Driven by a Need for Scale, Banks Focus on Balance Sheet Growth in an Improved M&A Climate, Bank Director Survey Finds


BRENTWOOD, TENN., November 16, 2015 — Is the pressure on for small banks to get bigger? Sixty-seven percent 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. Many of these respondents (62 percent) 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.

Despite a positive attitude on bank M&A, bank leaders also hint at a potential dark cloud. Forty-six percent of respondents say they’re beginning to see a deterioration in loan underwriting standards within the industry that could lead to credit quality issues in the future.

The 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.

The majority of bank executives and boards feel a need to grow, but respondents don’t agree on the size banks need to be in order to compete today. A slim majority, 32 percent, identify $1 billion in assets as the right size. Eighty-nine percent of commercial banks and savings institutions are under $1 billion in assets, according to the Federal Deposit Insurance Corp.

Key findings include:

  • 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 percent), a branch (20 percent), a nondepository line of business (14 percent), a loan portfolio (6 percent) and/or a financial technology firm (2 percent).
  • Respondents indicate that credit culture, at 32 percent, and retaining key talent that aligns with the buyer’s culture, at 31 percent, 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. Fifty-five percent of respondents who purchased a bank in 2014 or 2015 used social media, compared to 42 percent of 2011-2013 deals and 14 percent of 2008-2010 deals. Facebook, at 26 percent, 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, sixty percent cite deal price. Forty-six percent 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 percent say they sold because shareholders wanted to cash out. Twenty-seven percent cite limited growth opportunities. Despite concerns that regulatory costs are causing banks to sell, just 27 percent cite this burden as a primary motivator.

Full survey results are available online at BankDirector.com, and will be featured in the 1st quarter 2016 issue of Bank Director magazine.

ABOUT BANK DIRECTOR
Since 1991, Bank Director has served as a leading information resource for the directors and officers of financial institutions. Through its quarterly Bank Director magazine, executive-level research, annual conferences, and its website, BankDirector.com, Bank Director reaches the leaders of the institutions that comprise America’s banking industry. Bank Director is headquartered in Brentwood, Tennessee.

ABOUT CROWE HORWATH LLP
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting, and technology firms in the United States. Under its core purpose of “Building Value with Values®,” Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk, and performance services. With offices coast to coast and 3,000 personnel, Crowe is recognized by many organizations as one of the country’s best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 120 countries around the world.

Source: BankDirector.com

Contact: Michelle King, chief brand officer, (615) 777-8465, mking@bankdirector.com
Mike Alday, Alday Communications, (615) 791-1535, mike@aldaycommunications.com