Facts and Circumstances

What do current hot topics such as Trump Bump, tax reform, change in the regulatory tone, and improvement in net interest margin mean for M&A? As many of you know, publicly traded bank stocks have enjoyed a robust run-up in pricing post-election.

The run-up has not been as pronounced in the community banking space. The rising tide has not raised all boats. Pricing still remains about facts and circumstances. I am not saying there haven’t been deals announced at strong metric levels, but rather the strong metrics are for those banks deserving them. Profitability, growth, strong loan-to-deposit ratios, favorable markets, minimal termination fees, high core deposit levels, and strong management teams are still the largest drivers affecting value.

Many states have lost more than 25% of their banks over the last 10 years, and consolidation is expected to continue at an annual rate of 3% to 5% of all banks. The reasons for consolidation haven’t changed, but pricing has improved for those banks with the best “facts and circumstances.” Interested in evaluating your “facts and circumstances”? Please contact your Wipfli client service executive.