In my next few posts, I'll share some of the key takeaways from various presentations made at last week's Acquire or Be Acquired (AOBA) conference.  As you may have read, I had the pleasure of introducing a number of our speakers over the three day event -- a culmination of a year's worth of effort for the Bank Director team.  Leading up to the conference, I spoke with many of the participants as they framed their information and insight for an audience of 550+ bank CEOs, CFOs, Chairmen and board members from banks that ranged from a few hundred million in assets to nearly $17Bn in size.  Up first: a workshop presented by our friends at Griffin Financial entitled "How Do You Make Your Bank Relevant in Today’s Consolidating Industry?"

The first time I met Mark McCollom, I had just downed three cups of coffee & was trying to shake a long night of travel from my eyes.  It was Jan. 30, 2011 -- an early Sunday morning to be exact -- and I'd just entered a conference room in at the Hyatt Gainey Ranch in Arizona chocked full of talkative bankers eager to hear from the former CFO at Sovereign Bank and his colleagues at Griffin Financial.  Mark, now the Senior Managing Director at the investment bank, was speaking on the first time spot at last year's AOBA -- and I'd been back with Bank Director for only a few months so we hadn't met.  While I'd prepared to welcome everyone to our conference, I quickly realized the time for small talk between the two of us would have to wait until after his two hour presentation... a real problem, as I couldn't find his bio.  Thank goodness their Chairman (who was leading the presentation) bailed me out by introducing Mark to the crowd!

Fortunately, this year's intro went far smoother than last -- much needed, in fact, as it was Mark leading this year's workshop. So "taking a bailout" was not an option as we opened AOBA with his presentation on staying relevant to potential merger partners and/or investors who provide growth capital.  With a 80+ page deck, let me share some of the more salient points of Mark's presentation (IMHO):

• Over the past 10 Years, large banks have typically out-earned smaller banks due to both size & scale + an ability to leverage operating expenses.
• Returns for community banks will continue to suffer, with margin compression due to increased competition and flatter yield curves, higher capital requirements under Dodd-Frank and Basel III and more severe risk weighting.
• As recently as 5 years ago, a moderately performing community bank could gain access to public capital sources. This has largely dried up in recent quarters.

To the merger-side of his talk, many are on record that banks < $1 Billion in assets should seriously consider selling their bank (or tying up with a similar sized institution).  While I know quite a few CEOs under this threshold who have absolutely no interest in selling, Mark did share stats like these:

• About 2% of small banks (<$250 million) have sold each year since 2008, and represent about 67-81% of total M&A volume each year, despite being only 66% of the total number of financial institutions
• The median relative size of seller assets has shifted upward from 13% in 2005 to 18.5% in 2011 – according to Mark, this implies lower premiums are allowing banks the opportunity to grow more quickly when they do transact a deal and a greater willingness to pursue a merger of equals

While many factors ultimately impact “relevance” for banks today, Mark ultimately believes it comes down to generating the best returns for shareholders when taken in light of attracting investor or acquirer interest.  Agree or disagree?  Feel free to weigh in below.

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*If you attended the conference, you can access all of Mark's slides using the "on demand" feature on BankDirector.com (under the past conference tab on the site).

Earlier this week, I had the opportunity to moderate a point/counterpoint panel discussion at our 18th annual Acquire or Be Acquired conference at the Arizona Biltmore.  A fixture on the agenda*, we once again invited four panelists to join me on stage & respond to five "deal-or-grow" type statements by indicating their position (pro or con).  Based on their perspectives, we subsequently polled an audience of 500+ bank CEOs, CFOs, Chairmen and board members to ascertain what these officers & directors think will happen in 2012.

Joining me on stage this year were Steve Hovde, the President & Chief Executive Officer @ the Hovde Group, Ron Janis, a partner at the law firm of Day Pitney, Doug McClintock a Partner at Alston & Bird and Michael Mayes, Managing Director, Raymond James.  A tip of my cap to each of them; all four did a tremendous job sharing their thoughts within the 2 minute window with relevant stats, anecdotes and outlooks that benefited the audience.

Let me share the takeaways from this 50-minute session.  While my first statement -- that the primary obstacle to increased M&A activity in 2012 will the unrealistic price expectations of sellers -- split the room vote, things started to get interesting with point #2.  Yup, the vote trended towards a "disagree" position when I said "banks that are thinking about selling would be better off waiting until 2013 when valuations will be higher than they are likely to be in 2012."  

By statement #3 -- "Increased bank and accounting regulation will be a driving factor in why many community banks consider selling" -- the vibe in the crowd began to trend toward more disagreement than agreement from the crowd.  But nothing like the 4th point -- one that had the crowd voting in mass against my statement that M&A will be the only way to grow in 2012.  Almost 90% took the side of the cons.  So while we wait for the seemingly inevitable wave of consolidation, it seems to me that this year sets up nicely for all those companies looking to help banks explore organic means to grow their franchises.

(*Here's how this session works: two attorneys and two investment bankers have 2 minutes per statement to argue their position.  After that, I open things up to the audience to decide if they agree or disagree with the statement, weighing in via an automated response device that tabulate 500+ votes in near-real time.)

Last June, as part of the Bank Director / Grant Thornton Bank Executive Survey, our team asked CEOs, CFOs and audit committee members for their outlook on the U.S. economy. Slightly more than half of respondents (52%) believed the economy would remain the same over the next six months.  Another 39% believed it would improve and only 9% believed it would get worse. Gotta love the optimists among us!

With these figures in place, my favorite editor, Jack Milligan, and the head of Grant Thornton's financial institutions group, Nichole Jordan, just wrapped up an interesting & interactive session here at our Acquire or Be Acquired conference.  The two posed some pretty interesting questions to a very full room.  For instance, where else can you ask Chairmen, CEOs and CFOs what they feel the top risk is currently facing their bank -- and get near real-time answers?  Unfortunately, I didn't capture the percentages, but answers involved credit risk, liquidity risk, IT risk or compliance risk due to uncertain regulatory developments.  

With this particular event focused on M&A and growth issues, it was not surprising that Nichole posed another question that got the crowd buzzing.  Specifically, what is the top way your bank plans to grow over the next year?  Answers included:

• Organic loan origination;
• Purchase of loan pools; 
• M&A;
• Lease finance;
• Non-lending investment activities; and
• Using more advantageous tax strategies and structures

While Nichole & her team at Grant Thornto are seeing healthy M&A activity in the industry, she was quick to note activity has yet to return to pre-recession levels.  In her words, many banks are viewing mergers as a viable way to grow in today’s environment and others are pursuing mergers as a way of dealing with increased regulatory demands. 

She also cautioned that an area that needs to be better thoroughly addressed is post-integration activities.  I'm paraphrasing, but her take is banks, their advisers and accounting firms do exhaustive work preparing the books, but the key to a successful merger is largely what happens after the transaction. Perhaps most importantly, how will you blend the two cultures of both institutions? Communication and leadership are essential in making sure the acquisition is a success.  So some really intereting discussions taking place on a Monday -- this being one I had a few minutes to write up.  More to come...

Not a tremendously long post today.  I guess you could say that I'm saving up for for our Acquire or Be Acquired conference (that you can follow using #AOBA12 and/or @bankdirector) that kicks off this Sunday.

Recently, I've had a lot to celebrate -- a new baby boy, the Patriots advancing to the Super Bowl and an unbelievably awesome experience of ringing the closing bell at the NASDAQ MarketSite in NYC in December.  As we did last year, we will again assemble a dynamic group of industry leaders to examine the board's role in lending.  Yup, we are all set to do so again in Times Square in early December.  So, as we spin up our marketing machine, I'll do my best to provide insight on how we decide to use different tools and techniques to promote our second go-round at the MarketSite.  Want a sneak peek of the kinds of messaging we're putting together?  Here's a 30-second video we will begin to share this weekend:

With my last post focusing on the digital side of our business, a quick entry to highlight another big piece of our company.  

For the past 21 years, we've been the leading information resource for officers and directors of financial institutions. Chairmen, CEOs, CFOs, General Counsel, Presidents and members of the boards at institutions of all sizes rely on us to keep pace with an ever-changing financial landscape.  A more powerful & influential audience base simply does not exist at any other banking organization in the United States.

So yes, I'm pretty proud to write about this hugely influential organization of which I'm a part.  Since re-joining the firm in September of '10, I've shared some behind-the-scenes information relative to ways we've improved the quality and frequency of the board-level information we share. From our digital channels to research reports to publications, I do my best to give an insider's look at how a small business like ours operates on a national scale.  So its our conference groups turn for its day in the sun; specifically, the "granddaddy" of all our conferences, Acquire or Be Acquired (shortened to AOBA which is pronounced A-O-Bah) that kicks off in Arizona later this month.

Long recognized as the premier M&A and growth event, this 3-day conference addresses the most important trends in the merger and acquisition landscape and other growth options.  Right now, we are at 639 attendees -- and I expect we will break 650.  Easily our best turn out in the 18 years  we've been hosting this particular event.  I just saw the demographics and thought to share:

Who is coming (by title)

• 46% = CEO/President
• 13% = Chairman
• 11% = CFO
• 23% = Outside Directors
• 7% = Other senior executives of financial institutions

Are they public or private?

• 25% = Public
• 75% = Private

This is a pretty good ratio when you consider of the 7800+ banks in the U.S., approximately 500 are publicly held...

Where are they (regionally) joining us from?

• 5% = West
• 61% = Central
• 18% = Northeast
• 16% = Southeast

If you're coming out to one of my all-time favorite hotels (the Arizona Biltmore) from January 29 - 31, please let me know.  With many predicting a massive wave of consolidation in the coming years, this should be an interesting & spirited three days together!

AOBA (ay-oh-bah): shorthand for the financial industry’s premier M&A and growth event since 1995. 

Its hard for me to believe, but in less than three months, more than 700 leaders from the financial community will gather at the Arizona Biltmore for Bank Director’s annual Acquire or Be Acquired conference.  Already, we are tracking more than 75 attendees ahead of last year’s record turnout.  The agenda is set, speakers have been confirmed, and our conference team has already reached out to set up speaker calls.  In addition to M&A, this event provides bank officers and directors with best practices and invaluable first-hand information on strategy, capital formation, deposit growth, dealing with criticized assets and alternatives for liquidity.  Why the shameless plug for this event? How else to "justify" posting this new promotional video?