Buying a bank’s the obvious way to grow, but it’s not the only way
There's more than one way to grow.
That was the message from two veteran bankers — John Asbury, president and CEO of Union Bankshares in Richmond, Va., and Laurie Stewart, president and CEO of Sound Community Bank in Seattle — who spoke Wednesday at American Banker’s Retail Banking Growth Stories conference.
Community banks have several options for expansion including buying competitors, recruiting rival banking teams or buying branches.
While whole-bank deals make the biggest splash, sometimes branch acquisitions or recruitment of talented bankers make more sense, Asbury and Stewart said. And, no matter what banks do, there should be a clear purpose behind it, they said.
“It’s a really important time to be thoughtful,” Asbury said. “Whenever I hear the term opportunistic — that’s baloney. What does that mean?”
It's more important to create an M&A strategy that complements a company's long-term strategic plan. But remaining flexible and keeping an eye out for meaningful opportunities is also important, Stewart said.
Stewart, who has overseen several branch acquisitions for Sound Community, recalled asking a bank CEO to meet with her after seeing his company’s branch map at a conference. Stewart noticed three branches that made sense for Sound Community to purchase.
“Keep your eyes wide open,” Stewart said. She added that branch acquisitions are “a sweet spot” for the $717 million-asset Sound Community because there is less risk involved than with whole-bank M&A deals. Sound is also in the process of acquiring a team of lenders from a competitor.
“We’ll see what the return is on that — we don’t know yet,” Stewart said.
The $17 billion-asset Union Bankshares recently completed a $500 million purchase of Access National and bought Xenith Bank in Richmond last year. The Access deal gave Union 15 branches and about $2 billion in loans in northern Virginia. With those two deals behind it, Union will soon rename itself Atlantic Union Bankshares.
Asbury said that he prefers to do negotiated M&A deals, so he knows that the sellers share Union’s vision, rather than choosing the largest bid in an auction. It makes sense for community banks mulling exit plans or succession strategies to consider merging with a bank of a similar size, he said.
“The strategic and financial logic has to be there, and you hope there is a shared vision — that is the advantage we had,” Asbury said.
Still, there are trade-offs to pursuing M&A deals, Asbury said. Union has a “backlog of things to do,” including investments in digital technologies, after focusing on its recent purchases.
Asbury said he will take a break from bank M&A activity to prepare the combined company to take advantage of potential opportunities that could arise from the pending merger of BB&T and SunTrust. Asbury, who noted that the two regional powerhouses have significant overlap in Virginia, recently told American Banker that he envisions Union extending from Charlotte, N.C., to Baltimore.
“Frankly, the last thing on my mind right now is, ‘Let’s go do another deal,’ ” he said. “Because I want to make sure that faced with what I think is the greatest opportunity that we are going to see, which is SunTrust and BB&T coming together, we need to make darn sure we are ready for that and those customers don’t perceive us as having something less in terms of offering.”