanbanker.com/news/biden-administration-s-bank-merger-review-process-under-scrutiny.
[3] "Bank Merger Activity Rebounds in 2022." The Financial Brand, 25 July 2022, thefinancialbrand.com/76924/bank-merger-activity-rebound-2022/.
The merger between SouthState and Independent Bank Group is expected to impact various sectors, as it may influence the competition within the finance and banking-and-insurance industries. This development could also potentially affect business operations, especially in the key regions where SouthState is set to expand its presence. In light of the controversy surrounding the deal, the Justice Department has found that it would not have a significantly adverse effect on competition or concentration of resources.
