Category: conferences

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Experience FinXTech As We #WFH

WASHINGTON, DC — By the time the NFL announced plans to host the draft from various remote locations, nearly every other sports league had postponed or canceled their events.

The decision raised eyebrows.

The NFL draft has become a must-attend in-person event, as evidenced by the record-breaking 600,000 turnout in Nashville, Tennessee, last year. As a fan, I wondered if the league was putting their own interests too far ahead of others by going forward with a new, unproven format just to keep to this activity on the calendar.

It turns out, the digital nature of the three-day event resonated in many positive ways. The draft was viewed by 55 million viewers over the three-day event, according to the league. Naturally, some of the viewership reflected an appetite for new, non-pandemic related content. But from a business perspective, it showed how migrating an in-person event entirely online could, in a pinch, work.

As we all try our best to live normal lives from our homes, the NFL’s success with the draft gives me confidence in our decision to go remote with our annual Experience FinXTech.

Much as the NFL drew a great audience to Music City last year, so too were we excited to welcome a stellar audience to Bank Director’s hometown in early May. Just as the NFL figured out how to provide viewers with new glimpses into their team’s futures, so too will our Experience FinXTech as we move online. Ours will just be in terms of how and where financial technology companies and financial institutions might develop relationships that beget future successes.

Experience FinXTech parallels the NFL draft based on the concept of team-building. Just as every NFL franchise faces its own challenges, so too does every financial institution. Indeed, the ever-expanding digital chasm between the biggest banks and community institutions remains a major strategic challenge in terms of talent, tools and dollars spent.

While there is no one-size-fits-all approach to building a team, there are lessons that executives and leadership teams might entertain from their peers during a program like this one. Indeed, we have heard and seen incredible examples of community banks pulling together to serve their constituents as best they can, however they can, during this time. This program allows us to share examples.

Bank Director’s desire to help community banks succeed in all circumstances provides an impetus for moving to video and webinars instead of waiting until the late fall to meet in person. Helping banks and fintechs get smarter about immediate opportunities to develop meaningful relationships is incredibly relevant. The time is now to assess a business strategy and make decisions that could reshape your institution’s future. Access to timely, verified and reliable information is something we didn’t want to delay in providing.

Indeed, Experience FinXTech will touch on areas where technology can assist banks to provide counseling, assistance and a personal touch to their existing and potential customers. In addition, we talk about authentication. The need to embrace the cloud. Filling in the missing pieces in the digital commercial banking product set.

Beginning on May 5, we take a pragmatic approach to new business relationships, collaborations and strategic investments. We offer virtual demonstrations to help viewers see proven technologies available to banks with regards to security, data and analytics, internal systems, lending, digital banking, payments, compliance and the customer experience.

With so many elements of our economy being challenged, we know our “next normal” will look very different from what we’ve become accustomed to. Connecting interests, and ideas, to help banks and fintechs navigate their futures is why we ultimately decided to offer this year’s experience online, for free, to anyone interested in joining us.

I look forward to welcoming people to this year’s Experience FinXTech and promise that references to certain NFL teams will be kept to a minimum.

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Thanks to the support of these companies, we are able to extend complimentary registration for Experience FinXTech. To sign up, please click here.

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On the Horizon for Bank CEOs, Their Leadership Teams and Boards

WASHINGTON, DC — Can community banks out-compete JP Morgan, BofA and Wells Fargo?  This is the elephant in the room awaiting 853 bank executives and board members — representing 432 Banks — at our upcoming Acquire or Be Acquired Conference.  The lights don’t officially come up on our 25th annual event at the JW Marriott Phoenix Desert Ridge until Sunday, January 27.  So in advance, three big questions I anticipate fielding in the desert.

Does 2019 Become the Year of BigTech?

As noted by H2 Ventures and KPMG, Amazon is providing payment services and loans to merchants on its platform, while Facebook recently secured an electronic money licence in Ireland.  Alibaba, Baidu and Tencent have become dominant operators in China’s $5.5 trillion payments industry.  Add in Fiserv’s recent $22B acquisition of First Data and Plaid’s of Quovo and we might be seeing the start of a consolidation trend in the financial technology sector.  Will such investments and tie-ups draw the attention of big technology companies to the financial services industry?

Has the window to sell your bank already closed?

When I heard the rumor that BBVA might be buying UK-based Atom Bank — one of the proverbial European challenger banks — I started to look at acquisition trends here in the U.S.  Case-in-point, we put together the following graphic in December for BankDirector.com

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We know that some community banks have been holding out hopes of higher pricing multiples or for a strategic partner.  These institutions might find the window of opportunity to stage an exit isn’t as open as it was just a few years ago. This doesn’t mean the window has shut — but I do think an honest assessment of what’s realistic, at the board level, is appropriate.

Wither the bond market?

A NY Times op-ed piece  posits that the bond market reveals growing cracks in the financial system.  Authored by Sheila Bair, the former chairwoman of the FDIC, and Gaurav Vasisht, director of financial regulation at the Volcker Alliance, it warns that “regulators are not doing enough to make sure that banks are prepared.”  While the duo calls for thicker capital cushions for big banks and tighter leveraged loan underwriting standards, I wonder how executives joining us in Arizona feel about this potential threat to our economy?
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As the premier bank M&A event for bank CEOs, senior management and board members, Bank Director’s 25th annual Acquire or Be Acquired Conference brings together key bank leaders from across the country to explore merger & acquisition strategies and financial growth opportunities. If you’re joining us in the desert, I’ll share a few FYIs later this week. If you’re unable to join us in Phoenix, AZ, I’ll be tweeting from @aldominick and using #AOBA19 when sharing on social platforms like LinkedIn.

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An Early Look at the 2019 Acquire or Be Acquired Conference

Quickly:

  • Bank Director’s 2019 Acquire or Be Acquired Conference takes place next January 27 – 29 at the JW Marriott Phoenix Desert Ridge in Phoenix, AZ.  To register, click here.

WASHINGTON, DC — As the last few hours of July tick by, our team continues to build towards next winter(!) and the premier bank M&A event for CEOs, senior management and board members: Bank Director’s annual Acquire or Be Acquired Conference. This special event brings together key bank leaders from across the country to explore merger & acquisition strategies, consolidation trends and financial growth opportunities.

Earlier this year, we welcomed 1,200+ to the Arizona desert — and anticipate a similar audience when we return a week before next year’s Super Bowl. We’ve recently added a lot of new information on January’s program to BankDirector.com; if you’re interested to see what we’re planning, I invite you to take a look.

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In addition to Acquire or Be Acquired, I am really excited to host two conferences before we return to the desert.  On September 10-11 at the Four Seasons Hotel Chicago, we host our very popular Bank Board Training Forum.  This two-day program provides bank directors with the education and training needed to address the issues and challenges facing them in today’s ever competitive, highly regulated and rapidly evolving banking and financial services industry.

From November 5 – 7, at the Four Seasons Resort & Club Dallas at Las Colinas (a short hop from DFW airport), we convene Bank Director’s annual Bank Compensation & Talent Conference to focus on the recruitment, development and compensation of a bank’s most essential talent.  While in Dallas, leading advisers share their perspectives on building and supporting the best teams by providing first-hand information on the strategies and plans being used by successful banks today.

If you’re interested in any of these three exceptional programs, you can learn more here.

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Trending Topics from CBALive!

Quickly:
  • A few quick-hit thoughts from this week’s CBALive! conference, where I spent the past three days engaged in conversations about consumer behavior and emerging digital initiatives.

ORLANDO, FL — When the Former Director of the National Security Agency and the Central Intelligence Agency says that the private sector needs to step in and take more responsibility for cyber safety and protection, it is a lede I dare not bury.

To paraphrase General Michael Hayden, now a Principal at The Chertoff Group, nation-states like North Korea and Iran pose major challenges to the fabric of our financial industry.  The Russians, though, remain in a class of their own.  As he explained, their focus on information dominance, not just cyber dominance, reflects a coordinated and concentrated fight to control the American public’s perceptions. As the recent presidential election proved, their ability to create “information bubbles” gives them a weapon with which to hurt companies’ reputations in addition to using other cyber hacking techniques to corrupt an institution’s data or to steal money.

While many bank boards have a tight pulse on their organization’s cybersecurity preparedness, Gen. Hayden made clear that the U.S. government views cyber as a new domain of warfare (alongside the traditional domains of air, sea, land and space).  Whether they want to or not, banks of all sizes form the cavalry that needs to ride to the country’s rescue as the cyber threats continue to proliferate.

Gen. Hayden discussed our virtual vulnerabilities and the real risks for our country during his afternoon’s keynote presentation at the Consumer Bankers Association CBALive! conference at the Hilton Orlando Bonnet Creek.  In addition to these remarks, I made note of three key issues that tie into their conference theme of “beyond the bank:”

The race to grow deposits continues.

The digital presence and marketing efforts of the biggest banks in the U.S. continue to enable them to acquire an outsized share of consumer and commercial relationships.  Given that deposits proved the big theme at our Acquire or Be Acquired Conference, I made note of Novantas‘ perspectives as they apply to community banks trying to grow and compete.  Given their involvement with financial institutions — the firm provides information, analyses and automated solutions designed to improve revenue generation — they believe acquisitive banks must apply the same discipline to evaluating a potential acquisition bank’s deposit portfolio as they historically have given to the lending book.  As they shared in a white paper, “the importance of such rigor has increased with higher rates: the low-rate banks of yesterday can wind up with unattractive deposit positions tomorrow.”

Artificial intelligence remains the ultimate buzzword.

Alistair Rennie, General Manager, Solutions at IBM Watson Financial Services opined on the promise of machine learning and artificial intelligence, highlighting the intersection of digital, offline and social identity data as a means to improve enterprise-wide visibility into regulatory and internal compliance controls.  As he shared, cognitive technologies promise to fundamentally change how banks identify customer behaviors and patterns. Personally, I found his most interesting point for bank leadership came from his first audience-specific question (*see the image that leads off today’s post).

Can you really “own” the customer experience?

Forgive me if you caught me rolling my eyes during presentations that began with “banks need to own the customer experience,” especially when delivered as if a novel approach to business.  Marketing 101 starts with a basic premise: know your customer — and give them what they want.  So when looking for the characteristics of disruption that might strengthen a relationship, I liked this particular tweet:

While we covered a lot of ground, these three thoughts accompany me on my flight home to D.C.  My thanks to Richard Hunt and his team at the CBA for inviting me and our CMO, Michelle King, to join them in Orlando.  The CBA represents America’s retail banks and does a great job bringing together some of the biggest institutions in the U.S. to address issues such as these.  If you’re not following Richard on Twitter, his handle is @cajunbanker and for the CBA, check out @consumerbankers.

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Three Things to Know About the Digital Delivery of Financial Products and Services

Quickly:

  • Technology continues to reshape what it means to lead, to innovate and to offer in terms of financial goods and services.

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech.

WASHINGTON, DC — It is no secret that financial institutions are in a race to figure out how and where innovative technologies can help win and keep loyal customers, improve operational efficiencies and enhance their overall cyber-security measures.  While we might disagree on how fast changes will occur, can we all agree that the ever-expanding expectations for the digital delivery of products and services will dramatically impact banking’s future?

I put this not-quite-rhetorical question out in advance of our annual Acquire or Be Acquired Conference at the Arizona Biltmore.  Indeed, the technological shifts taking place in this industry are significant, and I anticipate quite a few conversations about what our “digital future” might look like.  In the spirit of sharing information and ideas prior to this Sunday’s presentations, this video surfaces a few areas I think a bank’s board needs to pay closer attention to.

If you’re interested in following conversations that focus on issues like these during Acquire or Be Acquired, I invite you to follow me on Twitter via @AlDominick, check out what the team shares through @BankDirector plus our @Fin_X_Tech platform and search & follow #AOBA18 to see what the social shares with (and by) our attendees.

*This video — which is normally available only through our special bank membership program — foreshadows several presentations at Acquire or Be Acquired.  It also tees up our FinXTech Annual Summit.  Held the past few years at the NASDAQ’s MarketSite in NYC, we’ve partnered with Promontory Interfinancial Network to best explore opportunities to generate top line growth and bottom line profits through partnerships, collaboration and investments. Held at The Phoenician in Scottsdale, AZ on May 10th and 11th, I invite you to take a peek at the recently updated agenda.

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The Intersection of Leadership and Profitability

By Al Dominick, CEO of DirectorCorps — parent co. to Bank Director & FinXTech

Quickly

  • Key takeaways from one of my favorite summer banking events, Crowe Horwath’s Bank Leadership and Profitability Improvement Conference.

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This morning, on the first of my two flights from Washington National to Monterey, California, I learned that Walmart customers might soon be able to get installment loans for big-ticket items through Affirm, a San Francisco-based FinTech I first wrote about in 2014 (For Banks, the Sky IS Falling).  Per the Wall Street Journal, the companies reportedly are nearing an agreement on a pilot program.  This potential partnership caught my eye as I prepared for today and tomorrow’s conference.  Indeed, relationships like these make clear that when it comes to growth and efficiency, the digital distribution of financial goods and services is a significant issue for the banking industry.

This idea took further shape when I walked into the conference center at the Inn at Spanish Bay.  Immediately upon entering the room, I found John Epperson, a partner at Crowe and Jay Tuli, senior vice president retail banking and residential lending at Leader Bank, sharing their opinions on partnership strategies involving banks and FinTechs.  From the stage, they touched on increasing net interest margins via improved pricing strategies on commercial loans, approaches to streamline mortgage application processes, ideas to reduce staff counts for loan administration processes and how to improve customer experiences through online rent payment solutions.

Their perspectives lined up with those we recently shared on BankDirector.com.  To wit, “many banks have realized advantages of bank-FinTech partnerships, including access to assets and customers.  Since most community banks serve discreet markets, even a relatively simple loan purchase arrangement can unlock new customer relationships and diversify geographic concentrations of credit.  Further, a FinTech partnership can help a bank serve its legacy customers; for instance, by enabling the bank to offer small dollar loans to commercial customers that the bank might not otherwise be able to efficiently originate on its own.”

Of all the difficult issues that bank leadership must deal with, I am inclined to place technology at the top of the list.  Banks have long been reliant on technology to run their operations, but in recent years, technology has become a primary driver of retail and small business banking strategy.  John and Jay simply reinforced this belief.

In addition to their thoughts on collaboration, this afternoon’s sessions focused on ‘Liquidity and Balance Sheet Management,’ ‘Fiscal Policy During Regulatory Uncertainty’ and ‘Managing Your Brand in a Digital World.’  While I took note of a number of issues, three points really stood out:

  • Yes, banks can make money while managing decreasing margins and a flat yield curve.
  • Asset growth without earnings growth is a concern for many because of loan pricing.
  • How a CFO sets a target(s) for interest rate risk may start with an “it depends” type response — but gets nuanced quickly thereafter.

Finally, I’m not holding my breath on the industry receiving regulatory relief any time soon.  I get the sense many here aren’t either.  But it would be nice to see some business people brought in to run various agencies and I’m looking forward to the perspectives of tomorrow’s first guest speaker, Congressman John Ratcliffe.

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My thanks to Crowe Horwath, Stifel, Keefe Bruyette & Woods + Luse Gorman for putting together this year’s Bank Leadership and Profitability Improvement Conference at The Inn at Spanish Bay in Pebble Beach, California.  I’ll check in with additional takeaways based on tomorrow’s presentations.

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Opportunities Abound at Acquire or Be Acquired

#AOBA17 conference intel (Monday)
By Al Dominick, CEO of Bank Director | @aldominick

Quickly

  • Earnings pressures, regulatory/compliance costs + the impact of technology will continue to make it more difficult for banks to compete and be profitable, which will continue to generate consolidation.
  • The increase in stock prices and capital raising activity is likely to provide an additional catalyst for M&A in early 2017
  • Raising capital is an immediate and viable option for most banks today

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Here at Bank Director’s annual Acquire or Be Acquired conference, it is clear that to maximize shareholder value, a bank’s leadership must not only plan for the future but also take advantage of today’s opportunities.

For those interested in following the conference conversations via social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and its @Fin_X_Tech platform, and search & follow #AOBA17 to see what is being shared with (and by) our attendees.

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Trending at Bank Director’s Acquire or Be Acquired Conference

#AOBA17 conference intel (Sunday)
By Al Dominick, CEO of Bank Director | @aldominick

Quickly

  • We could see over 200 merger transactions despite a declining number of banks in 2017.
  • There is a clear trend on M&A pricing multiples being driven by bank profitability and asset quality.
  • For banks, too little capital is not the only issue — too much capital and the inability to produce sufficient returns on capital is equally problematic.

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What is my bank worth?  How will the changing tax environment affect bank values?  When is the right time to buy (or sell) a bank?  What are the most significant factors affecting bank value?  These were just some of the questions surfaced this morning here in Arizona.  In this video recap of Sunday morning’s presentations at Bank Director’s Acquire or Be Acquired Conference, I share a few observations about the conversations taking place around issues such as these.

Given the focus of this three-day event, I anticipate many subsequent presentations building off of these points.  For those interested in issues such as these, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector and its @Fin_X_Tech platform, and search & follow #AOBA17 to see what is being shared with (and by) our attendees.

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Look At Who Is Attending Acquire or Be Acquired

In just 20 days, we raise the lights on our 23rd annual Acquire or Be Acquired Conference.  This is Bank Director’s biggest event of the year, one primarily focused on banking’s “great game” — mergers and acquisitions.  My team has spent considerable time and energy developing a spectacular event focused on growth-related topics that range from exploring a merger to preparing for an acquisition; growing loans to capturing efficiencies; managing capital to partnering with fintech companies.  To see the full agenda, click here.

Widely regarded as one of the banking industry’s premier events, we have more than 1,000 people registered to attend AOBA later this month — an all-time high.  We couldn’t do this alone, and over the course of these 2 ½ days, executives from many of our industry’s leading professional services firms and product companies share their perspectives on “what’s now” and “what’s next.”  I invite you to take a look at all of the corporate sponsors joining us:

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As I shared in a recent post, bank executives and their boards face some major issues without clear answers.  Before heading out west, I’ll share more about the banks (and 660+ bankers) joining us at the JW Marriott Phoenix Desert Ridge Resort & Spa.  Until then, I invite you to learn more about the companies supporting this conference by hopping over to bankdirector.com. To follow the conversations happening around this conference on Twitter, I’m @aldominick and we are using #AOBA17.

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Banks Have to Grow to be Competitive

As I reflect on my time at Bank Director’s Growing the Bank conference, I can’t shake the fact that many banks across the United States continue to struggle to grow their deposits and/or expand asset bases.  What follows is a piece authored by Tim Melvin, a gifted writer who joined us at the Four Seasons outside of Dallas.  Tim specializes in value investing and has written numerous articles in various publications on the subject of value investing, the stock market and the world around us.  With his permission, I’m sharing his perspectives on our event.

I just returned from the Bank Director 2016 Growing The Bank Conference in Dallas and I have to say it was one of the more interesting meetings I’ve attended this year. This conference covered everything from the 30,000 foot view of the rapidly changing banking industry to the nuts and bolts of day-to-day stuff and I came away with an even deeper appreciation of the industry and the opportunity.

The threats and potential posed by what are commonly known as Fintech companies was heavily featured during the two-day event. Nobody is quite sure if they’re friend or foe yet and there was a lot of wary circling like a road weary cowboy and an unsure Indian trying to decide to break bread together or lock hands on throats. Mobile and cybersecurity were also topics on everyone’s minds, as both are going to play an enormous role in deciding if a bank grows or withers away to obscurity.

Closer Look At Fintech

The Fintech discussion was perhaps one of the most interesting of the meeting. While banks may see some of the Fintech lenders like LendingClub (NYSE: LC), Sindeo and On Deck Capital (NYSE:ODNK) are seen as a real threat to traditional lenders, I think we will find that it’s not as big a threat as we might currently think.

The first time we have a credit hiccup or recession, these lenders will find out just how important to success a core deposit-based funding source can be. When markets dry up in the bad times, investors aren’t going to as easy a source of funds as they are in the current benign and yield starved markets. I think what’s far more likely to happen is the technology that allows for high-speed decision making, easier underwriting and razor focused marketing will end up being sold to the banks to improve their offering.

As Steven Hovde of the Hovde Group warned the crowd in Dallas, “Fintech and banks are going to end up marrying up. It’s the only way you are both going to survive. If you think you can do it on your own, you are sadly, sadly mistaken.”

Naomi Snyder, the editor at Bank Director, put a little differently when she wrote an article for the magazines website following the conference: “The tech companies have something many banks lack: innovative products and simple, customer-friendly digital solutions for a changing world. Meanwhile, the banks have some things many of the tech companies lack: actual customers and a more stable funding base.”

Although the fast-moving high tech kids of Fintech and the stuffy old bankers may at first appear to be as mismatched, as James Carville and Mary Matalin may need to find a partnership that has worked out as well as theirs has. They may not initially like each other but they need each other.

Mobile Banking

I think Dave Defazio of Strategycorps scared a lot of community bankers when he talked about the future of mobile banking in his session. He pointed out the tremendous lead that the bigger banks have in this space and the competition from apps like Apple Pay, Venmo and other apps that, to be honest, I’ve never even heard of before but are increasingly popular for managing finances and making payments among the millennial set. For folks who think the ATM and drive-up window are newfangled innovations the world of mobile banking is a bit frightening. What makes it even more frightening is that if you don’t compete well in the mobile space, you won’t retain the next generation of customer. They expect everything to be done on the fly and right now using mobile devices.

The millennial customer is just different. The use their mobile device to pay for their Starbucks (NASDAQ: SBUX), pay their share of the bar tab, watch movies, read books, pay bills and manage their finances. Apparently you can even use an app to collect your boarding pass, as I found out after running out of the bar after the first day to get to the business center and print out my boarding pass exactly 24 hours before takeoff. When I returned and expressed my disappointment at getting a B slotting on Southwest (NYSE: LUV) I was told that I should just get the app to avoid this in the future.

I didn’t even know there was an airplane app, but now I can count myself among the airplane app aristocracy thank to my slightly younger and far more tech savvy friends at Bank Director.

I caught up with Defazio on Tuesday morning and we chatted a bit more about the challenges and opportunities of mobile banking. He told me over coffee, “Banks are not just competing against other banks’ mobile apps, but instead against the very best apps on the planet, apps like Uber to Amazon (NASDAQ: AMZN) to Waze. Customer expectations are very high, and banks must make it their mission to have an app that people can’t live without. Community banks must do a better job of responding to changes in customer behaviors and expectations. The big banks have raced out to a big lead. The time is now for banks to go beyond transactions and do a better job of connecting with their customers’ mobile lifestyles. In particular, I’m seeing the big banks add mobile tools that assist people with their shopping tasks. They know that helping people save a dollar is just as good as helping them make a dollar of interest.”

I chatted with several bankers and the discussion of mobile frankly scares many of them. One banker said if this is the future of banking, then community banking is just dead. I think he overstated the case, but community banks are going to have to aggressively look for partners like Strategycorps to build and offer a much better mobile experience. Those that can’t, or don’t want to, should consider hanging out the for sale sign right away as they simply won’t be competitive in the future. They can probably get a better multiple in a deal now than in a few years when deposits are bleeding out to more mobile sensitive banks at a rapid rate.

Steven Hovde gave a talk on the search for efficiency in the industry. Hovde is an investment banker serving community banks, a majority owner of several smaller banks and is part owner of a real estate development company that borrows from banks so he sees all sides of the industry. He pointed out that the more efficient a bank is the higher then returns on assets and the higher valuation of the institutions stock. Both of these make for happier shareholders. He said the best way to gain efficiency in the banking industry today is to grow the size of the bank.

Right now, we have historically low net interest margins, growing regulatory costs and a huge need to spend money on technology, especially in mobile and cyber security. GDP growth is slow and there are no real signs that it will improve dramatically anytime soon. The loan markets are increasingly competitive and the regulators are focusing on the one area where community banks had an edge, commercial real estate. It really is a “grow or die” world and the majority of banks need to get to $1 billion in assets to quit operating in survival mode and the $5 billion level to thrive in the current economy.

The best way to grow remain via mergers and acquisitions. Hovde told us, “As the regulatory environment becomes increasingly difficult to maneuver for smaller banks, we expect deal activity for smaller institutions to continue as they search for greater efficiencies.” While this is not necessarily great news for bankers running smaller banks, it’s good news for me as bank stock investor and I continue to seek out and buy smaller publicly traded banks.

That’s A Wrap

The Growing the Bank Conference is more of a nuts and bolts, but I walked away with two overriding insights. First banks must look to partner with or even buy the innovative aggressive fintech companies. They cannot compete with them without disastrous consequences so they must partner with them. For their part, most of the fintech competitors need the banks and their large customer base and deposit funding. It may be a shotgun wedding in some cases, but nuptials will be needed for both to survive and thrive.

My second takeaway is that although it sounds like a slogan, “Grow or Die” is a real thing. To thrive in today’s difficult markets, banks need to grow to at least that $5 billion asset level. With the exception of a few niche small town and rural banks the $1 billion asset level is really needed just to be a viable competitor. The best way to grow in a slow growth economy is to buy smaller banks or engage in a merger of equals that increases returns for the ban, as well as shareholders. All of this is good news for us as small bank investors.

The Trade of the decade in community bank stock rolls on.

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To read more of Tim’s work on Benzinga, click here and to follow Tim on Twitter, his handle is @timmelvin.

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Takeaways from Commerce Street Capital’s Banking Conference

Insight and ideas come from many sources; today’s reflect my day at Commerce Street Capital’s 14th annual Bank Conference at the Four Seasons Resort and Club Dallas (home of the Byron Nelson golf tournament — hence today’s picture).

Commerce Street chose “The Sky’s the Limit” as this year’s theme — so I will play off of the investment banking firm’s message and keep my takeaways at a 30,000 foot level:

  • Dory Wiley, the President & CEO at Commerce Street Holdings, opined that while community banks have great insight into local economies, the elephant in the room that will help or hurt financial institutions are macro-level U.S. economic issues… which are in turn influenced by world issues.  As he shared, indications are 2016 will be volatile based upon weakness in the U.S & world economy and various issues of world political instability.
  • The stock market’s volatility traces to global and political events, which, in combination with slow earnings growth, puts the year’s return at potentially just 3% to 5%.  But for bank stocks, Dory and his team see the potential to outperform the market due to current earnings trends.
  • Sticking with the stock market, when it comes to bank IPOs, I’m hearing that bank offerings could open up gradually with rising rates and proven earnings growth.
  • In terms of earning trends, an interesting reminder that the Southwest has outpaced and continues to outpace the rest of the U.S. consistently in terms of ROAA and ROAE.
  • C.K. Lee, Managing Director at Commerce Street Capital, noted that the number of months between the past four U.S. recessions averages out to 95 months. 81 months have passed since the Great Recession and credit crisis, with GDP Growth Rate showing “signs of resistance.”
  • Specific to bank M&A, 2015 accumulated $26.6B in deal value compared to $18.8B in 2014. So far, 2016 has seen $6.6B in announcements.
  • When it comes to proverbial ‘Merger of Equal’ opportunities, the numbers typically make sense — but when it comes to social issues, there is always a struggle.  Still, these types of deals (regardless of what you call it) can solve for strategy and succession.

Finally, the idea that pricing is often a deal-breaker in bank M&A came up in several presentations.  As you can see in this short video of Dory Wiley that recently ran on BankDirector.com, while pricing likely won’t rise in 2016, some banks will be better positioned for the best price and, more importantly, the best deal.

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Al Dominick is the President & CEO of Bank Director, a privately held media & publishing company designed around strategically important business issues that a CEO, executive and/or board member(s) need to know — and be prepared to address. An information resource to the financial community since 1991, the company publishes Bank Director magazine every month, host major industry conferences like “Acquire or Be Acquired,” conducts board-level research, provides board education & training programs, runs BankDirector.com… and recently launched FinXTech.  

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Acquire or Be Acquired: Don’t Overlook This

Thanks to our keynote speaker, J. Michael Shepherd, pictured above. The Chairman & CEO, Bank of the West and BancWest Corporation, he inspired quite a few with both his wit and wisdom.

Over the past few days at Bank Director’s annual Acquire or Be Acquired conference, various speakers have touched on a number of key strategic growth issues.  From exploring an acquisition to growing loans, controlling expenses to managing capital, the discussions hit the “timely and relevant” standard that we consider essential.  They also reinforced my sense that more boards and their management teams are seriously considering an acquisition as their primary growth plan than at this time last year.

As our editor-in-chief opined, the heightened level of interest could certainly be explained by the continued margin pressure that banks have been operating under for the last several years.  For those thinking about buying another, my short video recap from the mid-way point of AOBA offers a heads up about a pre-deal consideration not to be overlooked.

 

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