TO ABSOLUTELY NO ONE’S SURPRISE, SMALL-BANK M&A STARTS TO STIR IN EARNEST

In Minnesota, this cycle’s dynamic of bank M&A is emerging right on schedule:

Several community bankers in the buyer’s seat said they think the growing regulatory burden is motivating sellers to sit down at the table in earnest.

“The regulation has finally got to the point where I think a lot of folks have gotten tired,” said Mark Bragelman, president of Liberty Savings Bank in St. Cloud.

Whatever the main driver, the price gap between buyers and sellers has narrowed. [Emph. added]

Duh! The new regulatory burden imposed by Dodd-Frank has made the smallest small banks inherently uneconomic, and the people who run those banks know it. They have one choice: sell. And as regards price (at least in Minnesota), sellers and buyers aren’t as far apart as you’d think at this stage of the game

According to [local banking lawyer] Grandstrand, many bids have been in the range of 120 percent to 140 percent of a bank’s book value, with some going over 150 percent. Her conversations with investors, accountants and others who monitor M&A pricing indicates prices will get into the range of 170 to 180 percent.

As gaps between reality and expectations go, that one doesn’t look unbridgeable. The sellers won’t (and can’t!) wait around forever. Let the mini-deals begin, and we’ll all work our way up from there. . . .