Growth and profitability optimism
The general outlook for the banking industry is positive, with profitability and growth expected to increase over the next 24 months. While analyst expectations include noticeable rises in credit and noninterest expenses, they’re not anticipated to be overwhelming. The consensus among industry leaders is that the economic engine will continue to expand, avoiding a recession. There were also general optimistic views of the recent statement from FDIC Acting Chair Travis Hill, who attended the conference to provide more discussion from his Jan. 20, 2025 release. When asked “What can derail a successful strategy?”, bank leaders also agreed that near-term credit risk remains manageable, if concentrations are monitored carefully. Cyber risks continue to be a constant concern that requires vigilant monitoring. These are certainly two top-of-mind areas as we begin the 2025 calendar year.
Leverage relationships and technological innovation
CEOs from top-performing banks highlighted that success is driven by execution and relationships rather than size alone. They emphasized the importance of technology and innovation in the community bank models, which enable competition across all size categories. To compete with larger money center banks, focusing on relationship building and technical competence is crucial. Additionally, staying nimble and providing access to decision-makers are key aspects of the community bank model. We see our clients continuing to explore investments into and relationships with fintech entities and artificial intelligence, which requires a defined approach and strategy.
Banks need well-defined strategies to address the question: acquire or be acquired?
Of course, the purpose of the Bank Director conference was to highlight M&A markets and dive into strategies and decision points for buy/sell. Speakers made it clear that the need for a thorough succession plan, continued investments in technology, and maintaining capital levels adequate to execute the necessary strategies are critical to stay independent. While not new, private equity investment was discussed as an alternative source of capital, noting that for many, it started the clock towards a future sale. A larger community bank pointed to these items as the driver that resulted in a sale becoming a better strategy than organic growth or acquiring other institutions.
Ultimately, the conference provided refreshing viewpoints and practical strategies for banks to enhance growth, strengthen relationships, and manage risks effectively in the current economic landscape. If any of these topics resonate with you, feel free to reach out to our community bank experts.
