QCR Holdings (QCRH) Announces Acquisition of Guaranty Federal Bancshares (GFED) in Cash and Stock Deal
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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 whereby QCR Holdings will acquire Guaranty and merge Guaranty Bank, the banking subsidiary of Guaranty into Springfield First Community Bank (“SFC Bank”), QCR Holdings’ Springfield-based charter. The combined bank will operate under the Guaranty Bank name in all Springfield and southwest Missouri markets.
“Springfield and neighboring Southwest Missouri markets make up a vibrant region where strong relationships with our clients matter. Guaranty Bank strongly aligns with our culture and our dedication to client service,” said Larry Helling, QCR Holdings Chief Executive Officer. “Enhancing our market share in this region supports our strategic goals and enables us to extend our high-performing and profitable niche business lines benefiting clients and shareholders alike.”
Established in 1913, Guaranty Bank currently has 16 banking locations in Springfield, Joplin, Carthage, Ozark, Nixa and Neosho, Missouri, which will expand and complement QCR Holdings’ presence in and commitment to 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 #4 in deposit market share in the Springfield market as of June 30, 2021. Consolidated pro forma total assets as of September 30, 2021 would be $7.2 billion, while 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 that share our core values and business strategy,” said Todd A. Gipple, President, Chief Operating Officer and Chief Financial Officer of QCR Holdings. “The blending of talent and expertise from both SFC Bank and Guaranty Bank, and the increased product and service capabilities of the combined bank, will result in continued strong growth in Springfield and surrounding communities. We are very excited about the opportunities this merger provides.”
Upon completion of the merger, SFC Bank President and CEO Monte McNew will serve as CEO of the combined bank, while Guaranty Bank President and CEO Shaun Burke will serve as President.
“We are delighted to be joining forces with Guaranty Bank to serve our clients and our communities,” McNew said. “This partnership positions us to become the preeminent bank in this market. We look forward to demonstrating the value of this merger to all of our stakeholders by showing how we’re better together.”
“Guaranty Bank has been proud to serve our communities for more than a century,” Burke said. “Joining the QCR Holdings family and the team at SFC Bank is an exciting opportunity for us to expand our product and service offerings while continuing our track record of delivering exceptional client service.”
- Increased Market ShareCombined market share at #4 with $1.4 billion in deposits, based on data as of June 30, 2021, and the opportunity for continued growth. Retaining local charter autonomy will create the second largest locally-managed bank in the community.
- Accelerated Growth OpportunitiesExpansion of QCR Holdings’ niche products and services to new clients provides an exceptional opportunity in the attractive Springfield market. The merger will create important scale and capabilities of a much larger organization.
- Attractive EconomicsStrong QCR Holdings’ EPS accretion of approximately 13% expected in the first full year, 2.75 year tangible book value per share earnback period and accretive to an already strong ROAA.
Terms of the TransactionUnder the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, stockholders of Guaranty will have the right to receive for each share of Guaranty common stock owned, at the election of each stockholder, and subject to proration, (i) $30.50 in cash, (ii) 0.58775 shares of QCR Holdings common stock, or (iii) mixed consideration of $6.10 in cash and 0.4702 shares of QCR Holdings common stock, with total consideration to consist of approximately 80% stock and 20% cash. Based upon the $59.99 closing price of QCR Holdings common stock as of November 5, 2021, the transaction is valued at approximately $152 million. The transaction is subject to regulatory approvals, approval by Guaranty’s stockholders and certain customary closing conditions. The transaction is expected to close in the first or second quarter of 2022.
Excluding one-time merger-related expenses, QCR Holdings expects the transaction to be approximately 13% accretive to earnings per share in 2023, the first full year of combined operations. QCR Holdings also expects to incur tangible book value per share dilution of approximately 5% upon closing of the transaction, with a tangible book value per share dilution earn back period of approximately 2.75 years.
AdvisorsPiper Sandler & Co. served as financial advisor and provided a fairness opinion to QCR Holdings and Barack Ferrazzano Kirschbaum & Nagelberg LLP served as legal counsel.
Keefe, Bruyette & Woods, Inc. served as financial advisor and provided a fairness opinion to Guaranty Bancshares and Sidley Austin, LLP served as legal counsel.
Conference CallQCR Holdings will host a conference call to discuss this transaction on November 9 at 10 a.m. central time. Dial-in information for the call is toll-free 1-888-346-9286. Participants should request to join the QCR Holdings, Inc. call. The event will be archived and available for digital replay through November 16. The replay access information is toll-free 1-1-877-344-7529 (international 1-412-317-0088); access code 10161548. A webcast of the teleconference can be accessed at QCR Holdings’ News and Events page at http://www.qcrh.com. An archived version of the webcast will be available at the same location shortly after the live event has ended. Participants should visit QCR Holdings’ website or call into the conference line set forth above at least 10 minutes prior to the scheduled start of the call.
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