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The Value of a Deal
Pricing was ticking up until earlier this year while aggregate deal value has
remained relatively stable.
Source: Janney Montgomery Scott
Aggregate deal value by quarter, in millions
Median price to tangible book value (TBV) paid
$3,000
200%
agement succession, as it did in the case
of Peoples Financial’s merger with FNCB.
$2,500
Craig Best, who was CEO of Peoples
Financial at the time, had been looking
$2,000
to retire and the board had to figure out
150%
$1,500
C-suite succession. In January, the board
elevated Champi to succeed Best as CEO
of the combined bank.
$1,000
Though efficiency is often a hallmark of
a successful bank deal, that doesn’t mean
$500
that prospective sellers should slim down
prior to seeking out a buyer. “In a lot of
100%
Q2
25
20
20
25
Q1
Q4
24
20
Q3
24
20
Q2
20
24
Q1
24
20
Q4
23
20
Q3
23
20
23
20
20
23
Q1
Q2
$0
cases, the first thing [the buyer is] going
to do is reevaluate costs,” Marinac says.
“While it’s great to be efficient and maximize your profit margins, having some
fat to trim is probably healthy. It gives the
buyer some room to trim costs and get
data from Janney Montgomery Scott.
At the same time, 2025 has been characterized by market volatility, with bank
spective seller should have good insight
into its core depositor base.
However, the funding base is still a start-
extra profit.”
Post-merger Peoples Financial selected
one core operating system to use and
stocks in particular taking a beating. Since
ing point. “Having deposits is table stakes
enlisted an outside adviser to exit its
the beginning of this year, the KBW Nas-
for a bank,” says Chris Marinac, director
contract with the other, Champi says.
daq bank stock index has had a roughly
of research at Janney Montgomery Scott.
Peoples also found some cost savings by
39% swing from a low in April to a high in
“What you do with the deposits is ultimate-
consolidating five locations in overlapping
July. Volatility such as this can mute ac-
ly going to drive the value of the bank.”
markets. He adds that the combined bank
tivity as a deal may need to be completed
A core business that’s demonstrated
was able to mostly achieve staff reduc-
at a lower nominal price, something that
growth, profitability and solid credit
tions via attrition among bankers who
can be difficult for a board and manage-
quality over time, is valuable in a deal,
were already contemplating retirement.
ment team to swallow.
particularly if it’s complementary to the
However, banks need to remember
Integration is one area where Champi
acquiring bank’s loan mix. Prior to the
would do things differently, if he could
that the long-term value of a deal goes
merger, Peoples Financial had a little over
have a do-over. FNCB and Peoples closed
beyond the price tag. Stock ownership in
a quarter of its loan portfolio concentrated
their deal on July 1, 2024, but didn’t
an organization that is well capitalized, ef-
in non-owner occupied commercial real
begin integrating the two organizations
ficient and has high growth potential can
estate; FNCB brought a commercial and
until mid-October. That meant that the
also represent a great value for sharehold-
industrial lending franchise to the table
combined organization carried the full
ers of both banks. Asset quality, liquidity
that helped to diversify the combined
costs of running two banks through the
and longer term business strategy are key
bank’s business.
third quarter and into part of the fourth
factors that affect the combined bank’s
quarter.
stock price.
A strong deposit base is a good start.
That deposit base should be not only lowcost, but also diversified across product
types and customer segments, and a pro-
“You’re operating two banks, but you’re
Succession and Other
Considerations
Joining forces with another bank can
sometimes solve questions around man-
one, and you have to report that all
through on an interim basis,” he says. “It
worked out really well, but still, you just
can’t get there fast enough.”
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