At September 30, 2018, First Republic Bank (FRC) reported total deposits of $75 billion, which expanded to about $175 billion at December 31, 2022. A deposit run reversed four years of deposit growth over several days in March, with deposits at March 31, 2023 regressing to the September 2018 level excluding $30 billion of funds deposited by large banks in March 2023. The shareholder value destruction also was crystallized. FRC’s market capitalization declined from $16 billion at September 30, 2018 to $1 billion at April 26, 2023. This month, we look at this stunning reversal in fortune.
In this article we look at the performance of publicly traded banks in what was the worst performance since the GFC other than the first quarter of 2020 with the NASDAQ Bank Index declining 21% for the quarter and 28% YTD through April 26. Analyst estimate revisions have been declining for nine months due to now declining NIMs from rising COFs. The market implies that further reductions are likely to occur. While we do not want to be accused of piling on, we also offer a flyover of beleaguered First Republic Bank (NYSE: FRC).
A tough call for the merger arbitrage community: $25 per share cash deal closes; regulators reject the deal, causing First Horizon National to trade freely in a tough market for bank stocks; or the parties extend the merger agreement again, but does the price get renegotiated?
The Federal Reserve’s aggressive monetary policy tightening claimed its first banking industry casualties in March with the failures of Silicon Valley Bank and Signature Bank. In this month’s issue of Bank Watch, we explore the turmoil that enveloped some regional banks in March and its implications.
The SEC’s comment letters on public company filings give insight into what factors should be considered when discussing business combinations. In this article we discuss and comment upon four examples covering customer relationships, tradenames, contingent consideration, and bargain purchases. understanding how the SEC approaches these issues in the past will better prepare companies and their advisors for the level of scrutiny that often accompanies the accounting for business combinations.
In this month’s article we discuss a few themes from the Bank Director’s 2023 Acquire or Be Acquired Conference along with some highlights of the sessions we attended. Over the years the conference has broadened its M&A offerings to focus on a combination of M&A, growth, and FinTech strategies.
The tussle involving Frontier Group Holdings, Inc. and JetBlue Airways Corporation over Spirit Airlines has been decided in favor of JetBlue. In this article we take a look at the fairness opinions rendered by Morgan Stanley and Barclays, then concludes by asking a pertinent question the market seems to have answered even if the board answered in a nuanced way.
In each “Meet the Team” segment, we highlight a different professional on our Family Law team. This segment we highlight Timothy Lee. Tim is the Managing Director here at Mercer and is a member of the firm’s board of directors.
In 2022, market performance for publicly-traded banks was more dispersed than in 2020 or 2021, when most every bank reported share price declines (2020) or increases (2021). In 2022, approximately 35% of public banks with assets under $10 billion reported share price gains. We examine some reasons for this diverging bank stock performance during 2022 in this article.
To celebrate a new year and everything that comes with new beginnings, the Mercer Capital Litigation Support Services Team has decided to start the year with a blog emphasizing the importance of the beginning of a family law engagement, defining the assignment.
The outlook for deal making in 2023 is challenged by significant interest rate marks, uncertain credit marks given a potential recession and soft real estate values, and the bear market for bank stocks that has depressed public market multiples. However, core deposits and excess liquidity of potential sellers is highly prized today given tight balance sheet liquidity and an inability to sell bonds to generate liquidity given sizable unrealized losses. A rebound in bank stocks and even a modest rally in the bond market that lessens interest rate marks could be the catalysts for an acceleration of activity in 2022 provided any recession is shallow.
For this quarterly update, we bring together a couple of strands of our medtech and device industry practice. This article looks back at 2022 and also looks ahead to 2023.
In August 2022, the SEC adopted final rules implementing the Pay Versus Performance Disclosure required by Section 953(a) of the Dodd-Frank Act. These rules go into effect for the 2023 proxy season and introduce significant new valuation requirements related to equity-based compensation paid to company executives. What does this mean, and how does it apply to you? What are the requirements, and why might there be significant valuation challenges involved? We discuss this and more in this article.
The U.S. bond market is undergoing its worst bear market in decades. In this article we provide commentary on bank bond portfolios after the third quarter 2022 earnings calls.
There has been a lot of discussion surrounding the impact of rising rates on bank bond portfolios and bank stocks as rising rates have resulted in large unrealized losses in bank bond portfolios. If subjected to mark-to-market accounting like the AFS securities portfolio, most bank loan portfolios would have sizable losses too given higher interest rates and wider credit spreads. In this article, we examine data from a survey of periodic loan portfolio valuations by Mercer Capital to observe recent trends in loan portfolio fair values.
In-person conferences are back in 2022 and so are we. Our professionals have been speaking at and attending numerous conferences, so we thought it a good idea to reflect on a few of these conferences and share selected PowerPoint decks with you. Why? Because there are valuable materials on valuation, forensic and financial topics included in these PowerPoint decks.
Fintech partner banks have underperformed the broader banking sector in 2022 in a reversal of the trend in 2021. For some banks, fintech partnerships have accelerated growth and created new income streams. However, bank partners also face unique risks. We examine considerations for community banks pursuing a fintech partnership strategy in this month’s BankWatch.
The medical device manufacturing industry produces equipment designed to diagnose and treat patients within global healthcare systems. Medical devices range from simple tongue depressors and bandages to complex programmable pacemakers and sophisticated imaging systems. Major product categories include surgical implants and instruments, medical supplies, electro-medical equipment, in-vitro diagnostic equipment and reagents, irradiation apparatuses, and dental goods.
In this article we outline five structural factors and trends that influence demand and supply of medical devices and related procedures.
The COVID-19 pandemic brought economic hardship to many. The second quarter of 2020 might go down as one of the quickest economic downturns ever recorded. However, in an effort to protect the economy, the Fed created an extremely hospitable environment for venture capital, and with the glaring supply chain issues, FreightTech became a cushy landing place for investor’s money. We have written about venture capital and FreightTech before, and it has only gotten bigger since then.
What is normal? A question we seem to have been asking ourselves for the last few years. When it comes to making sense of the “normal” in this new day and age, we cannot offer any advice there. But we can speak on the process and importance of normalizing financial statements for a business valuation.
Mercer Capital previously published articles on core deposit trends in August 2020 during the early stages of the pandemic and again in August 2021. In those articles, we described a decreasing trend in core deposit intangible asset values. In response to the pandemic, the Fed cut rates effectively to zero, and the yield on the benchmark 10-year Treasury reached a record low. While many factors are pertinent to analyzing a deposit base, a significant driver of value is market interest rates. As shown below, we find ourselves in a very different interest rate environment today.
In contested cases where a business interest comprises a significant portion of a divorcing couple’s net worth, it is common for one or both parties to retain a business appraiser to value the business. Post-divorce, if only one spouse retains an interest in the business, all else equal, a higher business interest value typically implies the other party will receive a greater share of the remaining marital assets, as compared to a lower business interest value. As we will discuss in this article, the facts and circumstances of the business interest being valued may reasonably support various assumptions when comparing two valuation conclusions.
Bond portfolios saw a significant increase in unrealized losses during 2Q22; however, investors seem to be looking past the issue, focusing instead on expanding NIMs for banks with significant non-interest-bearing deposit funding.
In this article we provide a broad overview of PPAs and then a deeper look into the pitfalls and best practices related to them.
