MCLEAN, Va., Feb. 14, 2012 /PRNewswire/ -- Martin Friedman, Co-Founder, Managing Member and CIO of FJ Capital Management, says merger and acquisition (M&A) activity in the U.S. small- and mid-capitalization bank space is well on its way and could rival and possibly exceed the previous record of the mid-1990s consolidation that followed the savings and loan crisis.

In a white paper released today on the small- and mid-cap bank sector, Friedman, a banking expert with more than 20 years of capital markets experience, points to factors creating considerable pressure on banks' ability to earn acceptable shareholder returns.  This lack of returns, according to Friedman, could drive many management teams to find a strategic partner.

The paper, "Long-Term M&A Cycle Creates Opportunity in Banking Industry," showcases recent bank acquisitions that have largely fallen below investors' radar screens, despite having generated outsized returns.  In 2011, there were 159 M&A transactions, with one-day deal premiums at an average of approximately 69% over the prior day closing price.    

Additionally, today's U.S. banking climate is compared to that of the early 1990s, when banking M&A reached a major upswing in the consolidation cycle.  Though some differences exist between now and then, consolidation is indisputably a constant industry force, with the number of banks having dropped by roughly half during the past two decades.  As the trend continues, and picks up steam, the number of banks should fall much further.

Friedman says that, if the past is prologue, then outsized returns can be achieved by prudently investing in the community and regional bank sector before the M&A boom takes full force and the credit cycle has fully normalized.  Simply put, bank prices have tended to advance sharply before their credit metrics showed a recovery phase, and then increased further while the metrics reverted to longer term averages.  Though banks likely have more losses to take, the worst appears to be behind them; and investors must consider that these losses already may be baked into bank equities, which are trading at historically depressed levels.

Supporting M&A trends and expectations, the white paper also discusses significant drivers of bank consolidation, including increased regulatory pressure, lack of loan growth and access to capital markets, management and bank board fatigue, and material cost savings.

FJ Capital is an investment management firm that analyzes and invests in community and regional banks through alternative strategies. The firm utilizes its extensive research background and a fundamental approach to understand the current banking environment. For additional information on the white paper or to further explore opportunities in the bank sector, please use the below contact information or visit www.fjcapital.com.

CONTACT: Andrew Jose, COO and Co-Founder, FJ Capital Management, ajose@fjcapital.com, www.fjcapital.com. +1-703-875-8378

SOURCE FJ Capital Management, LLC

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