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QCR Holdings, Inc. (NASDAQ: QCRH) (“QCR Holdings”) and Guaranty Federal Bancshares, Inc. (NASDAQ: GFED) (“Guaranty”) jointly announced today the signing of a definitive agreement under which QCR Holdings will acquire Guaranty and merge Guaranty Bank, Guaranty’s banking subsidiary into Springfield First Community Bank (“SFC Bank”), a Springfield-based charter of QCR Holdings. The combined bank will operate as Guaranty Bank in all markets in Springfield and Southwest Missouri.
“Springfield and neighboring southwest Missouri markets are a vibrant region where strong customer relationships are important. Guaranty Bank aligns strongly with our culture and dedication to customer service, ”said Larry Helling, CEO of QCR Holdings. “Increasing our market share in this region supports our strategic objectives and allows us to expand our successful and profitable niche businesses for the benefit of our clients and shareholders alike. “
Founded in 1913, Guaranty Bank currently has 16 bank branches in Springfield, Joplin, Carthage, Ozark, Nixa and Neosho, Missouri, which will expand and complement QCR Holdings’ presence and commitment in the region. Guaranty reported approximately $ 1.2 billion in assets and $ 1.0 billion in deposits as of September 30, 2021.
As of September 30, 2021, the combined bank would have approximately $ 2.0 billion in total assets, $ 1.5 billion in total loans, and $ 1.6 billion in total deposits. In addition, the combined bank would rank 4th in terms of deposit market share in the Springfield market as of June 30, 2021. Total consolidated pro forma assets as of September 30, 2021 would be $ 7.2 billion, while that consolidated pro forma loans and deposits would be $ 5.4 billion and $ 5.9 billion, respectively.
“Our M&A strategy has always been about finding the right partners in the right markets who share our core values and our business strategy,” said Todd A. Gipple, President, COO and CFO of QCR Holdings . “The mix of talents and expertise of SFC Bank and Guaranty Bank, along with the increased product and service capabilities of the combined bank, will result in continued strong growth in Springfield and the surrounding communities. We are very excited about the opportunities this merger offers. “
Upon completion of the merger, SFC Bank President and CEO Monte McNew will assume the role of CEO of the merged bank, while Guaranty Bank President and CEO Shaun Burke will assume the role of CEO of the merged bank. will act as chairman.
“We are delighted to partner with Guaranty Bank to serve our customers and our communities,” McNew said. “This partnership positions us to become the leading bank in this market. We look forward to demonstrating the value of this merger to all of our stakeholders by showing how we are better together.
“The Guarantee Bank has proudly served our communities for over a century,” said Burke. “Joining the QCR Holdings family and the SFC Bank team is an exciting opportunity for us to expand our product and service offerings while continuing our experience of delivering exceptional customer service. “
Highlights of the merger:
- Increased market share Combined market share at No.4 with $ 1.4 billion in deposits, based on data as of June 30, 2021, and the opportunity for continued growth. Maintaining local charter autonomy will create the second largest locally managed bank in the community.
- Accelerated Growth Opportunities The expansion of QCR Holdings’ niche products and services to new clients provides an exceptional opportunity in the attractive Springfield market. The merger will create significant scale and capabilities of a much larger organization.
- Attractive economy Sharp increase in QCR Holdings’ EPS of approximately 13% expected in first full year, tangible book value of 2.75 years per payback period per share and accretive to an already strong ROAA.
Terms of the transactionUnder the merger agreement, which was unanimously approved by the boards of directors of both companies, shareholders of Guaranty will be entitled to receive for each common share of Guaranty held, at the option of each shareholder, and subject to pro rata, (i) $ 30.50 in cash, (ii) 0.58775 common shares of QCR Holdings, or (iii) a mixed consideration of $ 6.10 in cash and 0.4702 common shares of QCR Holdings, the total consideration to be approximately 80% equity and 20% cash. Based on the closing price of $ 59.99 of QCR Holdings common stock on November 5, 2021, the transaction is valued at approximately $ 152 million. The transaction is subject to regulatory approvals, Guaranty’s shareholder approval and certain customary closing conditions. The transaction is expected to close in the first or second quarter of 2022.
Excluding one-time expenses related to the merger, QCR Holdings expects the transaction to generate around 13% accretive earnings per share in 2023, the first full year of combined operations. QCR Holdings also expects to experience a dilution of tangible book value per share of approximately 5% at the close of the transaction, with a payback period of tangible book value per dilution of approximately 2.75 years.
AdvisersPiper Sandler & Co. acted as financial advisor and provided a fairness opinion to QCR Holdings and Barack Ferrazzano Kirschbaum & Nagelberg LLP acted as legal advisor.
Keefe, Bruyette & Woods, Inc. acted as financial advisor and provided a fairness opinion to Guaranty Bancshares and Sidley Austin, LLP acted as legal advisor.
Conference callQCR Holdings will host a conference call to discuss this transaction on November 9 at 10 a.m. central time. Dialing information for the call is toll free 1-888-346-9286. Participants should apply to join the call from QCR Holdings, Inc. The event will be archived and available for digital replay until November 16. Replay access information is toll free at 1-1-877-344-7529 (international 1-412-317-0088); pass code 10161548. A webcast of the conference call can be viewed on the QCR Holdings News & Events page at http://www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the end of the live event. Participants should visit the QCR Holdings website or call the conference line listed above at least 10 minutes before the scheduled start of the call.