Credit Marks on Acquired Loan Portfolios Trend Down During 2013

Merger related accounting issues for bank acquirers are often complex. In recent years, the credit mark on the acquired loan portfolio has often been cited as an impediment to M&A activity as this mark can be the most critical component that determines whether the pro-forma capital ratios are adequate. As economic conditions have improved in 2013, bank M&A activity has also picked up and we thought it would be useful to take a look at the estimated credit marks for some of the larger deals announced in 2013 (i.e., where the acquirer was publicly traded and the reported deal values were greater than $100 million) to see if any trends emerged.

Share Repurchases

Many bank analysts have been arguing that investors should buy bank stocks because capital is building faster than it can be deployed. The Federal Reserve, unlike during the pre-crisis era, is governing the amount of capital returned to shareholders. Basel III is another governor, especially given the enhanced leverage ratio requirement large U.S. banks are facing. But are buybacks a good idea for bank managers today?

Specialty Finance Sector Shows Signs of M&A Life

Acquisitions of specialty finance companies by banks are not a panacea for challenges that face the industry; however, in some instances a transaction that is thoroughly vetted, well-structured, and attractively priced can provide the buyer a new growth channel while also obtaining revenue and earnings diversification.

Evaporating Gains

Comments by Federal Reserve Board Chairman Ben Bernanke in the second quarter of 2013 resulted in significant increases in Treasury rates during the quarter, particularly for longer-term securities. In May, Bernanke testified before Congress and outlined the Fed’s eventual approach … Continued

Community Bank Stress Testing

While community banks may be insulated from certain more onerous stress testing and capital expectations placed upon larger financial institutions, recent regulatory guidance suggests that community banks should be developing and implementing some form of stress testing and/or scenario analyses.

S Corporation Banks Beware

While most banks and their directors are generally aware of the tax benefits of an S election, there are some potential disadvantages.

Sub-Chapter S Election for Banks

Excerpted from Mercer Capital’s book, The Bank Director’s Valuation Handbook: What Every Director Needs to Know About Valuation.

Capital Conundrums

This article provides a summary of capital raising transactions that have occurred in 2008 and offers insight into the financial considerations present in evaluating each capital alternative.

2007: A Year to Forget for Banks

As the world celebrated the closing of another year on December 31,2007, many bankers hoped to soon forget one of the worst periods for bank stock performance in recent history.