Bank Directors Predict More Mergers, Acquisitions in 2014

Some have described 2013 as a memorable year for its bank-buying buzz. Expectations are that the volume of acquisition talk won’t diminish during 2014 either.

“A lot of community banks are considering their options, especially smaller community banks looking at the regulatory costs going forward,” said Candace Franks, Arkansas State Bank Commissioner.

That prevailing trend extends beyond the state borders as part of a nationwide weather pattern dominating the financial sector. The same regulatory forces that are helping generate more merger gambits also make it more difficult to accomplish transactions, according to some lenders.

About 58 percent of bank executives and directors surveyed believe it’s more difficult to get regulatory approval to accomplish an acquisition than it was five years ago.

That feedback was among the responses gathered in a recent mergers and acquisitions survey Bank Director published that gauged the winds of change sweeping over its constituents.

The quarterly magazine, based in Brentwood, Tenn., also noted that 76 percent of the respondents believe the number of bank deals will increase next year.

Emily McCormick, director of research at Bank Director, said there often is a price gap preventing more bank-buy talk from culminating in more transactions. Potential sellers are rejecting offers as too low, and potential buyers are walking away from counteroffers deemed too high.

“But I think it’s getting better,” McCormick said of the valuation disparity.

The participants in the third annual survey were spread across the nation and represented lenders that ranged from having more than $5 billion in total assets to less than $250 million.

Candace Franks is unsure that a reliable asset-size threshold exists to delineate banks poised to grow and banks poised to go.

“There’s a lot of room for discussion on that,” Franks said. “A lot of banks are looking at how to position themselves for the future, whether to find a partner or how to do things differently.”

She believes smaller banks can be among the profitable survivors that continue as going concerns. Leadership willing to roll with the changes is key.