Issue link: http://www.insightdigital.biz/i/285855
34 | I nsIgh t • A p r i l 2 0 14 w w w . i n s i g h t o n b u s i n e s s . c o m i n s i g h t o n B A N K I N G B y To m G r o e n f e l d t I n november, Baylake Bank, headquartered in sturgeon Bay, announced it would buy an Appleton branch and deposits from Community Bank & trust as part of its strategy to build its presence in key metropolitan areas. Earlier last year, nicolet Bankshare announced that it completed its merger with Mid- Wisconsin Financial services, the largest merger in nicolet's 13-year history. en in January, three credit unions – CitizensFirst, Lakeview and Best Advantage – announced plans to merge, creating a credit union with 47,000 members and 10 branches serving 15 counties. two other credit unions – Pioneer and Capital – also announced they were merging. "e M&A (mergers and acquisition) world is starting to gain some traction," says Rob Cera, CEO of Baylake Bank. But it will take longer for that traction to gain any momentum, he says. Many smaller banks, which would be natural targets for acquisition by a larger firm, are waiting for their values to go up. In a recent report on community bank M&A activity, Keefe, Bruyette & Woods (KBW), a new York-based investment bank specializing in financial services, agreed with Cera's views on the reluctance of sellers to accept current valuation. "ere has always been a gap between the number of willing sellers versus demand from buyers, but in the current environment, we think this gap has widened somewhat and is acting as another headwind to any possible surge in M&A," the report says. "Buyers now demand that deals be much more economically attractive, which is resulting in more prudent pricing, which turns off sellers." For the managers of a small bank, the issues raised by selling are stark – what are the bankers going to do next? Cera says that Wisconsin banking varies by region. In Milwaukee and Madison, both attractive regions for business, small banks have difficulty competing against larger banks. e other attractive regions for banks are the Fox Valley, La Crosse and Eau Claire, he adds. small banks can continue to do well in smaller communities that larger banks don't find profitable. In many smaller towns, banks play a larger role than providing return for shareholders – a community bank may be run by a family or be an integral part of the community. "When you sell a bank in a smaller community, you aren't just disrupting your own life but the lives of a lot of folks," Cera says. "at is why banks may be different from other businesses." Mergers mean convenience One significant pressure on banks and credit unions is complying with new federal regulations. e merged Capital Credit Union will have a fully-staffed, five-person risk management and compliance department, for example. e mergers will make the credit unions more appealing and easier to use for members who routinely travel across the service areas for work, education, recreation or shopping. "Fixed costs remain the same no matter what the size of the credit union," says Pat Lowney, president and CEO of Lakeview Credit Union, Partnering for power Banks and credit unions merge to strengthen their presence