Brought to you by the Financial Institutions Team of Mercer Capital, these monthly newsletters are focused on bank activity across the United States. Each edition of Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.

1. October 2013
Bank
Watch
Loan Growth Resumes,
But Remains Slow
Loan growth continues to remain a struggle for community banks as loan demand remains weak in
most regions. Based on Call Report data as of June 30, 2013 for approximately 3,750 banks with
assets between $100 million and $5 billion, more than 50% of banks reported lower loan balances
in 2010 and 2011. In 2012 and year-to-date in 2013, approximately 40% of banks have reported lower
loan balances.
Percentage of Banks with Annual Loan Growth < 0%
% of Banks with Annual Loan Growth < 0%
60%
50%
40%
30%
20%
10%
2
YT 012
Y
D
@
6/
13
Y
11
Y
20
Y
10
20
Y
09
20
Y
08
20
Y
07
20
Y
06
20
Y
05
20
Y
04
20
Y
03
20
Y
02
20
Y
01
20
Y
00
20
Y
99
19
Y
98
19
Y
97
19
Y
96
19
Y
95
19
Y
94
19
93
92
19
19
Y
0%
Community banks as a group reported negative median loan growth in 2010 and 2011. Beginning in
2012, loan growth resumed, with the community bank group examined realizing median growth of
2.2%. Year-to-date through June 2013, median growth was 1.1%, or 2.2% annualized, on pace with
the 2012 growth figure. The low level of growth in loan portfolios is well below the historical average,
including prior recessions. During the 2001-2002 recession, for example, median loan growth was
approximately 7.5% for the community bank sample.
© 2013 Mercer Capital // Data provided by SNL Financial
1

2. Mercer Capital’s Bank Watch
October 2013
An analysis of mortgage data by SNL Financial indicates that residential loan growth has been
Median Annual Loan Growth
consistent across the country, with 932 of the 955 metro areas with available data reporting
Median Annual Loan Growth
increases in originations.1 The analysis by SNL looks at comprehensive data filed by lenders
14.00%
12.00%
pursuant to the Home Mortgage Disclosure Act for the 2012 fiscal year. The analysis shows
10.00%
the largest increases in mortgage lending activity in the areas that were hardest-hit by the
8.00%
recession, including Orlando, Phoenix, Las Vegas, Detroit, and Sacramento, which all posted
6.00%
growth in mortgage lending over 75% in 2012. Overall, funded mortgage loan volume was up
4.00%
43% from 2011, increasing from $1.5 trillion to $2.1 trillion for the metro areas included in the
2.00%
data set.
0.00%
For the community bank sample, total growth in single-family mortgages was slower than the
Y
13
12
6/
20
YT
D
@
Y
11
Y
20
Y
10
20
Y
09
20
Y
08
20
Y
07
20
Y
06
20
Y
05
20
Y
04
20
Y
20
03
Y
20
02
Y
20
01
Y
00
20
Y
19
99
Y
98
19
Y
97
19
Y
96
19
Y
19
95
Y
94
19
93
19
19
92
Y
-2.00%
The modest loan growth realized in 2012 and year-to-date in 2013 has been spread across
aggregate mortgage data for all institutions, with loan volume up 6.5% for the 2012 fiscal year,
indicating that the majority of loan growth, at least in the residential mortgage sector, was led
by larger institutions.
portfolio sectors, with all non-agricultural loan categories up 6.8% at June 30, 2013 from
year-end 2011. Within the non-ag categories, 1-4 family mortgages were up 6.4%, CRE loans
Madeleine G. Davis
davism@mercercapital.com
were up 7.4% with most of the increase in nonowner-occupied CRE loans, and commercial/
industrial loans were up 11.3%. Construction and development credits were the only sector
that saw declines in the last 18 months, with total C&D loans down 4.9% from year-end 2011.
Loan Portfolio Trends
Endnotes
1 “Loan Growth Spanned Entire US in 2012,” by Sam Carr and Fox, Zach. Published by SNL Financial, LC, October 3, 2013.
Loan Portfolio Trends
$250
What We’re Reading
$200
($ in billions)
$150
The OCC released an updated version of its Bank Accounting Advisory Series, which includes
frequently asked questions about acquired loans and fair-value accounting:
$100
http://mer.cr/17042iR
$50
$-
Closed-End
1-4 Family RE
Loans
Owner Occupied
CRE Loans
NonownerOccupied CRE
Loans
C&D Loans
C&I Loans
4Q11
$211
$165
$172
$77
$151
2Q12
$216
$166
$176
$73
$155
4Q12
$225
$170
$181
$72
$162
2Q13
$225
$174
$187
$73
Mercer Capital’s own Jeff Davis discussed the pros and cons of leveraged transactions that can
often unlock value for equity holders in his presentation entitled “Leveraged Lending, Dividend
Recaps, and Solvency Opinions”:
$168
© 2013 Mercer Capital // Data provided by SNL Financial
http://mer.cr/solvency-opinion-ppt
2

3. Mercer Capital’s Public Market Indicators
October 2013
Mercer Capital’s Bank Group Index Overview
Return Stratification of U.S. Banks
by Asset Size
150 !
40%
140 !
As of September 30, 2013
September 28, 2012 = 100!
130 !
120 !
110 !
100 !
90 !
30%
20%
10%
0%
20
12
11
!
/2
8/
20
12
12
!
/2
8/
20
12
1/
!
28
/2
01
3!
2/
28
/2
01
3!
3/
31
/2
01
3!
4/
30
/2
01
3!
5/
31
/2
01
3!
6/
30
/2
01
3!
7/
31
/2
01
3!
8/
31
/2
01
3!
9/
30
/2
01
3!
8/
28
/2
01
2!
80 !
Assets
$250 - $500
MM
Month-to-Date
Assets
$500 MM $1 BN
Assets $1 $5 BN
Assets $5 $10 BN
Assets >
$10 BN
SNL Bank!
S&P 500!
2.27%
5.70%
5.54%
0.61%
27.75%
25.54%
28.17%
33.38%
22.23%
Last 12 Months
/2
10
9/
MCM Index - Community Banks!
2.22%
Year-to-Date
34.20%
24.85%
27.89%
30.46%
30.71%
Median Valuation Multiples
Median Total Return
Valuation Multiples as of September 30, 2013
Month-to-Date
Year-to-Date
Last 12 Months
Price/
LTM EPS
Price / 2013
(E) EPS
Price / 2014 (E)
EPS
Price /
Book Value
Price / Tangible
Book Value
Dividend
Yield
Atlantic Coast Index
3.08%
24.16%
23.44%
14.55
17.36
13.71
106.4%
117.9%
2.3%
Midwest Index
6.40%
30.12%
27.69%
12.66
13.06
13.49
107.9%
121.2%
2.1%
Northeast Index
4.16%
23.12%
19.55%
14.43
14.84
12.97
123.0%
131.2%
2.7%
Southeast Index
2.84%
24.38%
20.06%
13.39
14.22
12.61
119.9%
124.2%
2.4%
West Index
4.65%
23.42%
25.65%
13.60
14.88
13.90
128.6%
130.7%
1.9%
Community Bank Index
4.23%
24.72%
23.51%
13.88
14.53
13.57
116.8%
127.5%
2.4%
SNL Bank Index
3.14%
19.80%
19.34%
na
na
na
na
na
na
Indices
© 2013 Mercer Capital // Data provided by SNL Financial
3

4. Mercer Capital’s M&A Market Indicators
October 2013
Median Price/Earnings Multiples
Median Price/Tangible Book Value Multiples
Target Banks Assets <$5BN and LTM ROE >5%
Target Banks Assets <$5BN and LTM ROE >5%
350%
25
300%
20
Price / Tangible Book Value
Price / Last 12 Months
Earnings
30
15
10
250%
200%
150%
100%
5
50%
0
U.S.
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
22.6
22.2
22.2
22.4
20.7
18.2
18.1
21.9
16.8
15.8
0%
U.S.
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
248%
242%
242%
229%
195%
150%
143%
125%
128%
142%
Median Core Deposit Multiples
Median Valuation Multiples for M&A Deals
Target Banks Assets <$5BN and LTM ROE >5%
Target Banks Assets <$5BN and LTM ROE >5%, through September 30, 2013
Price /
LTM
Earnings
Price /
Tang.
BV
Price /
Core Dep
Premium
No.
of
Deals
Median
Deal
Value
Target’s
Median
Assets
Target’s
Median
LTM
ROAE (%)
Atlantic Coast
14.47
1.38
4.0%
9
77.66
741,713
7.32%
Midwest
17.12
1.44
6.3%
41
40.51
122,905
9.02%
Northeast
16.06
1.49
7.7%
4
110.80
649,359
8.02%
Southeast
18.76
1.32
2.7%
4
122.22
1,296,520
5.76%
West
25%
10.67
1.25
2.9%
12
31.82
242,113
7.15%
Nat’l Community Banks
15.76
1.42
5.2%
70
43.99
232,922
8.15%
Regions
Core Deposit Premiums
20%
15%
10%
5%
0%
U.S.
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
18.5%
19.7%
19.7%
18.9%
11.9%
8.2%
6.4%
3.5%
3.5%
5.2%
© 2013 Mercer Capital // Data provided by SNL Financial
4

5. Mercer Capital’s Bank Watch
September 2013
Mercer Capital’s
Regional Public
Bank Peer Reports
Updated weekly, Mercer Capital’s Regional Public Bank Peer Reports offer a closer
look at the market pricing and performance of publicly traded banks in the states of
five U.S. regions. Click on the map to view the reports from the representative region.
Atlantic Coast
Midwest
Southeast
© 2013 Mercer Capital // Data provided by SNL Financial
Northeast
West
5

6. Mercer
Capital
Financial Institutions Services
Mercer Capital assists banks, thrifts, and credit unions with significant corporate
valuation requirements, transactional advisory services, and other strategic
decisions.
Mercer Capital pairs analytical rigor with industry knowledge to deliver unique insight into issues facing banks. These insights
underpin the valuation analyses that are at the heart of Mercer Capital’s services to depository institutions.
Mercer Capital is a thought-leader among valuation firms in the banking industry. In addition to scores of articles and books, The
ESOP Handbook for Banks (2011), Acquiring a Failed Bank (2010), The Bank Director’s Valuation Handbook (2009), and Valuing
Financial Institutions (1992), Mercer Capital professionals speak at industry and educational conferences.
The Financial Institutions Group of Mercer Capital publishes Bank Watch, a monthly e-mail newsletter covering five U.S. regions.
In addition, Jeff Davis, Managing Director, is a regular contributor to SNL Financial.
For more information about Mercer Capital, visit www.mercercapital.com.
Contact Us
Jeff K. Davis, CFA
615.345.0350
jeffdavis@mercercapital.com
Andrew K. Gibbs, CFA, CPA/ABV
901.322.9726
gibbsa@mercercapital.com
Mercer Capital
5100 Poplar Avenue, Suite 2600
Memphis, Tennessee 38137
901.685.2120 (P)
Jay D. Wilson, Jr., CFA, ASA, CBA
901.322.9725
wilsonj@mercercapital.com
www.mercercapital.com
Copyright © 2013 Mercer Capital Management, Inc. All rights reserved. It is illegal under Federal law to reproduce this publication or any portion of its contents without the publisher’s permission. Media quotations with source attribution are encouraged.
Reporters requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry Focus is published quarterly and does not constitute legal or financial consulting advice. It is offered as an
information service to our clients and friends. Those interested in specific guidance for legal or accounting matters should seek competent professional advice. Inquiries to discuss specific valuation matters are welcomed. To add your name to our mailing list
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