authored by Al Dominick since 2010
As we head into the final day of Acquire or Be Acquired, its clear to me that there are some great opportunities for community and regional banks to compete effectively and recapture market share in 2016.
*Thanks to our keynote speaker, J. Michael Shepherd, Chairman & CEO, Bank of the West and BancWest Corporation for inspiring today’s title and video.
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.
Throughout the first day of Bank Director’s 22nd annual Acquire or Be Acquired Conference, I found quite a few presentations focused on the emergence of mid-sized regional banks that are growing through the consolidation of smaller banks. Clearly, mergers & acquisitions provide an avenue for some banks to drive improved operating leverage, earnings, efficiency and scale. At the same time, the pressures prompting larger banks to innovate — sluggish loan demand, depressed revenue, higher compliance costs — are the same ones forcing smaller banks to pursue a sale.
By Al Dominick, President & CEO, Bank Director
For those unfamiliar with “AOBA,” this annual event explores issues like the one mentioned above. Since the conference kicked off at 8 AM on a Sunday, this morning’s post shares three short video recaps from my time at the Arizona Biltmore followed by links to recent posts specific to this conference.
In addition to these videos, below are links to four of my posts specific to the event:
If these types of conversations interest you, take a look at what we’re sharing on BankDirector.com. Additionally, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) the 930 men & women in attendance.
I planned to write about a number of banks I was excited to see this weekend at AOBA. But as Steve Jobs once shared “people don’t know what they want until you show it to them.” In this spirit, let me highlight nine banks that I anticipate our attendees will be talking about in Arizona at Bank Director’s annual M&A conference.
In a few minutes, I’ll hop an American flight to Phoenix for this year’s Acquire or Be Acquired Conference. Before I depart the cold and slush of D.C. for some warmth and sun in the desert, this is my take on the banks I anticipate people talking about when we’re all together:
By no means are these all of the banks that will come up in conversation; rather, those that are top of mind.
One final thought before hopping my flight west. The recent volatility in the stock market may be impacting institutions considering a capital raise, IPO or acquisition — but this week’s deal pace is far different then at this time in recent years. The patterns I’m beginning to see is a concentrated effort to get to over the $5Bn asset mark and into that sweetest of spots: the $5Bn to $50Bn asset class. A point I’ll elaborate on in an upcoming post/video.
So if you are interested in following the conference conversations via social channels, I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) our attendees. Safe travels to those 930 men & women joining us this weekend!
You might think every bank CEO I meet wants to talk about buying another institution; truth-be-told, some recognize that tying up with another makes a lot of sense. So this post looks at why now may be the right time for a bank’s CEO and board to consider a sale. It plays off the idea that in many markets, organic growth options are limited and times are tough for banks, especially those under $1Bn in asset size.
By Al Dominick, President & CEO, Bank Director
Over the past three years, a number of bank executives and board members have struggled with whether to buy or sell their bank — or pursue growth independently. Over the same time, Bank Director has welcomed more than 1,300 bankers — from more than 500 financial institutions — to our annual M&A conference to explore their short- and long-term options.
This year, those numbers go up in a BIG way. Indeed, we have 600 bankers from 300+ banks joining us at the Arizona Biltmore for “AOBA” this upcoming Sunday through Tuesday. To me, this signals that more potential buyers & sellers are getting off the sidelines and into the bank merger and acquisition game. So in advance of Bank Director’s 22nd annual conference, here are five challenges that a bank’s CEO and board might want to consider.
Now, it has been said that business is not about longevity, it is about relevance. So as Bank Director’s team continues to gear up for this year’s Acquire or Be Acquired conference, these five questions merit serious conversation and consideration both leading up to, and at, our 22nd annual event. For those not able to join us — but interested in following conversations such as these — I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared by (and with) our attendees.
With this morning’s news that Huntington and FirstMerit are set to merge, it is clear that more and more buyers & sellers are getting off the sidelines and into the bank merger and acquisition (M&A) game. So in advance of Bank Director’s 22nd annual Acquire or Be Acquired Conference, seven M&A trends to consider.
By Al Dominick, President & CEO, Bank Director
As I shared in yesterday’s post, we are putting the finishing touches on this year’s Acquire or Be Acquired conference. With nearly 600 bank officers & directors from 300+ banks joining us at the Arizona Biltmore for “AOBA” this Sunday through Tuesday, what follows are seven trends in bank M&A that I expect this hugely influential audience to hear and work to address.
Whether you are coming to the conference or just interested in following the conversations, I invite you to follow me on Twitter via @AlDominick and/or @BankDirector — and search & follow #AOBA16 to see what is being shared with and by our attendees.
Why banks are bought or sold involves much more than just the numbers making sense. Indeed, to successfully negotiate a merger transaction, buyers & sellers must bridge the gap between a number of financial, legal, accounting and social challenges. So in advance of this year’s biggest merger and acquisitions (M&A) conference, a few things I feel attendees of “AOBA” should know.
By Al Dominick, President & CEO, Bank Director
Starting this Sunday at the Arizona Biltmore, Bank Director’s team once again opens the doors to our annual Acquire or Be Acquired Conference — affectionately called “AOBA” (ay-oh-bah). About this time last year, I wrote about a record turnout, one we will exceed in a few days when 925 men and women arrive at this architectural gem.
By design, the numbers I share in the image above only reflect key data from the financial institutions attending. In fact, we are prepared to welcome another 60+ professional services firms and product companies to the Biltmore. While I am particularly impressed by the caliber of support provided to the industry by our sponsoring companies, today’s post focuses on a handful of issues impacting the officers and directors joining us from strong and well performing community banks.
While big banks typically garner mainstream headlines — Wells Fargo, Citi, JPMorganChase and Bank of America account for a whopping $8.1 Trillion of the $17.3 Trillion assets held by banks in the U.S. — the buying and selling of banks takes place outside their domain. The overwhelming majority of deals today involve community banks, many of whom have their CEOs attending AOBA. So for this hugely influential audience, here are my key points to know and consider before the conference kicks off.
Certainly, the buying and selling of banks has been the industry’s “great game” for the last couple of decades. As the conference agenda reflects, we dive deeper into topics like these and look at pre-deal considerations, post-integration challenges and everything in between. So for those not able to join us — but interested in following the conversations — I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA16 to see what is being shared with (and by) our attendees.
Earlier this week, I shared my perspectives on bank M&A with the Wall Street Journal. What follows builds off the piece that ran in Tuesday’s print edition, highlighting key findings from Bank Director’s annual Bank M&A Survey.
By Al Dominick // @aldominick
At a time when J.P. Morgan is getting smaller, the pressure is on for smaller banks to get bigger. As KPMG recently shared with BankDirector.com, there was a 25% increase in bank deals in the U.S. in 2014, compared to 2013, and there is a good possibility that the number of deals in 2015 will exceed that of 2014. One reason for this: a larger institution can spread costs (such as investments and regulatory burdens) across a larger customer and revenue base.
Not surprisingly, 67% of executives and board members responding to Bank Director’s 2016 Bank M&A Survey say they see a need to gain more scale if they are going to be able to survive in a highly competitive industry going forward. As our director of research, Emily McCormick, shared, “many of these respondents (62%) also see a more favorable climate for bank deals, hinting at a more active market for 2016 as banks seek size and scale through strategies that combine organic growth with the acquisitions of smaller banks.”
While the majority of bank executives and boards surveyed feel a need to grow, respondents don’t agree on the size banks need to be in order to compete today. A slim majority, 32%, identified $1 billion in assets as the right size… interesting, but not surprising, when you consider that 89% of commercial banks and savings institutions are under $1 billion in assets, according to the FDIC (*personally, I’m of the opinion that $5Bn is the new $1Bn, but that’s a topic for another day). On to the key findings from this year’s research:
The full survey results are now available online at BankDirector.com, and will be featured in the 1st quarter, 2016 issue of Bank Director magazine. In addition, for those executives interested in connecting with many of the key decision makers driving the deals mentioned above, our annual Acquire or Be Acquired Conference will be held at the Arizona Biltmore from January 31 through February 2.
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Our 2016 Bank M&A Survey, sponsored by Crowe Horwath LLP, examines current attitudes and challenges regarding bank M&A, and what drives banks to buy and sell. The survey was completed in September 2015 by 260 chief executive officers, independent directors and senior executives of U.S. banks, and former executives and directors of banks that have been acquired from 2012-2015.
Mergers & Acquisitions will continue to serve as one of the biggest revenue drivers for banks in the United States.
By Al Dominick // @aldominick
I’m in Chicago to host Bank Director’s annual Bank Audit & Risk Committees Conference, an exclusive event for Chief Executive Officers, Chief Financial Officers, Chief Risk Officers, Chairmen and members of the board serving on an audit or risk committee. As I reviewed my speaker notes on yesterday’s flight from D.C., it strikes me that of all of the risks facing a bank’s key leadership team today — e.g. regulatory, market, cyber — knowing when to buy, sell or grow independently has to be high on the list.
While we welcome officers and directors to a series of peer exchanges and workshops today, the main conference kicks off tomorrow morning. To open, we look at the strategic challenges, operating conditions and general outlook for those banks attending this annual event. With public equities and M&A valuations at multi-year highs, numerous institutions having raised capital to position themselves as opportunistic buyers and sellers continuing to take advantage of a more favorable pricing environment, I thought to share three points about bank M&A for attendees and readers alike:
According to Tom Wilson, a director of investment banking with the Hovde Group, many of the factors driving the current M&A cycle have been well documented and remain largely unchanged. These include improving industry fundamentals, increased regulatory costs, net interest margin compression in a low rate environment, industry overcapacity and economies of scale. As he notes, while those themes have been playing out in various forms for several years, some additional themes are emerging that are significantly impacting the M&A environment; for example, “the advantages of scale are translating to a significant currency premium. For years we have seen a significant correlation between size, operating performance and currency strength. Lately, that trend has become a significant currency advantage for institutions with greater than $1 billion in assets and resulted in smaller institutions being constrained in their ability to compete for acquisition partners because of a weaker valuation.”
Moreover, an industry outlook published by Deloitte’s Center for Financial Services earlier this year says that the “M&A activity seen in 2014 is likely to continue through 2015, driven by a number of factors: stronger balance sheets, the pursuit of stable deposit franchises, improving loan origination, revenue growth challenges, and limits to cost efficiencies.” However, their 2015 Banking Outlook also acknowledged that “as banks move from a defensive to an offensive position to seek growth and scale, they should view M&A targets with a sharper focus on factors such as efficiencies, growth prospects, funding profile, technology, and compliance.”
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For those looking for more on bank M&A, let me suggest a read of our current digital issue (available for free download through Apple’s App Store, Google Play and Amazon.com). In it, we look at how to “bullet-proof” your deal from shareholder lawsuits and have a great video interview with ConnectOne Bank’s CEO, Frank Sorrentino, who talks about how his bank fought back against fee-seeking shareholder activists. To follow the conversations from the JW Marriott and Bank Director’s annual Bank Audit & Risk Committees Conference, check out #BDAUDIT15, @bankdirector and @aldominick.
To kick things off today, we took a look at those banks reshaping the banking industry. With M&A providing an avenue for banks to drive improved operating leverage, earnings, efficiency and scale, we focused on the emergence of mid-sized regional banks that are growing through the consolidation of smaller banks. My thanks to Jack Kopnisky, President & CEO, Sterling National Bank & Sterling Bancorp (NYSE: STL), Ben Plotkin, Vice Chairman of the Board, Stifel Financial Corp (NYSE: SF) and Frank Sorrentino, Chairman & CEO, ConnectOne Bank (NASDAQ: CNOB) for sharing their time and opinions in their session entitled “The New” Consolidators this morning.
News and notes from the first day of Bank Director’s annual Acquire or Be Acquired conference.
As was the case at last year’s Acquire or Be Acquired, 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 conference (#AOBA15 via @bankdirector): to be a successful player in today’s bank M&A market, one needs adequate capital and earnings for regulatory approval of a deal, the infrastructure in place to both acquire and grow an institution and available sellers in the bank’s target market.
Overall, the issues I took note of where, in no particular order: $5 to $10Bn public banks are in the sweetest of the sweet spot for investors; cash is often useful to sellers as a form of price protection — and can benefit buyers as fewer shares are issued in a transaction; earnings estimates, not P/E Expansion, will drive bank stocks in 2015; deal pricing has a direct correlation to the size of the seller and the size of the buyer; bank boards should be particularly mindful of shadow banking’s strong relative growth.
I had a chance to talk with a number of attendees and introduce quite a few of our presenters. Here are some of the anecdotes I made note of throughout the day:
More to come from The Phoenician and Acquire or Be Acquired tomorrow.
Banks are increasingly interested in the topic of mergers and acquisitions, which must have something to do with our record attendance at this year’s Acquire or Be Acquired Conference in Scottsdale, Arizona.
The fun begins at The Phoenician (pictured above) this weekend with Bank Director’s 21st annual “AOBA.” Last year, we welcomed 435 officers & directors from 271 financial institutions to the Arizona Biltmore. This year, we have 522 bankers and bank board members from more than 300 banks in attendance. Merger activity is clearly gaining steam, and this is bringing more interested parties to the table.
Why banks are bought (or sold) involves much more than just the numbers making sense. Moreover, to successfully negotiate a merger transaction, buyers and sellers must bridge the gap between a number of financial, legal, accounting and social challenges. So allow me to sketch out what’s on tap for this massive three-day event.
To kick things off, we take a macro-level look at capital markets and operating conditions for banks nationwide. Additionally, we look at how M&A fits within a broad range of strategic options for a bank’s board and how some successful acquirers have aligned transactions to achieve strategic goals. Of note, we welcome the perspectives of CEOs from high performing banks like Pinnacle National Bank, Banner Corp., First Interstate BancSystem, IBERIABANK and CVB Corp. as part of several presentations. On stage, these men will share their thoughts on what it takes to build and lead successful institutions.
Building on the first day of the conference, we turn our attention to the long-term preparation required by both a buyer and seller. For instance, regulatory planning remains critical to getting deals done for both sides — especially on compliance issues. Thematically, Monday builds on Sunday’s presentations, with sessions dedicated to helping a bank’s board make a rational buy, sell or hold decision.
To put a bow on this year’s event, we start with a look at what the biggest banks are doing today followed by a series of breakout sessions on more in-depth topics. To conclude, we welcome the perspectives of our friends from NASDAQ who will look at trends, issues and the “movers and shakers” in the technology world that may impact growth and innovation within the financial community. As much as AOBA explores one’s financial growth opportunities, this final session examines what’s happening outside of our industry that may precipitate new changes or challenges to a bank’s growth aspirations. Oh and in the afternoon… we swap suits for cleats, wrapping up AOBA with our annual golf tournament.
For those not able to join us — but interested in following the conversations — I invite you to follow me on Twitter via @AlDominick, the host company, @BankDirector, and search & follow #AOBA15 to see what is being shared with our attendees.
About That Ratio 