It was interesting to hear the thoughts of a number of great speakers regarding the current environment and what to expect for 2020. While a multitude of issues were discussed, the following three factors were consistently identified as the primary drivers of merger transactions in the current market:
- Succession planning. Planning (or lack thereof) for the next generation of bank leadership remains as a significant issue for community banks. The aging of boards and shareholders continues to serve as a motivation for many banks to seek out acquisition partners. This is an issue faced by many rural banks in Arkansas and I expect that it will continue to spur M&A activity going forward.
- Low Cost Deposits. Certainly not surprising to hear, but a number of speakers noted that a significant consideration in any acquisition is the desire to capture low cost core deposits. These funding considerations will no doubt continue to drive deals in 2020.
- IT Costs and Fintech Competition. Rising technology costs also lead many smaller institutions to reconsider remaining independent. Pressure is also mounting with increased competition from non-bank financial service providers. Several speakers encouraged banks to not be afraid to take some risks with technology offerings provided that you are partnering with a reputable Fintech vendor – noting that enhancing the customer experience is of utmost importance.
Our firm is fortunate to work with community banks and holding companies on M&A, securities, regulatory and corporate matters throughout Arkansas.
For more information on the matters discussed above, or to request assistance on any other legal issues, please contact Robert Smith in our Finance and Commercial Transactions practice group at (501) 370-1559 or
rsmith@fridayfirm.com.
