The idea of the Trade of the Decade in small banks is not something I cooked up just to sell subscriptions. I have been investing in small banks for more than 20 years and I follow the industry closely. Talking to analysts and executives of small banks it is clear to me that conditions are ripe for an acquisition wave similar to the one on the 1990s where bank prices rose about tenfold and deal multiples soared to about 2.75 times book value. With deal multiples at just .3 and dozens of financially strong banks trading below book value now is the time to buy community banks Activists are stepping up in the sector and so should you.
You do not have to just take my word on this. Listen to what the CEOs of banks are telling you. They are telling you that they are seeking to grow by buying other banks. Tracking valuations, activist and insider activity we can put together a portfolio of potential target and reap tremendous rewards. Right now we have more than 20 on our current buy list and will be adding more in the next week or so.Join us at Banking on Profits to cash in on this powerful and long lasting trend.
Ray Davis Umpqua Bank- Small institutions — the capital they require to stay up to snuff and the talent they need — are competing against bigger institutions as well as tech companies. On top of it, you have regulations. So you can’t stay small; you have to join forces. For the first time, size matters.
Roger Busse Pacific Continental Bank -Institutions face additional regulatory costs, which may make them more prone to look for partners and get scale. But transactions such as Capital Pacific arise not just from regulatory pressures. They are opportunities on the strategic level. The acquisitions are a combination of talent and opportunity to get scale in major markets strategically.
Terry Zink Bank of the Cascades-A larger bank can spread its infrastructure costs over a larger number of customers and can earn the profit that is needed for viability. When I came onboard in 2012, we had the option of drastically downsizing or looking for someone to partner with. That’s how we came up with Home Federal. We were able to take out 25% of the cost of the combined companies.
During an April 24 conference call to discuss first-quarter 2015 results, Hancok Holdings President and CEO John Hairston said organic growth is still the top priority, and the Gulfport, Miss.-based company is “working relentlessly” to create it. He said that with the bank’s buyback program complete, M&A is priority No. 2 in terms of capital use as long as the price and the strategic fit make sense. “We will be very prudent in doing it, but I would very much like to use our ability to acquire to augment earnings,” he said.- SNL Financial
The bank would look outside of the markets it already operates in if a strategic and accretive transaction came along, Chairman and CEO Lynn Fuller told SNL. But, in part because the company would not have management on the ground or a deep understanding of the economic cycles of the new market, it would also have to find a target of substantial size. Fuller said the seller would need to be at least $750 million in assets and a clean bank with strong management, a good track record and a good reputation. Heartland would also have to be sure that it could grow to more than $1 billion in the new market within a couple of years. “We are much more critical when we go out of footprint,” Fuller said.- SNL Financial
David Turner Regions Financial- The way we think about it is we want to deploy it in our loan growth. And when we have excess after that, we look to have acquisitions, whether it’s banks or nonbanks,” Turner said. “We’re doing a lot of work around that to use the excess capital. I want to be real clear that when we think about acquisitions, it’s more about using the excess capital and cash versus using our shares where they’re priced today.”
Of course, he added, M&A can play an important role. Increasingly, as banks grow and push for loan expansion, they will need low-cost, core deposits to help fund it. This could prove an important driver of deals in years to come. Banks not ready to break out and innovate but that have solid core funding could increasingly become attractive sellers. And the likes of ConnectOne will be surveying the M&A landscape closely for such opportunities. Already, ConnectOne has made a seismic stride on the deal path. In 2014, it merged with Union, N.J.-based Center Bancorp Inc. in a deal that more than doubled ConnectOne’s size.=SNL Financial
“I still believe in community banks, not only from the small to mid-size business perspective, but also as an investment,” said Mario Garcia Jr., CEO and managing partner of Validus Group. He’s also founding chairman of the bank and currently sits on the board at both the bank and its holding company. “The key, is knowing what we know today, with the additional regulatory costs that are put on the banks at that level, you have to be over a $500 million [asset] bank to absorb those costs, and in order to realize the full value of the business, you have to be over $1 billion- Tampa Bay Business Journal
Scott Custer, Yadkin Bank- Custer says part of his job is keeping conversations going with potential partners, and that he’s always eyeing potential opportunities – and that means acquisitions.“I would say that I have lots of discussions and we’re certainly interested in continuing to grow the company,” he says, adding that there’s nothing imminent in the works. But the bank’s pattern has been a deal nearly every 15 months.- Charlotte Business Journal
Huntington Bancshares might not be done making deals. The bank, which has put together a string of acquisitions in recent years to help drive growth, is continuing to look at opportunities that fit its goal of providing additional value, said Steve Steinour, the bank’s chairman, president and CEO, at yesterday’s annual meeting.Last year, Huntington completed its acquisition of Camco Financial, bolstering its presence in the Cambridge, Ohio, area and the southeastern part of the state. Huntington also bought 24 Bank of America branches in Michigan last year and has been adding offices in Giant Eagle stores in Ohio and Meijer stores in Michigan. Finally, it just closed its deal for Macquarie Equipment Finance, an equipment-leasing and -finance company based in Bloomfield Hills, Mich. The bank has rebranded the operation as Huntington Technology Finance. Steinour said the bank will consider deals that are “part of our strategy and are disciplined” and are in the Midwest, where the bank operates, or adjacent to it. “We continue to look at different opportunities, as we have over the years,” he said during a conference call with analysts yesterday, a day after the bank reported an 11 percent increase in first-quarter profit. “We look at banks and nonbanks in our footprint.”- Columbus Dispatch
But Hamilton will still have the capital to do future deals in an environment where technology and regulatory compliance costs are easier for larger community banks to handle, Hamilton CEO Robert DeAlmeida said. “We need to get larger,” he said. “We know we need to get to that $500 million mark if not larger.”
The CEOs are telling you that they are looking to buy banks. A portfolio full of target banks should give us outsized returns for years to come. Join us by clicking here today