“Why do banks merge?” There can be positive reasons, such as growth, filling a product line or adding talented executives. There are also negative reasons, such as insolvency. These issues were discussed at the Texas Bankers Association’s 5th Annual Strategic Opportunities and M&A Conference, which ran from November 6 to 8, 2017 in New Orleans, Louisiana.
“Fed Anticipates Problems”
Even during the best times, some banks fail. The Federal Reserve has been appointed as “receiver” of insolvent banks under its FDIC powers. The official “2016 FDIC Failed Bank List” included 5 banks: Allied (AR), Woodbury (GA), First Cornerstone Bank (PA), Trust Company (TN) and North Milwaukee State Bank (WI). Each of these was merged with a solvent bank.
Bank mergers must be approved by the Fed. Fed bank merger approval takes on average six months to a year. On March 17, 2017, the Fed made the process easier by increasing the asset amount, which would trigger closer scrutiny from $25 billion to $100 billion. This only makes sense since banks continue to grow in size.
“Offering Solutions & Growing Banks”
NexBank CEO John Holt spoke as a panelist of the Strategic M&A Conference sub-group called “Reinventing Community Banking: Perspectives on Competing by Innovation.” Technological financial innovations are likely to be patented and could be a key reason for an acquisition. Certain executives might also have expertise selling special exotic financial instruments.
“Stable NexBank Ratings”
NexBank is in a great position due to its healthy bottom line. It enjoys an “A+” Bank Tracker Rating and “A” Deposit Accounts Health Rating. The NexBank asset amount for December 31, 2016 was $4.6 billion. Hopefully, this conference has helped bankers identify M&A opportunities. This could increase bank industry growth rates, if the failed bank had innovative technology or financial products.