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All Dressed Up with No Place to Go

November 3, 2017

Authors

Robert Klingler

All Dressed Up with No Place to Go

November 3, 2017

by: Robert Klingler

the-bank-accountOn the latest episode of The Bank Account, Jonathan and I discuss the prospects and alternatives for a small bank that finds itself without an interested buyer.   Frequently, we are finding clients and other depository institutions that have reached the internal decision that it’s time to sell, but when they check the market, the anticipated buyers are either not available, not interested, or at least not as interested as expected/hoped.

Before getting to those topics, we have a brief foray into me trying to avoid talking about college football, as well as updates on the proposed tax reform act and the announcement of the appointment of Jerome Powell to serve as Chair of the Federal Reserve Board.

Among the

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Considering a Sale of the Bank? Don’t Forget the Board’s Due Diligence

July 12, 2016

Authors

Jim McAlpin and Michael Shumaker

Considering a Sale of the Bank? Don’t Forget the Board’s Due Diligence

July 12, 2016

by: Jim McAlpin and Michael Shumaker

In today’s competitive environment, some bank directors may view an acquisition offer from another financial institution as a relief. With directors facing questions of how to gain scale in the face of heightened regulatory scrutiny, increased investor expectations, and general concerns about the future prospects of community banks, a bona fide offer to purchase the bank can change even the most entrenched positions around the board table.

So, how should directors evaluate an offer to sell the bank? A good starting place is to consider the institution’s strategic plan to identify the most meaningful aspects of the offer to the bank’s shareholders. The board can also use the strategic plan to provide a baseline for the institution’s future prospects on an independent basis. With the help of a financial advisor, the board can evaluate the institution’s projected performance should it remain independent and determine what premium to shareholders the purchase

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Negotiating Complexity: Executive Compensation Issues in M&A

April 8, 2015

Authors

Michael Shumaker and Rick Arenburg

Negotiating Complexity: Executive Compensation Issues in M&A

April 8, 2015

by: Michael Shumaker and Rick Arenburg

Upon reaching a letter of intent to acquire or sell a financial institution, many bank directors will breathe a sigh of relief. Following the economic challenges of the past several years, the directors of each institution have charted a course for their banks that will likely result in their respective shareholders realizing the benefits of a strategic combination. Although directors should be focused on “big picture” issues during the negotiation of a definitive agreement, they should not overlook the resolution of the many issues that can arise from executive compensation arrangements in a potential transaction. While often seemingly minor, compensation matters can raise unexpected issues that can delay or de-rail a transaction.

Procedural Issues

In addition to considering the economic features of a proposed merger, directors should also consider their individual interests in the transaction, including the potential payout of supplemental retirement plans, deferred fee arrangements,

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Don’t Forget to Consider Deposits in an Acquisition

February 17, 2015

Authors

Michael Shumaker

Don’t Forget to Consider Deposits in an Acquisition

February 17, 2015

by: Michael Shumaker

With many U.S. markets experiencing slow loan growth, some boards of directors looking to increase the size of their institutions have turned to acquisitions to capture greater scale and efficiencies. While asset growth is important, directors should also consider the deposits acquired as part of a merger. Many banks have found that a careful evaluation of the deposits of the selling bank can spot unexpected issues and also drive earnings for the combined institution. The issues and opportunities raised by the liability side of the balance sheet have implications for both buyers and sellers going forward, particularly as they seek to maximize the scope and franchise value of their institutions.

Gaining Deposit Share and Margin

 With many growth opportunities centered in more densely-populated areas, some financial institutions plan to use an acquisition to establish a “beachhead” in a growing market. Unfortunately, many have found

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Building a Better Mousetrap: Executing a Merger of Equals

October 27, 2014

Authors

Michael Shumaker

Building a Better Mousetrap: Executing a Merger of Equals

October 27, 2014

by: Michael Shumaker

With merger activity on the rise during 2014, some boards of directors are considering whether the time is right for their financial institution to find a strategic partner. These boards, particularly those serving institutions with less than $1 billion in assets, may believe their banks need to gain size and scope to maintain a competitive footing. However, these boards may also want to maintain the strategic direction of the institution or capture additional returns on their shareholders’ investment. For these boards, a merger of equals with a similarly-situated financial institution may hold the greatest appeal, as a combined institution could gain greater competitive resources and additional return for its investors than if it were to remain an independent institution. Although a merger of equals may be appealing to both management and the board, the particular circumstances required to execute such a transaction can often be elusive. A merger of equals may involve

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M&A: How to Review Deals at the Board Level

October 20, 2014

Authors

Michael Shumaker

M&A: How to Review Deals at the Board Level

October 20, 2014

by: Michael Shumaker

Many bank boards are considering a sale of their institution for a variety of reasons—heightened regulatory burdens, board and management fatigue, or an opportunity to partner with a growing bank are just a few. But while the financial crisis has taught important lessons about bank management, for many bank directors, the sale of their financial institution is uncharted territory. As you typically only have one opportunity to get it right, directors considering a sale should focus first on establishing a sound process around the board table.

Although it is rational for directors to worry more about specific aspects of the proposed deal than procedural matters, we have found that establishing an appropriate process for considering a possible transaction is often a prerequisite for success on the business issues. Moreover, in today’s world of heightened scrutiny of board actions, Directors cannot neglect procedure and expect to fulfill their duties of loyalty

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