The future is now -

It's hard to believe but 2010 is rapidly coming to a close and it has been another challenging year for banks in the West, but it appears that the worst may be over.

While several banks still remain in jeopardy and others are struggling, the FDIC informally indicated that failures in the West have fallen short of their own projections – a good sign.

Now, if the real estate and job markets could only stabilize, we would be on our way to a real recovery.

Looking Ahead

2010 has seen assisted transactions as the deals of choice, with few whole bank deals, lots of private and public offerings and negligible new bank startups. By contrast, 2011 could see the return of whole bank deals.

There is clearly pent up demand on the part of sellers. With enhanced capital for buyers and more stable loan portfolios for sellers, the "lock-down" environment for whole bank mergers in 2010 may change. I think sellers, in particular, may be more realistic in their pricing expectations and anxious to get out of a very challenging business, with directors tiring of the process and the uncertain costs of regulation.

The Regulators Speak

For the first time in several years, I sense that the regulators will selectively and cautiously take their foot off the pedal. I think they finally see the proverbial light at the end of the tunnel. This shift in attitude could be critical in facilitating more whole bank mergers.

A Consolidating Industry

Through a combination of assisted deals, whole bank mergers and sparse new bank formations, the banking industry as we know it will continue to consolidate. What the magic number will be is anyone's guess, but 5,000 by the end of this decade seems like a real possibility.

Survival of the Fittest

Those banks which have exercised some degree of discipline and foresight will be the survivors. As always, capital will play a key role for the survivors and consolidators. As the pendulum slowly swings, 2011 will usher in the start of the next wave of consolidation in the banking industry.

Graham & Dunn is a Seattle Washington based law firm that has proudly served the Pacific Northwest for over 100 years. Graham & Dunn attorneys bring a wealth of experience working with the legal needs of specific industries including financial services, hospitality, franchise & distribution, beverage, real estate, natural resources, manufacturing, and emerging companies and have been recognized nationwide. 

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