Navigating Your Bank’s M&A Opportunity in 2024 by Endurance Advisory Partners

In 2023, bankers faced their most prolonged challenges to mergers since the 2008–2009 Global Liquidity Crisis. Optimism prevails for 2024. According to Bank Director's 2024 Bank M&A Survey, sponsored by Crowe, approximately one-third of bank executives and directors anticipate their bank will acquire another institution by the end of 2024. A declining rate environment could trigger a chain of mergers, freeing banks from long-term bond investments that have anchored balance sheets for the last 18 months and have effectively discouraged partners and suitors from taking on legacy issues.

There are several compelling reasons to expect increased merger and acquisition activity as the year unfolds.

Many community banks are challenged by a combination of factors impacting liquidity and capital despite having solid commercial and retail banking platforms and leadership. Investment portfolios have been upside down compared to actual rates, affecting the ability to lend and generate quality earnings. Headwinds include more stringent liquidity requirements, and the avenues for obtaining liquidity and capital have narrowed. Capital supplementation via sub-debt is expensive and challenging to obtain and can limit opportunities if not managed and executed carefully.

The ongoing technological evolution will drive activity. Aside from the need to spend on market- competitive technology, the impact of generative AI, embedded finance, open data, and enhanced person-to-person payments is leading more banks to realize that adaptation is increasingly challenging. These innovative technologies and their providers require a robust and expensive investment in risk management and controls by the banks that implement them. This will likely prompt mergers among institutions, particularly among those providing Banking as a Service to many fintech firms.

Often the quietest yet most motivating factor for both buyers and sellers is the continuing generational transitions and estate planning facing ownership, families, and management. Let’s face it; banking has become a more challenging business in today’s regulatory and business environment. Balancing the very real needs associated with estate planning and community continuity is challenging but very achievable. These can be common goals.

Barriers to activity may appear to be overwhelming. But each bank’s situation is different, and the opportunity to expand markets and platforms through M&A is real. Motivated and like-minded partners can create accretive and attractive transactions. We think these transactions are very compelling to regulators, investors, and your customers and employees.

We’ve seen it. We’ve experienced it firsthand. Our firm has the skills and ability to help institutions simply by building optionality and designing for opportunity. With deep expertise in capital markets, regulatory and risk management, we can provide strategies, tactics, and resources. Given our extensive activity in the industry, we understand what is needed now and in the future as the environment evolves.

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