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Branch swap: New M&A model? Or just one-off?

Jury’s out on early 2016 proposal

Can there be a better way to restructure than traditional M&A? Can there be a better way to restructure than traditional M&A?

Earlier this year, First Community Bancshares Inc., based in Bluefield, Va., and First Bancorp, based in Southern Pines, N.C., announced a branch swap to take effect in the third quarter. The deal calls for First Community’s bank unit, First Community Bank, to get seven branches in Virginia owned by First Bancorp’s bank unit, First Bank. In exchange, First Bank will pick up six First Community branches in N.C. All deposits and certain loans will transfer along with the buildings. 

Is this a one of a kind deal? Or an idea with legs? Views are mixed.

“It’s a very savvy idea,” says community bank investor Joshua Siegel. “It makes more sense than spreading yourself out across the map like in a game of Risk.”

“I think deals like that will become more common,” says Alston & Bird LLP partner Mark Kanaly. The appeal lies in obtaining exactly what the bank wants. But such deals would not offer the benefits that consolidation and reduction of costs would bring. “Nobody’s really looking for new brick and mortar,” says attorney Jeff Gerrish of Gerrish McCreary Smith. But a net-zero deal can have some appeal.

Still, Collyn Gilbert of Keefe, Bruyette & Woods is skeptical: “It’s part of a last-ditch effort to make branches work.”  [Read more about Gilbert’s view on branches in “Branches as excess baggage”]

Read main article, "M&A: Waiting at the crossroads"

This article originally appeared in the April-May Banking Exchange magazine. Read the article in magazine format.

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