Acquire or Be Acquired – Sunday Recap

The most successful banks have a clear understanding and focus of their market, strengths and opportunities.  One big takeaway from the first full day of Bank Director’s Acquire or Be Acquired Conference (#AOBA14 via @bankdirector): it is time for a bank’s CEO and board to reassess their strategic opportunities.

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thanks to Keith Alstrin of Alstrin Photography

90 Second video recap

Looking for profitability cures

From the strategies and mechanics behind transactions to the many lingering questions regarding industry consolidation, economies of scale, regulatory burdens and how to build long-term value, today featured some pretty fascinating presentations.  One of the common themes from the afternoon sessions: most bankers are looking to cure profitability challenges through some kind of M&A activity.

How much are you worth
Whether buying, selling or simply growing organically until it’s time for a transaction, a bank’s leadership team needs metrics in place to know and grow its valuation.  As we heard today, valuation is a controversial and complex subject.  To wit: it requires an in-depth understanding of a company, its market and competitors, financial and non-financial information.  In addition, factors such as the legal and regulatory environment proves quite a challenge.

Trending topics
Overall, the issues I took note of where, in no particular order: margin compression, deposit funding, efficiency improvements and business model expansion in the context of the current environment. Also, keep an eye on the the Northeast and greater Atlanta area this year for increased merger and acquisition activity.

More to come from the Arizona Biltmore tomorrow…

FI Tip Sheet: Great Bank CEOs (part 2)

“You know who’s good” might be one of my favorite conversation starters… be it talking football or baseball, banking or business, it always interests me to hear who others consider leaders in a particular field or discipline.  As the country’s economic recession gives way to recovery and many more banks return to profitability, quite a few executives have success stories to share.  This week’s tip sheet builds on last week’s post by highlighting three exceptional CEOs that lead publicly traded banks before shifting to the thoughts and opinions of two very talented colleagues.

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(1) In case you missed it, last week’s tip sheet looked at some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.  After I posted the piece, I thought about a number of bankers that could have been included in the $5 to $50Bn summary.  For example, Joe DePaolo, the president & CEO of Manhattan-based Signature Bank, a $19.7-billion asset, NASDAQ-listed financial institution.  He’s led the bank’s growth, from a mere $50 million in assets at its founding in 2001 to close to $20 billion today.

Likewise, Jim Herbert’s work to build First Republic Bank (the bank he founded in 1985 and is listed on the NYSE) deserves praise and recognition.  I shared my thoughts on Jim’s bank after meeting him last year.  For those in the know, First Republic is one of this country’s great banks. Not only is it solely focused on organic growth, it’s also focused solely on private banking. While my conversation with Jim was off-the-record, I left his office convinced its the smarts within, not the size of, a bank that will separate the have’s from the have-nots in the years ahead. Clearly, as new regulations and slim profit margins challenge the banking industry, the skills and backgrounds of the employees who work in banking must change too.

Finally, the co-head of Sandler O’Neill’s Investment Banking group, Bill Hickey, praised Vince Delie – the President & Chief Executive Officer of the 11.7Bn, NYSE-listed FNB Corproration.  According to Bill, Vince “has led FNB through four acquisitions in the last three years and three capital raise transactions… FNB continues to deliver above market returns and has been rewarded with a currency that trades at 245% of Tangible Book Value.”

(2) Before joining out team a few years ago, Bank Director Magazine’s Managing Editor, Naomi Snyder, spent 13 years as a business reporter for newspapers in South Carolina, Texas and Tennessee.  Based on this background, and her current responsibilities, I asked for her thoughts on the qualities and characteristics of a successful bank CEO.  In her words, “some of the CEOs of great banks seem to have leadership qualities without being bullies. I don’t think they hire a bunch of “yes” people who will agree with them as the ship is sinking. They don’t have charismatic personalities at the expense of honesty and ethics.”  She noted that in multiple performance rankings in Bank Director magazine, these banks show some consistent themes. “Great banks differentiate themselves from the competition. They often don’t compete on price but on quality of service, and there is no way to do that without hiring a superior staff and motivating employees to do their best.”

(3) To put some color and context to Naomi’s thoughts, I asked Jack Milligan, the Editor of Bank Director magazine, to share his thoughts on three community bank CEOs that are doing some impressive things.  The qualifier?  Keep ’em “local” — he is in Charlottesville, I’m in D.C. — and close to $1Bn size.  Fortunately for me, Jack accepted my challenge and suggested I take a look at Fairfax, VA-based First Virginia Community Bank (FVC).  Led by Chairman & CEO David Pijor, FVC was “a November 2007 de novo that has grown to $422 million in assets as of December 2013.  Pijor, a veteran of the NOVA banking market, raised $23 million in a little over eight weeks and had the bank up and running in just 11 months.  Granted, this was prior to the subprime mortgage crisis and “Great Depression,” and Pijor has had the advantage of being in one of the strongest banking markets in the country, but the bank’s loans, deposits and capital over the past 7+ years have been impressive all the same. Pijor also did a small acquisition in late 2012 that enabled FVC to expand into neighboring Arlington County. I would expect to see big things out of this little bank.”

Next, he pointed me towards Citizens & Northern Corp., a financial institution based in Wellsboro, PA and led by their Chairman & CEO, Chuck Updegraff.  As Jack shared, “C&N is situated in North Central Pennsylvania, not exactly a banking growth market although the local economy has received a bit of a lift from natural gas exploration in the Marcellus Shale Region. This is just a very well-run bank that makes the most of what its market has to offer, and Updegraff deserves credit for running a very tight ship.  C&N has a little over $1.3 billion in assets and was the top ranked $1-$5 billion bank on Bank Director’s 2012 Bank Performance Scorecard and the 2nd ranked bank in 2013.”

Finally, Jack lauded National Bankshares Inc., an organization that counts James Rakes as its Chairman & CEO.  Per Jack: “if you’ve ever been to Blacksburg, VA – the home of Virginia Tech University and a neighbor of nearby Radford University in Christiansburg – you know that it’s a beehive of activity nestled in the mountains and forests of Southwestern Virginia. At just slightly over $1 billion in assets,National Bankshares is another well-managed bank that takes full advantage of everything its market has to offer – in its case a relatively strong local economy that benefits from having two vibrant universities. Virginia Tech is the 2nd largest public college in the state and is a major research institution. National was the 3rd ranked bank in the $1-$5 billion category in the 2012 Bank Performance Scorecard, and placed 6th in 2013.”

Now, I will tease Jack that he could have talked about a number of fine community banks in the Washington, D.C. area (for example, the Bank of Georgetown, which has grown considerably under the leadership of Mike Fitzgerald, their Chairman, President & CEO).  Nonetheless, his is a good look at those institutions that may not have national brand recognition, but are strong and stable pieces of their local communities.

Aloha Friday!

FI Tip Sheet: Some of Banking’s Best CEOs

Last month on Yahoo Finance, Sydney Finkelstein, professor of management and an associate dean at Dartmouth’s Tuck School of Business, produced a list of the Best CEOs of 2013, one that includes Jeff Bezos of Amazon, Pony Ma of Tencent,  John Idol of Michael Kors, Reed Hastings of Netflix and Akio Toyoda of Toyota.  Inspired by his picks, I reached out to a number of colleagues that work for professional services firms to ask their thoughts on the top CEOs at financial institutions — along with why they hold them in such regard.  What follows in this morning’s tip sheet are myriad thoughts on some of the best CEOs in the business today — broken down into three categories: the “biggest banks” with $50Bn+ in assets, those with more than $5Bn but less than $50Bn and finally, those in the $1Bn to $5Bn size range.

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(1) Top CEOs at financial institutions over $50Bn

The names and logos of institutions over $50Bn — think M&T with some $83Bn in assets, KeyCorps with $90Bn, PNC with $305Bn and US Bancorp with $353Bn — are familiar to most.  Leading these massive organizations are some tremendously talented individuals; for example, John Stumpf, the CEO at Wells Fargo.  Multiple people shared their respect for his leadership of the fourth largest bank in the U.S. (by assets) and the largest bank by market capitalization.  According to Fred Cannon, the Director of Research at Keefe, Bruyette & Woods, John “has created and maintains a unified culture around one brand, (one) that demonstrates strength and stability.  Wells is exhibit #1 in the case for large banks not being bad.”

Similarly, U.S. Bancorp’s Richard Davis garnered near universal respect, with PwC’s Josh Carter remarking “Richard has continued to steer US bank through stormy seas, continuing to stay the course running into the downturn, taking advantage of their position of relative strength, weathering the National Foreclosure issues and managing to avoid being considered part of ‘Wall Street’ even though US Bank is one of the 6 largest banks in the U.S.”

Finally, Steve Steinour, the CEO at Huntington Bancshares, inspired several people to comment on his work at the $56Bn institution.  Case-in-point, Bill Hickey, the co-Head of the Investment Banking Group at Sandler O’Neill, pointed out that since taking the helm in 2009, Steve has led a “remarkable turnaround… Huntington is now a top performer and is positioned to be the dominant regional bank in the Midwest.”

(2) Top CEOs at financial institutions between $5Bn and $50Bn

For banks between $5Bn and $50Bn, Greg Becker at Silicon Valley Bank garnered quite a few votes.  Headquartered in Santa Clara, California, I think they are one of the most innovative banks out there — and several people marveled that it has only grown and diversified under Greg’s leadership.  According to Josh Carter, “what they’re doing is a good example of how a bank can diversify their lending approach while maintaining a prudent credit culture.”  This echoes what Fred Cannon shared with me; specifically, that the $23Bn NASDAQ-listed institution is “the premier growth bank with a differentiated product.”  

Fred also cited the leadership of David Zalman, the Chairman & Chief Executive Officer at Prosperity Bancshares Inc., a $16 billion Houston, Texas-based regional financial holding company listed on the NYSE.  According to Fred, David demonstrates how to grow and integrate through acquisitions that is a model for other bank acquirors.  C.K. Lee, Managing Director for Investment Banking at Commerce Street Capital, elaborated on David’s successes, noting their development “from a small bank outside Houston to one of the most disciplined and practiced acquirers in the country and more than $20 billion in assets. The stock has performed consistently well for investors and the acquired bank shareholders – and now they are looking for additional growth outside Texas.”

Keeping things in the Lone Star state, C.K. also mentioned Dick Evans at Frost Bank.  In C.K.’s words, “this is a bank that stayed true to its Texas roots, maintained a conservative lending philosophy, executed well on targeted acquisitions and a created distinctive brand and culture. As Texas grew into an economic powerhouse, Frost grew with it and Mr. Evans was integral to that success.”

Finally, Nashville’s Terry Turner, the CEO of Pinnacle Financial Partners, drew Bill Hickey’s praise, as he “continues to successfully take market share from the larger regional competitors in Nashville and Knoxville primarily as the result of attracting and retaining high quality bankers. Financial performance has been impressive and as a result, continues to trade at 18x forward earnings and 2.4x tangible book value.”

(3) Top CEOs at financial institutions from $1Bn to $5Bn

For CEOs at banks from $1Bn to $5Bn, men like Rusty Cloutier of MidSouth Bank (“a banker’s banker”), David Brooks of Independent Bank Group (“had a breakout year in 2013”) and Leon Holschbach from Midland States Bancorp (“they’ve not only grown the bank but added significant presence in fee-income businesses like trust/wealth management and merchant processing”) drew praise.  So too did Jorge Gonzalez at City National Bank of Florida.  According to PwC’s Josh Carter, Jorge took over a smaller bank in 2007 “with significant deposit concentrations, large exposures to South Florida Real Estate, weathered a pretty nasty turn in the economy and portfolio value and emerged with a much stronger bank, diversified loan portfolio and retained key relationships.  Jorge has also managed to maintained an exceptional service culture, with a significant efficiency level and has combined relationship driven sales to grow the bank.  Jorge has also diversified the product mix and is one of the few smaller banks that can really deliver on the small bank feel with big bank capabilities.”

In addition, Banner Bank’s CEO, Mark Grescovich, won points for his work at the commercial bank headquartered in Walla Walla, Washington.  Mark became CEO in August 2010 (prior to joining the bank, Mark was the EVP and Chief Corporate Banking Officer for the $24Bn, Ohio-based standout FirstMerit). In Fred Cannon’s words, the transformation “is truly exceptional and Mark accomplished this by encouraging and utilizing a talented team of bankers from legacy Banner.”

Finally, Ashton Ryan at First NBC in New Orleans is one I’ve been told to watch.  Indeed, C.K. Lee shared how “Ryan capitalized on the turmoil in New Orleans banking to turn in strong organic growth, with targeted acquisitions along the way. The bank is recently public and has been rewarded by the market with a strong currency to go with its strong balance sheet and earnings.”

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In addition to the list above, I have been very impressed by Peter Benoist at Enterprise Bank in St. Louis, look up to Michael Shepherd, the Chairman and Chief Executive Officer for Bank of the West and BancWest Corporation and respect the vision of Frank Sorrentino at ConnectOne.  This is by no means a comprehensive list, and I realize there are many, many more leaders who deserve praise and recognition.  Click the “+” button on the bottom right of this page to comment on this piece and let me know who else might be recognized for their leadership prowess.

Aloha Friday!

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