January 30, 2024 By Calvin Trice in Charlottesville As featured in MergeMarket
Gateway First Bank hopes to buy up to two commercial banks or branches per year, said CEO Scott Gesell.
The bank would like to grow from its base in Jenks, Oklahoma, throughout the state and adjacent ones to eventually become a regional bank, Gesell said.
Gateway would prefer whole institutions with five to 50 branches and is mainly leaning towards larger targets, he said.
The company can fund up to USD 1bn in acquisitions off its balance sheet because it is well capitalized and can leverage its mortgage servicing rights, Gesell said.
For any deal larger than that, Gateway is likely to raise additional capital from existing investors through a private placement, he said.
The firm is looking for markets in mostly rural areas that are deposit-rich and loan-poor, Gesell said.
Gateway was formed as a commercial bank in 2018 when legacy company Gateway Mortgage Group merged with Farmers Exchange Bank of Cherokee, Oklahoma.
Gateway’s mortgage businesses brings plenty of loan assets for integrating target banks as it also originates commercial loans, Gesell said. Deposits are “a more challenging piece to master,” he said.
“When you’re building your deposit base one deposit at a time, it takes a long time,” the CEO said.
Multiples for bank assets tend to be 1.25x-1.50x book value, Gesell said.
Gateway has about USD 2.21bn in assets. Its mortgage business originates loans out of 35 states from about 110 locations, he said. The firm sells the loans it originates and retains the servicing rights, Gesell said.
The company’s first acquisition as a commercial bank was for a banking center in Bartlesville, Oklahoma, that it purchased from Regent Bank & Trust.
Gateway has a pipeline of potential acquisitions and expects to close its next one this year, he said. Sellers in rural areas are especially keen on the community impacts of their deals, Gesell said.
Gateway wants to buy into markets in which its lines would do well and is eager to become members of local communities, particularly rural areas, which Gesell believes are under-banked and underserved, he said.
The firm previously had a target that signed a letter of intent (LOI) that backed out of the deal, Gesell said.
Commercial banking competitors include Oklahoma City, Oklahoma-based Mabrey Bank, Bank of Oklahoma, and Regent Bank. Competitors on the mortgage lending side include Cornerstone Bank, Freedom Mortgage , and Guild Mortgage.
Gateway is majority-owned by founder and Oklahoma Gov. Kevin Stitt.
It has about 845 employees.
