Independent Banker - July 2021 - 52

F
or enterprising community banks, there
isn't one path to growth, but many.
While some banks may choose to grow
organically by launching a new line of
business or expanding into new markets,
others are charting a path to growth by acquiring
nonbank companies.
Community banks can reap several benefits from these
acquisitions of nonbank companies like fintechs, wealth
management firms, mortgage and credit card originators,
and other entities. Chief among them is the ability to raise
fee income without affecting their balance sheet, which
makes these acquisitions very return-on-equity-friendly,
according to Marty Mosby, director of bank advisory and
strategic services for Vining Sparks, exclusive brokerdealer
to ICBA.
" Nonbank acquisitions don't require a lot of capital,
so you don't have to use the balance sheet, " he says.
" They give community banks a new line of business
they can build out to boost fee income. There are lots of
complementary businesses that banks can roll into now,
and technology is bridging the gap to make these kinds of
acquisitions easier. "
Shrinking net interest margins have also made nonbank
acquisitions more attractive for community banks today,
according to Greyson Tuck, an attorney and consultant
with law firm Gerrish Smith Tuck in Memphis, Tenn.
" With net interest margins so low, most community banks
are looking for other avenues to increase profits, " he adds.
Despite the economic rebound, Tuck says there are
still a lot of unknowns for community banks. " We may
not have felt the full effects of the pandemic yet, " he
adds. " Acquiring a nonbank provides much-needed
diversification that enables banks to do more than just
take deposits, make loans and live off the spread. If one
line of business is suffering, there are other lines the bank
can rely on to generate revenue and profits. "
Mosby points to statistics indicating that community
banks are doing a better job of growing fee income
than large banks. He attributes this, at least in part,
to the trend of community banks partnering with and
acquiring nonbanks.
" Fee income growth for community banks was 11%
in 2019 compared with 5% for large banks, " he says.
" [In 2020], it was 6% for community banks and flat for
large banks. "
Achieving tech autonomy
This past September, $1.1 billion-asset Horicon Bank in
Horicon, Wis., completed such a deal when it acquired
fintech firm Monotto.
" We had done as much as we could with our current
vendor set of technology and realized that we needed
some fintech help if we wanted to take our technology to
52 Q ICBA Independent Banker Q July 2021
" It takes different
perspectives and
experiences to
offer the products
and services
that are right for
your customers.
Sometimes, banks
need to go outside of
the industry to get
these perspectives. "
-Christian Ruppe,
Horicon Bank

Independent Banker - July 2021

Table of Contents for the Digital Edition of Independent Banker - July 2021

Table of Contents
Independent Banker - July 2021 - Cover1
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