-
Two troubled banks were sold through bankruptcy auctions this month, and another is expected next week. The much-discussed recapitalization method has only recently gained traction.
December 7 -
Old Florida Bancshares had been focusing on internal growth until the opportunity to buy New Traditions National Bank arose. The deal will take Old Florida to $1 billion in assets and cement its place as Orlando's biggest community bank.
November 5 -
Though bank deals have risen in Texas because of its robust economy and in California because of abundant capital, small Kansas banks are partnering because they worry about their viability as little guys.
July 2 -
Most of us buy into the thinking that the slow pace of bank M&A is a bad thing. But, unless you are an investment banker or a lawyer who advises on deals, there are a lot of benefits to measured consolidation, some industry observers say.
June 12
Every deal tells a story: sometimes it is about a banker who is just plain tired, and other times it might be about a banker hungry for growth. Occasionally it's both.
Though every deal involves unique elements, nearly all of them fall into a handful of patterns based on their asset sizes, the kind of market they operate in, their lines of business and other factors.
Putting aside the endless predictions about how many deals will occur next year — like this year, the bank M&A pace will probably increase somewhat, but not go gangbusters — American Banker queried a number of dealmakers and lawyers about the kinds of deals they anticipate next year. Drawing from those conversations, here are six catchy categories to sharpen your outlook for 2013 and simplify a complex market.
The Kansas Way
"These are deals driven by the seller," Brown says. "These are basically clean banks that just can't survive in the current regulatory environment."
He adds that there could be other reasons, too, like a lack of succession planning or a need for liquidity. Either way, Brown says, deals driven by the seller won't just be in Kansas anymore.
Small Fish Needs Rescue
Bright lights, big city? More like fierce competition and expensive rent. While community banks across the country are agonizing over expenses, those in metropolitan areas are feeling the crunch the hardest, advisors say.
"It is hard to justify being a small bank in a large metro area," says C.K. Lee, a
Constraints on lending also hold back smaller banks in bigger metro areas.
"If you have $10 million of capital, your in-house lending limit might be $800,000," Lee says. In a competitive landscape, "that shuts them out of the market."
The $390 million-asset HPK Financial, which
Private Equity Gets Antsy
Private equity saw a golden opportunity in the banking sector at the onset of the downturn,
"They've already raised or committed the capital," Brown says.
Strategic Growth Bancorp in El Paso, Texas is one example, Brown says. In the fourth quarter, it
Unite and Conquer
The days of banks selling for multiples of their book value are largely over, and 2013 might be a year filled with "no- to low-premium" deals, says
"It is the hardest kind of deal to do. Historically, it was called the merger of equals," Hickey says. "But it is basically taking two companies who know each other, respect each other, but decide it is better to double their size versus competing against each other."
The deals make sense because of the cost savings and the ability to quickly gain scale, but are difficult because boards have been engineered to see a sale as a big payout, not a pairing of like-minded companies.
Executives of the $624 million-asset Old Florida Bancshares in Orlando cited the opportunity for scale when it
Corralling One-Trick Ponies
Two of the hard lessons that bankers learned from the economic downturn were stick to what they know and limit their concentrations. But niche players who rely on one business are too vulnerable. They will need to diversify or sell.
"There are banks that are realizing that their business model might not be optimal, but what can you do?" Hickey says. "The regulators are promoting diversification."
The good news is that one bank's concentration problem can be another bank's diversification strategy.
Examples include M&T Bank's (MTB)
The Chapter 11 Leap
Creativity has been the hallmark of successful deals in recent years. That will continue in 2013, advisors say. One of the unusual approaches could be a bank sale overseen by a bankruptcy court. The method, which puts a typically insolvent and debt-heavy holding company into bankruptcy, has been tossed around for the last few years, but
Advisors are divided about how often the method will be used. Hickey is skeptical. But Ernest Panasci, a partner at Jones & Keller in Denver, who was involved in the Mile High deal, says that nearly 150 banks nationwide fit the profile for a Chapter 11 sale.
