PeoplesBank: The Power of Preparing for Growth

Mergers and acquisitions in the banking industry continue to take place at a rapid pace and provide a foundation for strong growth for financial institutions. M&A can be a complicated long-term process, and it requires consideration of many elements beyond just converting a system platform, as PRI points out in the article M&A Integration: It’s More Than a System Conversion.

Creating a playbook that incorporates a full picture of who the FI is, along with their capabilities and leveraging opportunities, can provide a solid framework for the initial conversations that can lead to a successful M&A integration process down the road. PRI client Brian Canina, Executive Vice President, Chief Financial Officer and Chief Operating Officer of PeoplesBank with 20 banking centers in Massachusetts and Connecticut, discusses in this blog how his organization created such a road map for the future of its growth. Other FIs can learn from PeoplesBank’s methods and the power of proactively preparing for growth.

“One of the main benefits of proactively creating a thorough playbook is the ability to paint a picture very quickly for another institution of what a merger could look like,” Canina said. “We can demonstrate all that we’ve done internally to build the infrastructure of a much larger institution, and they can see the opportunities to leverage what we’ve established.”

PeoplesBank, which has steadily grown from a $1 billion to a nearly $4 billion institution in 8 years, has created several internal systems and programs to address growth-oriented needs such as data analysis, risk management and process improvement.

PeoplesBank sought out PRI in the development of such a playbook due to the experience PRI has in developing the ideal integration setting to maximize the benefits that can come by merging banks under a single holding company.  PeopleBank now has an easy-to-understand guide that they can share with prospective banks looking to benefit from the resources of a nearly $4 billion institution. 

A sample of sections with the playbook includes:

• Governance
• Communication
• Shared Services (Operations)
• Branding and Marketing
• System Conversion

Canina said the beauty of the structure is that it allows the institutions to make better, more thoughtful decisions, avoid the pain points of wrong turns and gives the decisionmakers and senior leaders a vision for the future.

“Growing as much as we have in a short amount of time has meant significant changes in culture and processes for us,” Canina said. “All the changes you must make from a risk management perspective are only going to become more difficult as you grow. Our approach allows the institution to make that immediate leap in size while avoiding the most common mistakes and pitfalls.”

In the article M&A Integration: It’s More Than a System Conversion, PRI highlights some common efficiency improvement areas to consider when entering an M&A agreement:

• Best lending and NII practices, including debit card portfolio performance and interchange income network arrangements.
• Full vendor and contract review, keeping in mind that vendors are looking out for themselves. Many benefits from the new economies of scale can be leveraged on both the new and surviving contracts.
• Superior data validation and mapping. To end up a better entity in the end, this is a significant step to any successful conversion or integration project.
• System clean-up including overlapping contracts. FIs must choose which vendor to go with and determine the best time to terminate others. While the FI does not want to grow volume through the term, meaning paying more over time, they also should not cut bait too quickly before they are ready for a smooth transition and have completed an expert, comprehensive review.
• System redundancy. Yes, it’s worth repeating. It is likely that the system of the acquiring bank will be used going forward, but FIs should not discount the systems of the acquired entity. Often, the processes at smaller FIs are cleaner and could be adopted.

Resources:

M&A Integration: It’s More Than a System Conversion, Profit Resources Inc.

Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.