Pub. 1 2010 Issue 4

www.wvbankers.org 10 T his activity can even be witnessed at the gas pump. Recently, a banker reported that while the chairman of his bank was pumping gas, he saw a competitor at an adjacent gas pump and called out to him that, due to the mess in banking, it was time for his bank to get out of dodge! It is rumored that these two banks may even be in merger talks. After the financial crisis and the enactment of the Dodd-Frank legislation, the land- scape of community banking is about to change. Many community bankers have been hunkered down with loan and investment issues but, as they abate, we will see heads peeking out from the bunkers. What will the perception of the landscape be? Some will Beware of Investment Bankers Bearing Gifts By Jay Brew, Seifried & Brew, LLC From the American Banker to conversations over gas pumps, community banking merger activity is heating up. The American Banker reported that merger activity is picking up, especially on the East coast. see a scarred barrenness that has steep jagged cliffs of regulatory horror. Others will see a glimpse of flowers and a new dawn of once-in-a-lifetime opportunities. Which view will your board see? Enter stage right, investment bankers. They will, as they always have, deliver what your board’s perception mirrors. They will bend and manipulate the transaction to get the deal done. In this environment, fear is on the investment banker’s side. Fear will also mean that many community bank tar- gets will leave money on the table. The fear is being puffed up by rival accoun- tants, law firms, and investment bankers putting on seminars to scare bankers into doing business with them. Their message seems to be – Get out now! With community bank stock prices rising out of their dysfunctional crisis stage, the trumpets are blaring that now is the time to sell before they decline again. There is also talk that the current administration is going to national- ize community banks. There is a real/ perceived notion that certain regulators want to get rid of community banks by downgrading CAMELS ratings to force the sale through desperation. It could very well be argued that now is not the time to sell. If one went back to the early eighties, when community bank stock prices were dysfunctional, the banks that sold lost significant value ver- sus those banks that stayed independent until the markets recognized the value of the industry. Certainly, fears existed then, which included deposit deregulation. By all appearances, it seems that for solid banks the going price could be 1.25x to 1.5x book. When these deals are analyzed, a good bank/good bank combination accretes immediately to earnings at these multiples. This makes the possibility of closing these deals appear to be like “falling off a log.” It is easy for investment bankers to persuade acquirers to make an offer on these deals. The target bank may sigh with