Specialty Finance Acquisitions

Bank acquisitions of specialty lenders picked up notably last year amid efforts to deploy excess liquidity and grow loans. The rationale for a bank acquiring a specialty lender is intuitive: higher yielding loans funded with cheap deposits. While these deals are not without risk, for the right buyer they can provide a new growth channel and help diversify revenue and earnings.

First Quarter 2022 Review: Volatility Resurfaces

In this month’s article we summarize key metrics we track regarding equities, fixed income, and commodity markets leading up to the Ukrainian invasion on February 23, 2022 and thereafter.

Net Interest Margin Trends and Expectations

As 2022 gets underway, the banking industry is hopeful that rate increases and loan growth stemming from continued economic recovery will deliver a boost to margins. This potential inflection point provides a good opportunity to review recent margin trends and examine how banks may be impacted by rising rates this year. Read more in this month’s issue of Bank Watch.

Bank M&A 2022 | Gaining Altitude

At this time last year, bank M&A could be described as “on the runway” as economic activity accelerated following the short, but deep recession in the spring. Next year, activity should gain altitude. Should and will are two different verbs, however.

Value Drivers in Flux

No one knows for sure; the future is always uncertain. For banks, two key variables have an outsized influence on earnings other than credit costs: loan demand and rates. In other industries the variables are called volume and price.

Fairness Opinions – Evaluating a Buyer’s Shares from the Seller’s Perspective

Fairness opinions are more than a 3 or 4 page letter that opines as to the fairness from a financial point of view of a contemplated transaction. A fairness opinion should be backed by a robust analysis of all the relevant factors considered in rendering the opinion, including an evaluation of the shares to be issued to the selling company’s shareholders. In this article, we present key questions that should be asked about the buyer’s shares.

Not All MOEs Are Created Equal

In the December 2020 BankWatch, we provided our M&A outlook for 2021 and touched on themes that we believed would drive deal activity for the year.  Our view was that the need to reduce costs in the face of revenue … Continued

Mortgage Banking Lagniappe

2020 was a tough year for most of us. Schools and churches closed, sports were cancelled, and many lost their jobs. There were a select few, however, that thrived during 2020. Jeff Bezos and Elon Musk saw a meteoric rise in their personal net worth over the past 12 months. Mortgage bankers are another group showered with unexpected riches last year (and apparently this year).

Mortgage Banking Lagniappe (Part II)

The January Bank Watch provided an overview of the mortgage industry and its importance in boosting bank earnings in the current low-rate environment. As we discussed, mortgage volume is inversely correlated to interest rates and more volatile than net interest income. In this article, we discuss key considerations in valuing a mortgage company/subsidiary, including how the public markets price them.

Estate Planning When Bank Stocks Are Depressed

Maybe not for the best of reasons, the stars have aligned for bank investors who have significant interests in banks to undertake robust estate planning this year. Bank stock valuations are depressed as a result of the recession that developed from the COVID-19 policy responses, including a return to a zero interest rate policy that is now known as the effective lower bound. The result is severe compression in net interest margins

Four Reasons to Consider a Stock Repurchase Program

Amid many events brought on this year, many banks and their directors are evaluating strategic options and ways to create value for shareholders. While the Federal Reserve has prohibited the largest U.S. banks from share repurchases, the current environment has prompted many community banks to announce share buyback plans. In our view, there are four primary reasons that many community and regional banks are announcing or expanding share repurchase programs in the current environment. In this article, we expand on those four reasons.

Top Three Valuation Considerations for Credit Unions When Contemplating a Bank Acquisition

One emerging trend prior to the bank M&A slowdown in March 2020 was credit unions (“CUs”) acquiring small community banks. Based upon our experience of working on transactions where CUs acquire banks, we have compiled a list of three primary valuation considerations for CUs to consider when evaluating and hopefully ultimately closing successful acquisitions of bank targets.

Ernest Hemingway, Albert Camus, and Credit Risk Management

In the March 2020 Bank Watch, we provided our first impressions of the “reshaping landscape” created by the COVID-19 pandemic and its unfolding economic consequences.  This month, we expand upon the potential asset quality implications of the current environment. 

A Reshaping Landscape

March 2020 probably will prove to be among the most dramatic months for financial markets in US history.  Likewise, the fallout for banks may take a year or so to fully appreciate.  Nonetheless, in this issue of BankWatch, we offer our initial thoughts as it relates to the industry.

Community Bank Valuation (Part 5): Valuing Controlling Interests

To close our series on community bank valuation, we focus on concepts that arise when evaluating a controlling interest in another bank, such as arises in an acquisition scenario.  While the methodologies we described with respect to the valuation of minority interests in banks have some applicability, the M&A marketplace has developed a host of other techniques to evaluate the price to be paid, or received, in a bank acquisition.

Quality Of Earnings Study: The “Combine” to Help Harvest Top FinTech Acquisition Targets

This article discusses a number of considerations that buyers may want to assess when performing due diligence on a potential FinTech target. While the ultimate goal is to derive a sound analysis of the target’s earning power and potential, there can be a number of different avenues to focus on, and the QoE study should be customized and tailored to the buyer’s specific concerns as well as the target’s unique situations.