Page 29 - 2Q 2018 June Reporter
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Community Banks – Changing Market Dynamics
Put Spotlight on Strategic Options continued
banks. As long as community banks continue considerable motivation for additional community
to “know their customers” and provide tailored bank consolidation.
products and services, continued consolidation Currently, community banks have to consider
should not be a foregone conclusion. a number of strategic options. While there are
The low interest rate environment of the a number of considerations, including strong
past nine years has been a valuable source of financial performance, reduced regulation and a
support for business and consumer borrowers. favorable interest rate environment, favoring a
However, these low rates have made it difficult “doubling down”; the high valuation multiples may
for community banks to increase net interest compel a “sell now” transaction. Unfortunately,
margins. With the economy continuing to evaluating these strategic options is never an
expand and unemployment at historic lows, the easy decision.
Federal Reserve has already raised interest _______________________
rates twice this year and signaled that more
rate increases will likely follow. Given the ability
Ed Usalis, a keynote speaker at the 2018
to charge higher rates on loans, community
Midwest Strategic Options Conference, is Vice
banks will likely be able to increase their
President, BankValue at United Bankers’ Bank
profitability. This enhanced profitability can
and leads the BankValue team in providing
allow community banks to build capital to re-
financial advisory services tailored to the needs of
invest in technologies that provide economies
community banks.
of scale and enhance the customer experience.
While the previously mentioned challenges Ed brings to UBB a distinguished history of
provide justification for the consolidation management experience in the business valuation
among community banks, there is one other industry. Prior to joining UBB, he held leadership
motivation that cannot be ignored – community positions with the business valuation and litigation
bank valuations are at fairly high levels. Since support practices for the Minneapolis, MN
2013, the median price to tangible book offices of Baker Tilly Virchow Krause and RSM
multiples for bank acquisitions has increased McGladrey, Inc., in addition to establishing his
from 1.28 times to 1.60 times at the end of own financial advisory firm of Northern Valuation
2017. Additionally, the median price to last in St. Paul, MN.
12-months earnings multiple has increased
from 19.20 times in 2013 to 22.06 times at the
end of 2017. The multiples and the potential For Conference details,
please see Page 31
sales proceeds that they represent provide
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June 2018 IllInoIs RepoRteR
