2023 Bank M&A Survey: Complete Results

Written by

Bank Director’s 2023 Bank M&A Survey, sponsored by Crowe LLP, surveyed 250 independent directors, chief executives, chief financial officers and other senior executives of U.S. banks below $100 billion in assets to examine current growth strategies, particularly M&A. The survey was conducted in September 2022, and primarily represents banks under $10 billion in assets. Members of the Bank Services program have exclusive access to the full results of the survey, including breakouts by asset category.

Despite a significant decline in announced deals in 2022, the survey finds that acquisitions are still part of the long-term strategy for most institutions. Of these prospective buyers, 39% believe their bank is likely to acquire another financial institution by the end of 2023, down from 48% in last year’s survey who believed they could make a deal by the end of 2022.

Less than half of respondents say their board and management team would be open to selling the bank over the next five years. Many point to being closely held, or think that their shareholders and communities would be better served if the bank continues as an independent entity. “We obviously would exercise our fiduciary responsibilities to our shareholders, but we feel strongly about remaining a locally owned and managed community bank,” writes the CEO of a small private bank below $500 million in assets.

And there’s a significant mismatch on price that prohibits deals from getting done. Forty-three
percent of prospective buyers indicate they’d pay 1.5 times tangible book value for a target meeting their acquisition strategy; 22% would pay more. Of respondents indicating they’d be open to selling their institution, 70% would seek a price above that number.

Losses in bank security portfolios during the second and third quarters have affected that divide, as sellers don’t want to take a lower price for a temporary loss. But the fact remains that buyers paid a median 1.55 times tangible book in 2022, based on S&P data through Oct. 12, and a median 1.53 times book in 2021.

Click here to view the complete results.

Key Findings

Focus On Deposits
Reflecting the rising rate environment, 58% of prospective acquirers point to an attractive deposit base as a top target attribute, up significantly from 36% last year. Acquirers also value a complementary culture (57%), locations in growing markets (51%), efficiency gains (51%), talented lenders and lending teams (46%), and demonstrated loan growth (44%). Suitable targets appear tough to find for prospective acquirers: Just one-third indicate that there are a sufficient number of targets to drive their growth strategy.

Why Sell?
Of respondents open to selling their institution, 42% point to an inability to provide a competitive return to shareholders as a factor that could drive a sale in the next five years. Thirty-eight percent cite CEO and senior management succession.

Retaining Talent
When asked about integrating an acquisition, respondents point to concerns about people. Eighty-one percent worry about effectively integrating two cultures, and 68% express concerns about retaining key staff. Technology integration is also a key concern for prospective buyers. Worries about talent become even more apparent when respondents are asked about acquiring staff as a result of in-market consolidation: 47% say their bank actively recruits talent from merged organizations, and another 39% are open to acquiring dissatisfied employees in the wake of a deal.

Economic Anxiety
Two-thirds believe the U.S. is in a recession, but just 30% believe their local markets are experiencing a downturn. Looking ahead to 2023, bankers overall have a pessimistic outlook for the country’s prospects, with 59% expecting a recessionary environment.

Technology Deals
Interest in investing in or acquiring fintechs remains low compared to past surveys. Just 15% say their bank indirectly invested in these companies through one or more venture capital funds in 2021-22. Fewer (1%) acquired a technology company during that time, while 16% believe they could acquire a technology firm by the end of 2023. Eighty-one percent of those banks investing in tech say they want to gain a better understanding of the space; less than half point to financial returns, specific technology improvements or the addition of new revenue streams. Just one-third of these investors believe their investment has achieved its overall goals; 47% are unsure.

Capital to Fuel Growth
Most prospective buyers (85%) feel confident that their bank has adequate access to capital to drive its growth. However, one-third of potential public acquirers believe the valuation of their stock would not be attractive enough to acquire another institution.

Solving for Blind Spots in Bank M&A

Written by

Mergers and acquisitions are a major driver of change and returns in the banking industry. As banking leaders head into mission-critical strategic planning sessions for 2023, now is the perfect time for boards and executives to map out the coming year’s organizational and budgetary priorities. Recognizing that M&A can be a principal platform for growth, what are the key considerations empowering banks of all sizes to increase their influence and scale their organizations?

Reducing Risk
Mitigating institutional risk is at the top of the list of priorities as banks begin exploring M&A opportunities. Ensuring your bank has a comprehensive plan, inclusive of division of labor, is critical for successful M&A. Does your bank have the right staff with expertise and experience at the planning table, so nothing gets missed?

Tapping into the knowledge base of current customers and how the bank plans to maintain those relationships is a smart first step. But what about potential prospects the bank wants to reach – what do those people want? What’s relevant to them?

Well-designed research programs are table stakes for successful M&A. Data on markets and prospects will give decision-makers insights beyond their customer base. Even if bank leaders feel familiar with a market, updated data-based intelligence provides a true picture of opportunity and risk, so banks can form a plan suited to their particular circumstances. Smart data will also help uncover if another financial company using similar branding and overlapping media, or presents other legal and reputational exposure before the deal is done. 

Enhancing Efficiency
Data and insights will also produce efficiencies in M&A by helping executives discover whether their brands and names bring unneeded baggage. Having a brand that requires exhaustive explanation can be an opportunity cost, resulting in time not spent focusing on a prospect’s needs and the bank’s options for meeting them. Likewise, marketing’s return on investment can be negatively impacted when brand elements are limiting or nondescript.

For example, brand names with specific vocations or cities may cause a prospect to wonder if that bank is truly designed to help someone like them; they may eliminate the bank from their list of options before exploring the institution’s breadth of services. Also, if banks with similar branding or name invest in advertisements or community sponsorships, a consumer may mistakenly assign the message or public relations value to a competitor because they miss the distinction between local banks with similar names.

Competitive research will help boards and executives take a comprehensive look at their brand to identify what parts of their story prospects don’t know and what is meaningful to them. Leveraging data can help ensure messages and communications are spotlighting parts of the brand story that will have the most resonance with consumers, and have distinct and competitive value propositions in that market.

While it’s true that a financial institution may have to change its name because of a merger, research will help identify names that represent a hurdle to overcome both legally and reputationally. In our experience, brand research can become a downstream activity executives assume they’ll take care of later, but we think of it as a critical part of due diligence. Further, a powerful research program helps ensure banks can make the most of the brand launch, when people may be more open to hearing a renewed brand story that’s relatable and relevant.

Targeting Growth
M&A allows institutions to elevate their expansion efforts and future-proof their organizations. Oftentimes when executives consider marketing and brand research in light of M&A, they point to customer satisfaction data. While this is an important measure for retention and engagement, a more comprehensive data set is indispensable to help ensure organizations aren’t operating on biases and blind spots.

Smart banks leverage robust research in the M&A process to help uncover opportunities, eliminate friction and help distinguish, define and differentiate their brands. A crucial component of retention and growth pre-and-post merger is employees. Research insights can predict potential turbulence and inform strategies to equip employees to champion change and maintain performance. They can also be key factors in recruiting the best talent to fuel growth in new markets.

While bank executives may be satisfied with their current positioning and their current markets, data-driven insights will help institutions leverage their assets and increase the influence of their brand in the merger process — allowing them to grow and go further.

What the Heck is Web3?

Written by

With increased interest around Web3, making sense of the latest and newest technology trend — and its potential impact on financial services —  could add value to strategic discussions as leadership teams and boards consider their long-term strategies.

For early and seed stage venture capital, the top 15 firms invested $1.3 billion in Web3 and decentralized finance in the third quarter 2021, according to Pitchbook. The research company said investment in the space — which includes $900 million into the cryptocurrency exchange FTX and $120 million in Offchain Labs, a blockchain-based, smart contracts platform — beat out the separate fintech category, which landed in the No. 2 spot with $860 million invested.

Not everyone is convinced. In a December 2021 tweet, Tesla CEO Elon Musk called Web3 “more marketing buzzword than reality right now.” He was responding to a video of a 1995 interview of Microsoft Corp. founder Bill Gates with David Letterman, in which the TV host asked, “What about this internet thing?”

That question seems quaint today. Amazon.com had just opened for business as an online bookstore; Mark Zuckerberg would start Facebook roughly a decade later.

Facebook represents the current state of the internet, characterized by centralized platforms that own or leverage user content. But the web continues to evolve; venture capital firms and tech titans are using the term “Web3” to discuss this next phase. These changes encompass concepts that bank leadership teams and boards should be watching and regularly discussing.

“Web3 is really just a rebranding of a lot of the things we’ve already been talking about for a while,” says Alex Johnson, director, fintech research at Cornerstone Advisors. “It’s the collision of the internet and crypto in a way that allows for users of the internet to have verifiable ownership over the companies and products that they interact with.”

The expansion of digital assets underpinned by blockchain — including cryptocurrency and non-fungible tokens (NFTs), which represent ownership in art, music or even real estate — are reshaping the way that internet users think about ownership.

“There will now be the capability to give verifiable ownership — over content, over relationships, over access to special features, over [intellectual property] — to customers or users. And the potential impact of that is that companies that do that will have a significant marketing advantage and retention advantage,” says Johnson. Companies could use tokens to build loyalty and community, granting partial ownership to customers of products or ideas, similar to a referral bonus or share of stock.

Leveraging blockchain technology, investor Ryan Zacharia envisions consumers and businesses building digital identities. “People are going to effectively own and control their own identities and information, and hold that information in a digital wallet,” providing access when applying for a loan, for example. Zacharia is general partner at JAM Special Opportunity Ventures, which invests in up-and-coming bank technologies on behalf of partner institutions.

At the same time, a few banks are using blockchain to power real-time transactions. Last month, I watched the first real-time interbank transfer of stablecoins — cryptocurrency pegged to a stable currency or commodity — between two banks, $53 billion Western Alliance Bancorp., based in Phoenix, and $2.5 billion Coastal Financial Corp. in Everett, Washington. The transaction was facilitated by Tassat Group, which provides blockchain-based payment solutions for banks.

“The ability to have programmable money is a game changer for the whole economy,” says Chris Nichols, director of capital markets for SouthState Bank. “It’s the first time where you have value, the message and the ability to program all in one unit of code. … [T]his opens up a whole new set of products for banks.” Signature Bank, JPMorgan Chase & Co., Customers Bancorp and New York Community Bancorp are among the banks exploring blockchain-based products and services focused on payments and asset securitization.

Fintechs competing with banks are also taking advantage of the disintermediation trends promised by a Web3 economy. In March 2021, Block (formerly Square) acquired TIDAL. The artist-centered music streaming platform allows the Jack Dorsey-led digital payments provider to tap into another niche. In a press release, current TIDAL head and Square executive Jesse Dorogusker said the two platforms would “explore new artist tools, listener experiences, and access to financial systems that help artists be successful.”

Musicians and artists have been early movers on NFTs. Just last month, Ozzy Osbourne launched a “CryptoBatz” collection of NFTs, commemorating the notorious 1982 gig where the rocker bit the head off a bat. Earlier in 2021, the band Kings of Leon released the first NFT album.

“There is an opportunity for content creators, music creators, owners and writers and musicians to eliminate intermediation, connect directly to their fans [and] sell their music as NFTs,” says Zacharia. “That can generate revenue for the musician, and the NFT holders can receive programmatic royalties based on [a song] being played …  or what have you.”

Web3 requires an open mind and a firm foot in reality. Research into these concepts quickly unearth ideas that seem more like science fiction than traditional economics and finance. Facebook, for example, recently changed its corporate name to Meta Platforms as Zuckerberg expects people to interact more in the metaverse. Will part of the economy take place in a digital world, where we interact via avatars in a virtual space?

”It’s important to have conversations that contemplate what the world could look like in five or 10 years,” says Zacharia. The metaverse is an unlikely next step for a typical bank, but he could see an early-mover advantage for an enterprising financial institution that figures out how to bank the space. And despite the sci-fi luster, the evolution of the web promises to soldier on, bringing opportunities and risks for banks to consider, including fraud and cybersecurity. “There’s a tremendous amount of talent and effort and capital that’s going into this,” he says. “Frankly, I don’t think it’s a fad.”

New Research Finds 4 Ways to Improve the Appraisal Experience

Written by

Accelerating appraisals has become increasingly important as lenders strive to improve efficiency in today’s high-volume environment.

Appraisals are essential for safe mortgage originations. Covid-19 underlined the potential impact of modernizing appraisal practices, and increased the adoption of digitally enabled appraisal techniques, appraisal and inspection waivers, and collateral analytics.

Banks have numerous opportunities to improve and modernize their appraisal process and provide a better consumer experience, according to recent research sponsored by ServiceLink and its EXOS Technologies division and independently produced by Javelin Strategy & Research. The research highlights several actions that lenders can take to improve their valuation processes, based on the feedback of 1,500 single-family homeowners in March who obtained either a purchase mortgage, refinance mortgage, home equity loan/line of credit for their single-family home, or who sold a single-family home, on or after January 2018.

1. Implement digital mortgage strategies that streamline appraisal workflows. One of the most-compelling opportunities to make appraisals more efficient is at the very onset of the process: scheduling the appointment. Scheduling can be complicated by the number of parties involved in an on-site inspection, including a lender, appraiser, AMC, borrower and real estate agent. Today, two-thirds of consumers schedule their appointments over the phone. This process is inefficient, especially for large lenders and their service providers, and lacks the consistency of digital alternatives.

Lenders that offer digital appraisal scheduling capabilities provide a more-predictable and consistent service experience, and reduce the back-and-forth required to coordinate schedules among appraisers, borrowers, real estate agents and home sellers. Given younger consumers’ tendency to eschew phone calls in favor of digital interactions, it’s essential that the industry embraces multiple channels to communicate, so borrowers can interact with lenders and AMCs on their own terms.

2. Increase transparency in the appraisal process. Even after an appointment is scheduled, consumers typically receive limited details about the appraiser, what to expect during the appointment and how the appraisal factors into the overall mortgage process. For example, 61% of consumers received the appraiser’s contact information before the appointment; while only 20% were provided with the appraiser’s photo and 9% were told what type of car they will drive. Providing borrowers with more information about the appraisal appointment bolsters their confidence; information gaps can contribute to a less-satisfying experience. Nearly 20% of consumers said they were not confident or only somewhat confident about their appointment, while over 30% said the same about the names of the appraiser and AMC.

3. Focus on efficiency. Overall, 38% of consumers said the duration of the overall appraisal process contributed to a longer mortgage origination process; delays among purchase mortgage and home equity borrowers were even higher.

For example, about two-thirds of appraisal appointments required the consumer to wait for the appraiser to arrive within an hours­long window or even an entire day, as opposed to giving the consumer an exact time when the appointment will take place. Given this challenge, lenders and appraisal professionals that offer more-precise appointment scheduling can improve the consumer experiences and streamline the origination process.

4. Implement processes and technology that support innovative approaches to property inspections and valuations. Covid-19 highlighted the opportunity banks have to adopt valuation products that sit between fully automated valuations and traditional appraisals, such as valuation methods that combine third-party market data and consumer-provided photos and video of subject properties. This approach still relies on a human appraiser to analyze market data and subject-property

This concept is gaining traction in the mortgage industry. In the future, it’s conceivable the approach could be expanded with the use of artificial intelligence and virtual reality technologies.

No matter the method an appraiser uses to determine a property’s value, the collateral valuations process is fundamentally an exercise in collecting and analyzing data. Partnering with an innovative AMC allows lenders to take advantage of new techniques for completing this critical market function. You can view the full white paper here.

Navigating Today’s M&A Market

Written by



Bank deal activity in 2017 is likely to be on par with 2016, as the bank executives and board members responding to Bank Director’s 2017 Bank M&A Survey reflect lower levels of optimism for the bank M&A environment. In this video, Rick Childs, a partner at survey sponsor Crowe Horwath LLP, provides his perspective on the survey results and explains why, despite a lower number of sellers, it really is a buyer’s market today.

  • Expected Deal Activity for 2017
  • What Successful Buyers Look For in a Target
  • Factors That Sink a Deal

In accordance with applicable professional standards, some firm services may not be available to attest clients. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction. © 2016 Crowe Horwath LLP, an independent member of Crowe Horwath International. crowehorwath.com/disclosure

2017 Bank M&A Survey: What Buyers Value

Written by


merger-value-11-28-16.pngDriven by shareholder pressures in a low-growth and highly regulated environment, some community banks could be seeking an exit in the near future. But which banks are positioned to get the best price in today’s market? Fifty-eight percent of executives and board members whose bank has made a past acquisition report that being located in an attractive market is the most important factor in their decision to acquire another institution, according to Bank Director’s 2017 Bank M&A Survey, which is sponsored by Crowe Horwath LLP.

Forty-one percent say the opportunity to pick up lending teams or talented lenders as part of an acquisition is highly important, due to a competitive environment for commercial lenders. Bank Director surveyed online 206 chief executive officers, chief financial officers, chairmen and directors of U.S. banks in August and September.

  • An increasing number of respondents feel that the current environment for bank M&A is stagnant or less active: Forty-five percent indicate that the environment is more favorable for deals, down 17 points from last year’s survey.
  • Forty-six percent indicate that their institution is likely or very likely to purchase another bank by the end of 2017.
  • Twenty-five percent report that they’re open to selling the bank, considering a sale or actively seeking an acquirer. Of these potential sellers, 54 percent cite regulatory costs as the reason they would sell the bank, followed by shareholder demand for liquidity (48 percent) and limited growth opportunities (39 percent).
  • Price, at 38 percent, followed by cultural compatibility, at 26 percent, remain the two greatest challenges faced by boards as they consider potential acquisitions. Price is identified as the top reason that potential buyers and sellers have walked away from a deal in the past three years.
  • Forty-five percent report that they are seeing a deterioration in loan underwriting standards within the industry, leading to possible credit quality issues in the future.
  • Concerns about the quality of loan underwriting standards at the target institution caused 28 percent to walk away from a potential acquisition.
  • Eighty-eight percent believe that interest rates will rise by the end of 2017. Forty-six percent expect a modest increase of less than half a percent.

Just one-quarter of respondents indicate that they’re likely or very likely to purchase a branch or multiple branches by the end of 2017. Given the rise of mobile and online banking, foot traffic in branches is declining. Banks are evaluating the value of branches to their overall strategy, causing many—particularly the largest institutions—to attempt to rationalize their branch networks by selling or shuttering those deemed less desirable. When asked about how attractive the purchase of a branch is compared to five years ago, attitudes are mixed: One-third believe that buying a branch is more attractive, while another third believe that the value has remained the same. Twenty-eight percent believe that branch acquisitions are less valuable than they used to be, a view supported by national trends: S&P Global Market Intelligence reported in September that the industry shed more than 7,000 branches over the past five years.

To view the full results of the survey, click here.

2015 Compensation Survey: What Executives and Board Members Want

Written by


5-20-15-Compensation.pngFor a moment, forget about the talk about the death of traditional banking: Executives with particular sets of skills are in demand at U.S. financial institutions. Sixty-one percent of the senior executives and directors responding to Bank Director’s 2015 Compensation Survey, sponsored by Compensation Advisors, report that their bank hired or promoted new executives last year. One-third lost executive personnel.

At the board level, 15 percent say they brought on new directors in 2014, with many seeking board members with particular expertise, or adding those that can help grow their institution.

Lenders continue to be in high demand, particularly at banks with less than $5 billion in assets. Technology/information security, risk management and compliance were other top areas for hires and departures in 2014. Banks aren’t training up the next generation of bankers like they used to, so given a limited (and aging) talent pool, offering the right compensation package is an important strategy for ensuring the bank’s long term sustainability.

The 2015 Compensation Survey tracks what bank chief executive officers and boards were paid in fiscal year 2014, what benefits are currently awarded to executives and directors, and how bank leaders want to be compensated by their organizations. Responses were collected online from 281 directors and senior executives of U.S. banks, including CEOs and human resources officers, beginning March 18 and ending April 7, 2015. Information on board and CEO pay was supplemented using data from 90 bank proxy statements, collected March 16 through March 20.

Key Findings:

  • Executives responding to the survey say that in addition to a cash salary and bonus, what they want most is a retirement benefit, at 72 percent. Just half desire equity as part of their own compensation. Even the executives of publicly traded banks place less emphasis in holding equity: Just 58 percent indicate it’s of high value.
  • Seventy percent report that their bank offers a non-qualified retirement benefit. Half offer it to the bank’s CEO, and 39 percent to the entire management team as well.
  • Less than half of all respondents, and two-thirds from publicly traded banks, allocate equity to executives annually. Thirty-one percent offer restricted stock, while 21 percent grant stock options. Just 5 percent give their executives synthetic equity.
  • The median salary for a bank CEO was $382,205 in FY 2014, but how much the CEO earns varies widely depending on the size of the bank.
  • Twenty-eight percent of respondents plan to increase director compensation in 2015, and more than half increased pay in 2013 or 2014. However, 28 percent report their board hasn’t seen a raise in pay since at least 2010.
  • While most bank boards are earning more, directors are also spending more time on bank board activities. The median hours per month devoted to meetings, business development, education and other board obligations rose to 20 hours, up 33 percent from 2014.
  • Boards continue to shift from board meeting fees to awarding an annual retainer. The percentage of directors receiving board meeting fees declined 7 points from the 2012 survey, to 77 percent. Directors receiving annual retainers grew 17 points, to 61 percent.
  • The median board meeting fee for an independent director was $1,000 in FY 2014, an increase of one-third from FY 2013. The median annual retainer remained level in 2014, at $20,000.

Download the summary results in PDF format.

Bank M&A in 2015: Looking Ahead

Written by


In this video, Rick Childs of Crowe Horwath LLP highlights findings from Bank Director’s 2015 Bank M&A survey, sponsored by Crowe Horwath, which reveals a notable gap between those banks looking to sell and banks looking to buy.

Crowe Horwath LLP is an independent member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction. © 2015 Crowe Horwath LLP.

CEO Evaluations: Positioning the Bank for Success

Written by


11-19-14-Emily-DC.jpgA surprising number of boards don’t have a process in place to evaluate their most valuable player: the chief executive officer. But every bank should have a process in place, to provide the CEO not only with recognition for his accomplishments, but also to provide feedback, support and direction.

“I think a board that is undertaking a CEO evaluation should be applauded because I’m amazed how many boards do not,” says Jim McAlpin, a partner at Bryan Cave LLP. Gayle Appelbaum, a principal with compensation consulting firm McLagan, has talked to CEOs with long tenures at their institutions that have never had a performance evaluation.

Banks taking those first steps toward evaluating the CEO should view the process as an opportunity to discuss where the board wants to take the institution, what goals need to be met in order to get there and how the CEO will be compensated for achieving those goals, McAlpin adds.

While the board should have input, the responsibility for the evaluation process should ultimately fall on a designated independent board member—the chairman, or if the chairman is the CEO, then the lead director or the compensation committee chairman. How the board provides that input back to the CEO will differ based on the bank’s governance structure. If the evaluation falls under the realm of the compensation committee, for instance, the compensation committee chairman would ask these committee members to complete an evaluation form and return it to the chairman, who would then use those forms to complete the overall evaluation. The committee chair would then meet with the CEO to discuss the evaluation, perhaps with the board chairman or lead independent director present as well. And while some banks may consider the compensation committee, or even the full board, responsible for the evaluation, McAlpin recommends that one person communicate the message to the CEO.

“It’s a much smoother process if there’s one person that can be the focal point for the conversation with the CEO, as opposed to a committee talking to the CEO. Whatever message the board wants to convey needs to be clear [and] needs to be thought out in advance. In my mind, it’s much better if one person is conveying that message,” says McAlpin. “You want expectations to be very clearly set.”

Of course, the board will need to determine what it expects of its CEO in advance of conducting the evaluation. The board, through its designee, should communicate the areas in which the CEO is expected to improve, as well as the goals he or she is expected to accomplish in the upcoming year. As such, the evaluation should not be a static form. As the board’s goals for the CEO change, the board will want to modify the criteria that form the basis of its assessment. Appelbaum notes that the areas the board wants to focus on for the evaluation will differ based on each CEO and the bank’s needs, but would likely include:

  • How well the CEO leads the organization, including development of staff and planning for succession
  • Employee and customer satisfaction scores, if the bank has that information available
  • Relationship with the board, including how well the CEO communicates with board members and how open he or she is to feedback
  • Community involvement, including how the CEO is supporting and promoting the bank within the community
  • Fulfillment of key objectives within the strategic plan, including the bank’s financial performance.

Seventy-two percent of respondents to Bank Director’s 2014 Compensation Survey tie CEO compensation to performance indicators, with asset quality, return on equity and return on assets the most common metrics used. However, Appelbaum says that these quantifiable factors, which are tied to the CEO’s bonus, should be distinct from the more intangible elements discussed in the evaluation, which dig more deeply into board expectations of the CEO’s role within the organization.

It’s important to align the evaluation, and compensation, with the bank’s strategic plan. Directors from institutions of all sizes consistently indicate—most recently in the 2014 Compensation Survey—that tying the compensation of top executives to performance remains a top challenge. Yet less than half of the respondents to that survey—bank senior executives and board members of U.S. banks of all sizes—tie CEO pay to strategic goals. How will the CEO know how to effectively lead his institution without clear direction from the board?

An important final factor for boards to consider is ensuring the right amount of communication with the CEO, as well as providing the support that the CEO needs to achieve the strategic goals of the bank. “The board should ask the CEO what support he or she will need in achieving the goals [and] what additional resources might be needed,” says McAlpin. If the board is setting goals that the CEO believes are unachievable, or if the CEO feels that additional personnel or resources are needed, this can be discussed at this time. The CEO should feel supported, but the members of the board should also remember that they represent the shareholders, not to the CEO, he adds. “It’s incumbent upon the CEO and the board to have the bank achieve the best results possible and maximize shareholder value.”

Appelbaum recommends, at minimum, that the board conduct a midyear evaluation to provide the CEO feedback on progress. In turn, the board’s constructive comments could give the CEO the opportunity to course-correct in order to do what he or she has been tasked to do.

Additionally, the board chairman or lead director may consider meeting the CEO regularly, even monthly, to discuss what the CEO needs from the board in terms of support and what issues are top of mind. “You have to let the CEO run the bank, and you can’t allow the board to micromanage the bank or run the bank on a daily basis” says Appelbaum. “But you want the organization to win, and making sure your CEO has all the right information, all the skills [and] all the resources available to make that happen makes for a much better organization.”

An effective evaluation process positions the bank for success in the long run, not only due to the attention and care to its top executive’s performance, but also furthering communication and focus on what the bank needs to do to achieve its strategic vision. “A lot of bank boards are not used to that level of interaction with the CEO in setting goals and objectives,” says McAlpin.

2015 Bank M&A Survey: Plenty of Buyers – but Too Few Sellers?

Written by


11-14-14-MandA.jpgThere’s no shortage of financial institutions seeking an acquisition in 2015, but fewer banks plan to sell than last year, according to the bank CEOs, senior officers and board members who completed Bank Director’s 2015 Bank M&A Survey, sponsored by Crowe Horwath LLP. Forty-seven percent of survey respondents reveal that they plan to purchase a healthy bank within the next 12 months, compared to a mere 3 percent who plan to sell their bank.

Are some bank boards and management just waiting for the right deal? Seventy-one percent would consider selling the bank if they received an attractive offer. As bank valuations rise, potential sellers express a growing desire for stock in return for selling the bank—often combined with cash.

There may be fewer fish in the sea—at least not enough to satisfy the appetites of growth-hungry banks—but the survey reveals several positive trends for the industry. Of the two-thirds of respondents who see a more favorable M&A environment, 55 percent cite improved credit quality and 48 percent improved stock valuations. And despite the challenges of a highly competitive growth environment and costly regulations, 64 percent of respondents expect their bank to thrive as an independent entity. Absent a compelling deal, bank leaders express a preference for self-determination: When asked about barriers to selling the bank, more than two-thirds say that the board and/or management want the organization to remain independent.

More than 200 directors and senior executives of banks nationwide responded to the survey, which was conducted by email in September.

Key Findings:

  • Credit quality’s adverse impact on deal-making is lessened in the minds of respondents. A little more than one-third of respondents say that concerns about the asset quality of potential targets impedes the deal, a decline of 41 percent since the 2013 survey.
  • As credit quality continues to improve, 60 percent of bank leaders now reveal that post-merger integration was the most difficult aspect of their most recent deal—up by 33 percent from last year’s survey.
  • Price is still an issue. When asked about barriers to buying another bank, 63 percent say that the pricing expectations of potential targets are unrealistically high. Fifty-six percent say that current pricing is too low to sell the bank.
  • Both buyers, at 53 percent, and sellers, at 45 percent, prefer a mix of cash and stock as payment for the purchased bank. The percentage of potential sellers that would prefer that the transaction include stock has increased by 30 percent since the 2013 Bank M&A Survey, likely a reflection of higher valuations for bank stocks.
  • Eighty-three percent feel that their institution has adequate access to the capital needed to meet the demands of Basel III and fuel the bank’s growth and acquisition strategy.
  • Three-quarters of respondents integrated board members and/or executives from the acquired bank into the surviving institution after their most recent acquisition.

Download the summary results in PDF format.