Today’s environment provides a great opportunity for smaller banks that have a healthy balance sheet to expand significantly (i.e grow from $400 million to $2 billion +) via the acquisition of other banks that are trading at a significant discount to tangible book value (20-60%).   Many of these banks have a good foot print and franchise in profitable markets but are in a less than desirable condition due to their increasing capital requirements and troubled real estate exposure.   The number of troubled banks will increase as a large percentage of commercial real estate loans will go into default providing increased opportunities over the next 18 months.  There are many private equity funds that are looking to fund the growth of healthy banks (existing bank expansion or via M&A of other banks).  Strong executive management teams, operational efficiency, and defined strategies for dealing with the troubled real estate holdings of the acquired bank are necessary to attract the interest of these funds. 

Gary T. Saykaly (President of C5 Advisors) – gsaykaly@c5advisors.com