A growing number of community bank leaders are finally expressing a willingness to sell.
The long-awaited sea change, evident in a KPMG survey of 105 CEOs and other senior executives at banks with $1 billion to $20 billion of assets, suggests that the pace of dealmaking will pick up this year, perhaps significantly.
A quarter of the respondents say they expect to sell in 2014. (In a similar survey conducted a year earlier, when the price expectations of buyers and sellers were relatively divergent, only 15 percent of respondents planned to sell within a two-year time frame.) The percentage of respondents who expect to be acquirers has held steady at about 40 percent.
The latest results, based on responses gathered in October, indicate that the gap between buyers and sellers has started to close, says John Depman, KPMG's national leader of regional and community banking.
"There has been a lot of discussion about M&A and all of the reasons it could happen," he says. "Part of the disconnect" so far between the predictions of significant consolidation and the pace of the dealmaking "has been that everyone wanted to be a buyer and there were not enough sellers."
But now, improved asset quality is giving potential sellers a chance to command a better price, while recent increases in stock prices have given potential buyers a stronger currency for deals.
The continuing buildup of regulatory pressures and management fatigue also may be contributing to the change in perspectives on selling. More than 75 percent of the survey respondents say banks must reach $1 billion of assets to stay independent, and nearly a third say regulatory changes are important drivers of deals.
Respondents to the KPMG survey say that a seller's customer base is the most important criterion for making an offer.
Most buyers likely will select targets with customers similar to their own, since they understand those segments already. But there's also increased interest in diversifying, making some buyers interested in banks that serve other customer groups or offer different products, Depman says.
For example, "we've seen mutual thrifts that convert and want to get away from their traditional residential mortgage base to include commercial loans," Depman says. "That's a different reason to get into M&A."