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Many community banks have been hit with a double-whammy in the battle for profitability: low growth in loans mixed with a high amount of regulations.
So it makes sense that nearly half the respondents to a mergers and acquisitions survey, 46%, say their institution is likely or very likely to purchase another bank by the end of 2017. Another 25% say they are open to selling the bank, considering a sale or are actively seeking an acquirer, according to the survey, published by Bank Director magazine.
The survey of more than 200 CEOs, CFOs, chairmen and directors of banks also probed what bank executives look for when buying an institution. Nearly six out of 10 respondents, 58%, say being located in an attractive market is the most important factor in their decision to acquire another institution. More than four out of 10, 41%, say the opportunity to pick up talented lenders in an acquisition is highly important, due to a competitive environment for commercial lenders, the survey reports.
Other survey findings include:
Out of the 25% of respondents who say they are open to a sale, 54% cite regulatory costs as the reason they would sell the bank, followed by shareholder demand for liquidity at 48% and limited growth opportunities at 39%.
Price is identified as the top reason potential buyers and sellers have walked away from a deal in the past three years. Next to price is cultural compatibility.
Concerns about the quality of loan underwriting standards at the target institution caused 28% of respondents to walk away from a potential acquisition.
More than one-fourth of the respondents, 28%, believe branch acquisitions are less valuable than they used to be.
Nearly half of the respondents, 45%, say they are seeing a deterioration in loan underwriting standards within the industry, leading to possible credit quality issues in the future.
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