Dive Brief:

• Old National Bancorp has agreed to acquire Nashville, Tennessee-based CapStar Financial Holdings for approximately $344.4 million in an all-stock transaction, the companies announced Thursday.
• The deal would give Old National an added $3.3 billion in assets, $2.3 billion in loans and $2.8 billion in deposits, and give the bank a top-10 deposit market share presence in the Nashville metropolitan area. It would also help to expand its footprint in Asheville, North Carolina.
• The deal, expected to close in the second quarter of 2024, has been approved by the board of each company, though regulatory approval and vote of CapStar shareholders are pending, the statement said.

Dive Insight:

“This partnership with CapStar – one of the most highly respected and successful community banks in Tennessee – is a tremendous cultural fit and a natural extension of our growth strategy,” Old National CEO Jim Ryan said in a statement. “By establishing a full-service banking presence in Nashville and several other strong Tennessee and North Carolina communities, we can more fully serve our existing Nashville-area clients while also introducing our client- and community-focused brand of banking to the surrounding region.”

The Evansville, Indiana-based lender entered Tennessee last year, when it established a Nashville-based high-net-worth arm in the city. Old National also recently added a commercial banking and lending team there.

The move aims to help the $49 billion-asset lender achieve faster growth than possible organically, Ryan told analysts, according to American Banker. Ryan views the market as an economic pillar with robust long-term lending opportunities given steady expansion. Nashville could also serve as a platform for broader Southeastern expansion, Ryan added.

Nashville's population is projected to expand by 6% through 2028 — triple the national pace, the outlet noted.

Ryan affirmed that Old National is open to future deals. Talks progressed relatively quickly after CapStar approached the lender this year. Gaining scale and efficiency by joining a bigger institution helped drive the Nashville-based company to the deal, Ryan said, according to American Banker.

Old National is eyeing expansion in the Southeast and the Midwest — closing 13 acquisitions since 2011. In January 2022, the Federal Reserve signed off on its $2.5 billion acquisition of Chicago-based First Midwest. The approval closed despite a lawsuit filed by the Fair Housing Center of Central Indiana in October 2021, alleging Old National discriminated against Black borrowers trying to get mortgages. The case was settled that December.

Bank merger and acquisition activity has been moderate in 2023 due to economic uncertainty stemming from high inflation and interest rates and heightened regulatory scrutiny of M&A under Biden administration directives.

According to S&P Global, the first nine months of this year saw 79 announced bank deals — a significant plunge from 122 in the same period last year. 

However, deals rebounded to 34 in the third quarter — an increase from 20 and 25 in the first and second quarters, respectively.