Tag: mergers and acquisitions

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Bank Director’s 2017 Acquire or Be Acquired Conference

Sunday, January 29th, may seem like quite a ways off… but not for my team at Bank Director.  Indeed, we are full-steam ahead as we prepare to host the premier banking event for CEOs, senior management and board members: our Acquire or Be Acquired Conference.  AOBA continues to draw key leaders together in order to explore financial growth options; in 2017, we host this three-day program at the JW Marriott Phoenix Desert Ridge in Phoenix, AZ.

Each month, Tim Melvin shares nuanced observations on the banking space in his Community Bank Investor Newsletter.  In his October 2016 edition, he points out that “scale and earnings growth are still among the main drivers of M&A activity, and that’s not going to change anytime soon.”  Clearly, the need and desire to grow exists at virtually every organization, something I’ve picked up on while talking with bank CEOs about next January’s event.

2016 AOBA Demographics c:o Bank Director and Al Dominick

As you can see from this image, our 22nd annual Acquire or Be Acquired Conference brought together key leaders from across the country.  I addition to the 590+ bankers in attendance, an additional 300+ executives from leading professional services and product companies joined us.  During (and following) our time in the desert, I shared various observations on this site (e.g. Five Reasons Why Banks Might Consider Selling in 2016 and Community and Regional Banks are Crucial to the Vibrancy of Our Communities).  In the simplest of terms, I left Arizona with a sense that more bank boards and their management teams were seriously considering M&A as a growth plan than perhaps in previous years — a view formed by the continued margin pressure that banks have been operating under for the last several years.

Ironically, there is a growing likelihood that the bank M&A market in 2016 will see declines in both deal volume and pricing compared to the previous two years, even as the industry’s underlying fundamentals remain relatively unchanged.  Nonetheless, registration patterns for 2017 suggest an increase in bank executive’s appetites to explore a merger, to prepare for an acquisition, to grow loans, to capturing efficiencies & managing capital to partnering with fintech companies (*all topics that will be covered in ’17).  So for those of you looking to refine and/or enhance your growth playbook, I invite you to review the agenda for January’s program that we just updated on BankDirector.com.

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FWIW: we have welcomed over 5,000 CEOs, Chairmen and members of a bank’s board to this conference over the years, and we anticipate 2017 will be the biggest ever – with over 900 attendees focused on the future of their banks.  Most come with one or more officers of their bank and yes, many bring their spouses.

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What’s Happening at Acquire or Be Acquired

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.

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Five Reasons Why Banks Might Consider Selling in 2016

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.

  • Peer-to-peer lenders, credit unions and some — not all — FinTech startups either are (or will be) fierce competitors to community banks.  In addition, non-bank giants in technology, retail, media, entertainment and telecom are making noise about entering banking.
  • When margins decline, bankers try to compensate by improving operational efficiencies.  While slow growth + strong cost controls may allow for short term survival, such an equation doesn’t bode well for the long-term viability of many institutions where investors expect more significant gains.
  • The pressures prompting larger banks to innovate — sluggish loan demand, depressed revenue, higher compliance costs — are the same ones that will continue to force smaller banks to pursue a sale.
  • Let’s face it: the typical bond between a bank and a customer is is not personal nor very strong and the absence of real customer loyalty undermines the traditional business model most banks operate from (*and yes, I know that banks with dedicated customer bases enjoy significant advantages over any potential competitors. But let’s be honest about how dedicated such customers really are).
  • Finally, at many community banks, older management teams and a dearth of local talent mean there may be no one to hand over the reins to in the coming years.

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.

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4 Things to Know In Advance of Bank Director’s 2016 Acquire or Be Acquired Conference

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.

  • M&A remains attractive inasmuch as successful transactions improve operating leverage, earnings, efficiency and scale.
  • Today’s regulatory environment can hold up a deal — so it has become popular to note that banks can make acquisitions depending on how “clean” both the buyer and seller are + how big the resulting bank becomes.
  • As seen in their superior financial metrics (e.g. ROAA and ROAE), larger banks are growing and consistently outperforming smaller banks.
  • Small and mid-sized banks’ importance to the overall economy and select business sectors remains in place; however, their earnings potential is less diverse then big banks, making them more vulnerable to new competitors and shifts in pricing of financial products.

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.

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Size & Scale: The King and Queen of Bank M&A?

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:

  • Two-thirds report their bank intends to participate in some sort of acquisition over the next 12 months, whether it’s a healthy bank (51%), a branch (20%), a nondepository line of business (14%), a loan portfolio (6%) and/or a financial technology firm (a scant 2%).
  • Respondents indicate that credit culture, at 32%, and retaining key talent that aligns with the buyer’s culture, at 31%, are the most difficult aspects of the post-merger integration process.
  • More institutions are using social media channels to communicate with customers after the close of the deal. 55% of respondents who purchased a bank in 2014 or 2015 used social media, compared to 42% of 2011-2013 deals and just 14% of 2008-2010 deals (*FWIW, Facebook, at 26%, is the most popular channel for respondents).
  • Fifty-six percent of respondents have walked away from a deal in the past three years.  Of the respondents who indicate they declined to buy, 60% cite deal price while 46% blame the credit quality of the target institution.
  • Why do banks sell? Of the executives and board members associated with banks sold from 2012 to 2015, 55% say they sold because shareholders wanted to cash out.  Despite concerns that regulatory costs are causing banks to sell, just 27% cite this burden as a primary motivator.

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.

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Quick Guide: Bank Mergers & Acquisitions

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:

  1. In 2014, there were 289 whole-bank M&A transactions announced (and 18 failed-bank transactions) for a total of 307 deals. Through the first quarter of this year, there have been 67 whole-bank M&A transactions announced and just 4 failed-bank transactions.
  2. KPMG’s annual Community Banking Outlook Survey illustrates that M&A will be one of the biggest revenue drivers for community banks over the next three years, especially as community banks face the need to transform their businesses in an effort to reach new customer segments and streamline their operations.
  3. The continued strengthening of transaction pricing — with 2015 transaction multiples at the highest levels since 2008 — is an important and emerging trend.

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.

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Bank Mergers and Acquisitions

“The reality is organic growth is tough,’’ said Chris Myers, the president and CEO of the $7.2-billion Citizens Business Bank in Ontario, California, who spoke at our Acquire or Be Acquired conference in January.  His bank is one of those in the “sweet spot” for higher valuations and higher profitability, but even he feels the pressure to grow. “A lot of banks are stretching to try to grow [loans] and do things they wouldn’t have done in the past,’’ he said, commenting on the competition for good loans. “ We are going to need to do some acquisitions.”

By Al Dominick // @aldominick

The classic build vs. buy decision confronts executives in every industry.  For bank CEOs and board members today, mergers and acquisitions (M&A) remain attractive inasmuch as successful transactions improve operating leverage, earnings, efficiency and scale.  While I recently wrote that the best acquisition a bank can make is of a new customer, today’s post looks at what’s happening with bank M&A by sharing a few of my monthly columns that live on BankDirector.com:

  • Why Big Banks Aren’t Merging — with global companies announcing huge acquisitions, I look at where the banking industry is today.
  • Stressed Into Selling — after the largest U.S.-based banks passed the Federal Reserve’s stress tests, I write about modeling various economic conditions that might help a bank’s board to anticipate potential challenges and opportunities.
  • Don’t Sell The Bank —  figuring out when a bank should be a buyer—or a seller—had been on my mind since the Royal Bank of Canada announced a deal for “Hollywood’s bank,” City National, and this piece explored why now is not the time to sell.
  • Why Book Value Isn’t the Only Way to Measure a Bank — as the market improves and more acquisitions are announced, why I expect to see more attention to earnings and price to earnings as a way to value banks.
  • Deciding Whether to Sell or Go Public — while the decision to sell a company weighs heavily on every CEO, there comes a point where a deal makes too much financial and cultural sense to ignore.

In addition to these five columns, I invite you to read this month’s column, “Mind These Gaps,” which posts today on BankDirector.com.  It focuses on various pitfalls that have upended deals that, on paper, looked promising (e.g. due diligence and regulatory minefields, the loss of key talent/integration problems and bad timing/market conditions).  With perspectives from some of the country’s leading investment bankers and attorneys, it is one I’m pleased to share.  Don’t worry, unlike other sites, there is no registration — or payment — required.

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Three Observations from the Bank Board Growth & Innovation Conference

Select news and notes from the first day of Bank Director’s annual growth conference at the Ritz-Carlton New Orleans.

By Al Dominick // @aldominick

I mentioned this from the stage earlier today… every January, Bank Director hosts a huge event in Arizona focused on bank mergers and acquisitions.  Known as “AOBA,” our Acquire or Be Acquired conference has grown significantly over the years (this year, we welcomed some 800 to the desert).  After the banking M&A market tumbled to a 20-year low in 2009 of just 109 transactions, it has gradually recovered from the effects of the crisis. In fact, there were 288 bank and thrift deals last year, which was a considerable improvement on volume of 224 deals in 2013.  As our editorial team has noted, the buying and selling of banks has been the industry’s great game for the last couple of decades, but it’s a game that not all banks can — or want to — play.  Indeed, many bank CEOs have a preference to grow organically, and its to these growth efforts that we base today and tomorrow’s program.

Key Takeaway

To kick things off, we invited Fred Cannon, Executive Vice President & Director of Research at KBW, to share his thoughts on what constitutes franchise value. While he opened with a straight-forward equation to quantify franchise value over time — (ROE – Cost of Equity) × Market Premium — what really stuck with me during his presentation is the fact that a logo does not create franchise value, a brand does.  As he made clear, it is contextual (e.g. by industry’s served, technologies leveraged and clients maintained) and requires focus (e.g. you can’t be all things to all people).  Most notably, small and focused institutions trump small and complex ones.

Trending Topics

Anecdotally, the issues I took note of where, in no particular order:

  • Banks must be selective when integrating new technology into their systems.
  • The ability to analyze data proves fundamental to one’s ability to innovate.
  • When it comes to “data-driven decisions,” the proverbial life cycle can be thought of as (1) capture (2) store (3) analyze (4) act.
  • You don’t need a big deposit franchise to be a strong performing bank (for example, take a look at County Bancorp in Wisconsin)
  • We’ve heard this before, but size does matter… and as the size of bank’s balance sheet progresses to $10 billion, publicly traded banks generate stronger profitability and capture healthier valuations.

Picked Up Pieces

A really full day here in New Orleans, LA — with quite a few spirited discussions/debates.  Here are some of the more salient points I made note of throughout the day:

  • Selling services to large, highly regulated organization is a real challenge to many tech companies.
  • Shadow banking? Maybe its time I start calling them “Challenger banks.”
  • CB Insight’s has a blog called “unbundling the bank” — to understand the FinTech ecosystem, take a look at how they depict how “traditional banks are under attack from a number of emerging specialist startups.”
  • A few sidebar conversations about Wells Fargo’s incubator program, which the San Francisco bank began last August… interest in how the program involves direct investment in a select group of startups and six months of mentoring for their leaders.

To see what’s being written and said here in New Orleans, I invite you to follow @bankdirector, @aldominick + #BDGrow15.

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Three Observations From Bank Director’s 2015 Acquire or Be Acquired Conference (Tuesday)

News and notes from the final day of Bank Director’s annual Acquire or Be Acquired conference.

Key Takeaway

As always, the one constant in life is change.  Right now, with deflation in the Eurozone (is it time to bid Greece goodbye from the EU?), declining oil prices and the sluggish growth of the U.S. economy, optimism about banking’s future is tempered by present uncertainties.  As we heard from KBW, a handful of factors have contributed to the slower pace of our economic recovery:

  • Resetting of global GDP growth expectations;
  • Europe nearing closer to deflation;
  • Japan expanding its stimulus spending;
  • Modest wage growth; and
  • Conservative consumer and small business confidence.

Nonetheless, there is a true sense of optimism permeating the conference here at The Phoenician… especially in terms of the future of community banking.

Trending Topics

A spirited half-day of conversations and presentations that ranged from capital raises to digital growth opportunities.  With respect to trending topics, I made note of the following: to drive growth, the biggest banks are exploring opportunities in three areas: (1) deals for smaller product/technology/capability based companies, (2) analytics and (3) digital; as I noted on Sunday, bank M&A deals per year (as a % of total banks) are at historically high levels — and we see banks with strong tangible book value multiples dominating the M&A space; finally, there is a widening gap in terms of buyer valuations meeting seller expectations.

Picked Up Pieces

I made note of the following this morning:

  • Google’s partnership with Lending Club came up early and sparked quite a few sidebar-type conversations;
  • New skills, better analytics is where bigger banks are struggling the most.
  • Per Josh Carter at PwC, mobile phones, wearables and integrated devices (car, shopping cart, item RFID tags) have barely scratched the surface in terms of how they will shape our lives.
  • Several presenters noted the multi-charter bank model is under pressure.
  • Looking ahead, bank stocks may struggle to outperform the broader market if unable to meet earning-per-share (EPS) expectations.
  • By extension, if the Federal Reserve does not raise interest rates, EPS estimates will be at risk for negative revisions.

I will post a recap video tomorrow morning on About That Ratio and you can use the hashtag #AOBA15 to read through the last three days tweets.  Now, it is time for me to head out to the golf course to shake off the rust at our annual golf tournament.

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From Bank Director’s 2015 Acquire or Be Acquired Conference: A 45 Second Video Recap of Day Two

On Tap For Day Three

Last night, I shared three takeaways from our second full day at AOBA (Three Observations From Bank Director’s 2015 Acquire or Be Acquired Conference). Looking ahead to our final half day, we kick things off with a series of discussion groups that address the following issues:

  • New Lending Markets for Community Banks
  • Growing with SBA Loans
  • Everything You Wanted to Know about Civil Money Penalties
  • Capital Plans & Nontraditional Alternatives
  • Incorporating M&A into Your Strategic Planning Process
  • Beyond eMail – Purpose-Built Tools for Mobile Executives

With coffees in hand, we move into our first general session, led by PwC, entitled “What You Can Learn from the Country’s Biggest Banks.” Following that presentation, we have back-to-back breakout sessions available before closing with “The Butterfly Effect of Technology on Banks Today.”  To see an abbreviated PDF version of the three day agenda, please click 2015 AOBA Agenda (Overview).

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To follow the conversation on Twitter, I invite you to follow me @aldominick, follow @bankdirector and tweet using the hashtag #AOBA15.

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From Acquire or Be Acquired: A Video Recap of Today’s L. William Seidman CEO Panel

Former FDIC Chairman and Bank Director’s Publisher, the late Bill Seidman, was a huge advocate of a strong and healthy community bank system.  We honor his memory and this sentiment with a CEO panel each year.  My thanks to David Brooks, Chairman & CEO of the Independent Bank Group, Mark Grescovich, President & CEO of the Banner Corporation, Edward Garding, President & CEO of First Interstate BancSystem and Daryl Byrd, President & CEO of IBERIABANK, for sharing their thoughts on a variety of growth-related issues earlier today.

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Be Proud Of The Past But Look To The Future

In Charles Dickens’ “Christmas Carol,” Ebenezer Scrooge spends some quality time with the ghosts of Christmases Past, Present and Yet-to-Come.  Inspired by this holiday classic, and these decorative lights adorning Macy’s in New York City, today’s column mirror’s Dickens’ structure with three points on bank M&A, Capital One and Lending Club’s IPO..

Past: Three Bank M&A Deals You May Have Missed

Last week, my monthly M&A column posted on BankDirector.com (A Few Notable Deals You May Have Missed in 2014).  My premise: to successfully negotiate a merger transaction, buyers and sellers normally must bridge the gap between a number of financial, legal, accounting and social challenges. Couple this with significant barriers these days to acquiring another bank—such as gaining regulatory approval— and it’s no wonder that bigger financial deals remained scarce this year.

For as much digital ink as was spilled on BB&T Corp.’s $2.5-billion acquisition of Susquehanna Bancshares a few weeks ago, here are three deals worth noting from 2014: (1) Ford Financial plans to buy up to a 65 percent stake in Mechanics Bank, (2) Sterling Bancorp’s agreement to buy Hudson Valley and (3) United Bankshares completed acquisition of Virginia Commerce Bancorp.

Certainly, banking acquisitions like these three show a commitment to profitability and efficiency—and reflect solid asset quality and sound capital positions. There is more than one way to grow your bank and these banks are proving it.

Present: Catch the Digital Wave While You Can

A few days ago, the Washington Business Journal’s Mark Holan — @WBJHolan — wrote a very timely and relevant piece about Capital One’s Richard Fairbank, who says “the world won’t wait for banks to catch the digital wave.”  As Mark noted, Fairbank recently shared myriad thoughts at the Goldman Sachs U.S. Financial Services Conference in New York, opining:

“Banking is an inherently digital product… Money is digital. Banking is both about money and also about contracts about how money will be moved and managed. There is not a lot of physical inventory. This business is just crying out to be revolutionized and the world won’t wait.”

~Capital One’s CEO

Fairbank also cautioned the banking industry “has had a stunted and slowed evolution relative to the inherent nature of just how digital this product is” due to regulation, massive capital requirements, risk management issues, and other funding constraints.  He also said most banks are too focused on technology’s impact on physical branches or building the coolest app to satisfy customers.

Future: Why Lending Club’s IPO is Important

When it comes to financial innovation, many investors look outside the traditional banking space.  Take Lending Club, which touts itself as “America’s #1 credit marketplace, transforming banking to make it more efficient, transparent and consumer friendly. We operate at a lower cost than traditional bank loans and pass the savings on to borrowers in the form of lower rates and to investors in the form of solid returns.”  So I think their December 11th IPO on the NYSE is very important for bankers to take note of.

Much as Fairbank talks about transforming Capital One to match consumer’s digital demands, the firm stated in a pre-IPO filing that “borrowers are inadequately served by the current banking system.”  By positioning itself as the future of the lending business, it is not surprising to see entire columns dedicated to the the future of the company, as well as the future of the banking industry (see: The Death Of Banking: A LendingClub Story).  Feel free to draw your own conclusions, but certainly pay attention to upstart competitors like these.