Member FDIC Traci Oliver Eric Hallman Tara Koester Bankers’ Bank of the West We champion Community Banking bbwest.com | 800-873-4722 www.bbwest.com YOUR NEBRASKA RELATIONSHIP MANAGERS As a bankers’ bank we strive to help with every level of service and expertise. That is why we service anything from loan participations, merchant services, ATM/debit and much more, because we aim to answer your questions with, “…yes, we can do that too!” focus on the current tangible book value of target institutions as the primary focus for valuation. As readers of this article are well aware, community bank balance sheets have been stressed in 2023 due to rising interest rates. These higher rates have required would-be buyers to place more scrutiny on target bank’s allowance for loan losses. Additionally, and perhaps more importantly for the bank transaction market, rising rates have led many community banks to experience unrealized losses in the value of their securities portfolios. These unrealized losses created a chasm between the valuation expectations of would-be buyers and owners of community banks. Given the current environment, buyers argued that held-to-maturity securities should be marked to market for purposes of transaction valuations, while sellers countered that such losses are temporary in nature and a full market valuation adjustment is unwarranted. There are numerous ways to find a middle ground on this issue, and transaction activity on a national level has picked up during the second half of 2023 — perhaps signaling that buyers and sellers have begun to agree on an approach. 17 NEBRASKA BANKER
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