Acquisition activity has slowed to a drip, but Chemical Financial (CHFC) in Midland, Mich., is getting ready to act should the floodgates open. 

Chemical filed a $100 million shelf registration earlier this month.  The move positions the well-capitalized company to pounce if it finds a deal that would otherwise require additional equity.

"There haven't been any deals in Michigan so far in 2013, but we think it is going to happen," says Lori Gwizdala, the $6 billion company's chief financial officer. "There was no immediate need to raise capital, but with this sitting on the shelf we are ready should the right opportunity arise."

A "be-ready" strategy fits into a larger theme of bank M&A. Deal activity is slow — perhaps even slower than buyers' expectations. A lack of announcements, however, contrasts significantly from what deal makers say is happening behind closed doors.

"There is a lot of chatter," says John Donnelly, managing director of Donnelly Penman & Partners, a Grosse Pointe, Mich., investment bank. "We are going from speed dating, where everyone is talking, to more formal sit-downs. Buyers and sellers are much more serious today than they have been in a long time."

The disconnect between chatter and deals leaves a lot of room for ambiguity, so being prepared to raise capital is better than raising equity and waiting to deploy it, industry observers say.

Like Chemical, First Interstate BancSystem (FIBK) in Billings, Mont., filed a $160 million shelf registration in May. The prospectus also mentions possible acquisitions.

"It is prudent to have the shelf out there," says Brad Milsaps, an analyst at Sandler O'Neill. "From an investor standpoint, it is better than running the risk of having a bunch of capital sitting there."

Several banks were overcapitalized in 2009 and 2010 and are hunting for ways to use the capital and lower their tangible common equity ratios to around 8% or 9% to normalize returns on equity. Chemical's tangible common equity ratio was 8.1% at March 30.

Though activity has been slow nationwide, Michigan has been especially dry. Despite having a weak economy before the downturn, just 13 banks have failed there. That compares to 56 in Illinois since 2008.

With the exception of FirstMerit's $912 million purchase of Citizens Republic, open-bank deals have been scarce. Citizens Republic's sale closed in April, making Chemical the second-biggest bank based in Michigan.

Chemical has been able to complete a few deals. In 2010 it bought the $840 million-asset O.A.K. Financial in Byron, Mich., for $84 million. Last year it bought 21 branches, including $405 million in deposits and $44 million in loans, from Independent Bank (IBCP) in Ionia, Mich., for $8.1 million.

Chemical is looking for banks statewide, except for the southeast part of Michigan that includes the Detroit area, for acquisitions, Gwizdala says. Chemical doesn't have a target size, she says.

Michigan's economy has also improved drastically; that has also brought challenges to M&A.

"The acquisition market continues to be slower than what we thought it would be," Gwizdala says. "The banks are mostly healthy and well capitalized in Michigan, and I think that is part of the reason we haven't seen a lot of deals."

In mid-May, Oxford Bank in Michigan canceled an agreement to sell itself to Level One Bancorp because of regulatory delays and an improvement in Oxford's health. Though Oxford was adequately capitalized at March 30, it earned $500,000 in the first quarter and had a significant year-over-year reduction in problem loans.

Chemical could also be motivated to stay competitive.

Talmer Bancorp in Troy, Mich., has also upped the ante for buyers. With backers like Wilbur Ross, the $2.2 billion-asset company has $400 million to build a regional franchise. It has bought a few failed banks and last year bought First Place Bank in a bankruptcy sale.

"Chemical has been a force in M&A over the past 12 to 15 years, but Talmer is emerging as a force to be reckoned with, too," Donnelly says.

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