Environment Heats Up for Bank IPOs

After a quiet few years for bank IPOs, a favorable market for bank stocks has driven more activity — and the window remains open.

Some of last year’s initial public offerings were driven by a backlog as banks awaited an ideal environment to go public, says John Roddy, cohead of financial services investment banking at Raymond James Financial. Five banks went public in 2025, according to S&P Global Market Intelligence. That compares to a lean three bank IPOs total in the four preceding years from 2021 through 2024.

“2025 wasn’t a straight line up,” says Roddy. Tariffs, for example, caused some fluctuations in the markets, but overall stocks performed well, and bank valuations rebounded. “We certainly saw [a] reasonable amount of primary issuance from existing companies as well as a handful of banks that I think had been talking about going public for a number of years and now saw a window.”

Roddy suspects more banks could announce in 2026. In addition to favorable markets, there’s a sense that banks are overcapitalized. That could lead to more buybacks and a net reduction of shares available from publicly traded institutions. “That provides a further supply/demand window for new issuers. That’s the message we’re giving banks that are privately held,” he says. Much of the interest he has seen has come from banks seeking a liquidity option for shareholders rather than those seeking capital to drive growth. Many of those IPOs come from banks with private equity ownership.

While five bank IPOs represent more activity, that’s a drop in the bucket compared to the 181 bank acquisitions announced last year. It’s no accident that an increase in M&A and an uptick in bank IPOs occurred in the same time period. Both going public and selling the bank can provide shareholders with the liquidity they seek.

And some prospective acquirers have recognized that a liquid currency could make them a more attractive buyer. The $20 billion Central Bancompany in Jefferson City, Missouri, and $2 billion Commercial Bancgroup in Harrogate, Tennessee, both touted their M&A bona fides in their S-1 filings, required by the Securities and Exchange Commission for companies planning to go public. Commercial Bancgroup CEO Terry Lee, when asked about M&A in an October earnings call, said that “everybody now will begin to recognize us as the only buyer that’s in the marketplace” for banks between $500 million and $750 million in assets. Central Bancompany CEO John “JR” Ross, in January, was even more explicit in stating that the bank’s acquisition plans drove its IPO. “This offering is intended to facilitate our acquisition efforts. As we have grown larger, so have our target acquisitions and our potential partners’ preference for stock consideration,” Ross told analysts, adding that the combination of a liquid, public stock and relationships built with potential targets should position the bank to deploy that capital.

“It’s not a wide-open boom in bank IPOs, but it’s no longer shut,” says Pedro Bermeo, a partner at Davis Polk. “Investors are interested. There’s appetite. They’re being thoughtful about investment opportunities, but I think good regional bank franchises can attract capital and can tell a good story.” With the markets open, he sees closely held institutions eyeing longer-term independence and shareholder liquidity. “How do you think about the future? One path is you sell and then you’re likely fully out,” Bermeo says. An IPO “gives you another option, another tool.”

What makes a good candidate for an IPO? The institution should be prepared, from a compliance perspective, for life as a public company, including the requisite filings to the SEC and ability to react to investor sentiment. Directors should also understand how the shareholder base could shift. And boards should understand the value of the institution.

While there’s no hard-and-fast rule on the right size, Roddy suggests ensuring the stock would land in the Russell 2000, a benchmark of U.S. small cap companies. A Feb. 12 note from Piper Sandler & Co. projects a $147 million market capitalization cutoff for that index, up 29% from the prior year. “You probably want to be comfortably above [the cutoff], because the last thing you want to do is go in and then come back out,” says Roddy.

Bermeo describes investors as “cautiously optimistic.” They want to see how the 2025 class of IPOs perform. Central Bancompany, the final IPO of 2025, started trading on Nov. 20, 2025; that stock is up 18% from its public offering price of $21 per share, as of Feb. 17. San Jose, California-based Avidbank Holdings went public at $23 per share on Aug. 8; stock for the $2.6 billion bank is up 31%.

What ultimately drives success in the public markets is a good story. Roddy says that’s no longer a tale of “another community bank that is performing reasonably well in a reasonably good market” but one of differentiation. “We’ve had dramatic underperformance by the industry as a whole,” he explains. “It needs to have some differentiated niche or a differentiated management team, differentiated growth model in order to outperform the broader market.”