Today Bank Director, the leading information resource for directors and officers of financial institutions nationwide, released the results of its 2024 Bank M&A Survey, sponsored by Crowe LLP, an accounting, consulting and technology firm. According to the survey, bank leaders' enthusiasm for M&A appears dampened going into 2024 — in line with reduced deal activity in 2022-23. But an appetite for sticky, low cost deposits could motivate some financial institutions to make a deal in the year ahead.

Eight-five percent of respondents point to an attractive deposit base as a top attribute in an acquisition target in today's environment, compared with 58% who said as much a year ago. That was followed by a complementary culture (58%), efficiency gains (55%) and locations in growing markets (48%).

"While total deposits for the industry remain well above pre-pandemic levels, deposit competition and pricing have remained key themes in 2023, particularly following the bank failures in spring," says Emily McCormick, vice president of editorial and research for Bank Director. "Looking at 2024, a strong core deposit base seems likely to influence prospective deals."

Respondents do not expect dramatic swings in their bank's deposit rates over the next 18 months. Forty-five percent expect deposit rates to increase by no more than 50 basis points, and 22% expect them to decline by that amount.

"The overall trend is banks trying to keep deposits low and not reacting as much as the loans have reacted. It comes down to overall pressure on the margin," says Patrick Vernon, advisory services senior manager at Crowe. "We haven't seen the same magnitude of repricing on the deposit side yet in the last 12 months. It's kind of wait and see, and it seems like we're going to keep waiting right now."

Key Findings

Transformational Deals

Forty-one percent of respondents say their bank would be open to a merger of equals, while 34% say it would not be. Nearly a quarter are unsure. Two years ago, almost half (48%) said their bank would be open to such a transaction.

Waning Confidence in Valuations

Respondents cite the pricing expectations of potential targets (71%) as a top barrier to M&A, followed by a lack of suitable targets (59%). Among potential acquirers, 35% would be willing to pay up to 1.5 times tangible book value for the right target. However, just over half of respondents would expect a minimum of 1.75 times book value in a sale. For public banks, 40% feel their bank's stock is attractive enough to buy an institution that meets its acquisition criteria, a sharp drop from 51% who said as much last year.

Selective Sellers 

While a majority (61%) express no preference as to whether a potential acquirer would be a direct competitor, most would rather sell to a regional bank (65%) or community bank (60%) than to a private investor group (18%), multinational bank (12%) or credit union (9%).

Trouble on the Horizon 

Forty-three percent anticipate more bank failures over the next 18 months. Among those bank leaders, most do not expect to see more than 10 banks fail. A third of respondents do not anticipate any further bank failures in that time period.

Failed Bank M&A

Three-quarters of bank leaders say they have not discussed the possibility of buying a failed bank, but 17% have discussed it and informed their regulator of their interest.

Sluggish Fintech Investing

A large majority of respondents (79%) say their bank did not invest in or acquire a fintech firm in 2022 or 2023, consistent with last year's survey results. Of those who did invest in a fintech company, most cite a desire to gain a better understanding of the fintech space.

The survey includes the views of 201 independent directors, CEOs, CFOs and other senior executives of U.S. banks below $100 billion in assets. The survey results are now available online at BankDirector.com.