Bank leaders usually think about performance through the eyes of regulators, directors, and shareholders. In a recent SouthState Correspondent Division article, Chris Nichols argues they should also think about how their bank looks to a potential buyer.
Nichols says banks that get acquired often share a recognizable profile. Some of it is qualitative, including culture. But much of it is visible in areas acquirers can size up quickly: deposit quality, capital use, market attractiveness, technology, earnings profile, and the overall simplicity—or messiness—of the franchise. His point is not that every bank is headed for a sale. It is that management teams should understand what makes a bank look “fixable” to someone else.
Here are a few practical takeaways:
Start with how an acquirer would read the story. Nichols says most buyers prefer “a clean, understandable bank with few surprises.” That means fewer esoteric business lines to explain and a clearer operating profile overall. The goal is to make the strategic and capital plans distinct enough that the franchise becomes too expensive to acquire. Deposit performance also stands out. “Loan quality is often in the eye of the beholder, but deposit quality is universally known,” he writes. Ownership structure also plays a role; while family-owned banks sell on their own timeline, Nichols notes that the more public a bank is, the more it is “for sale every day.”
Do not leave excess capital open to interpretation. Nichols warns that underused capital or liquidity often “screams to find a better home.” His recommendation is not simply to hold less capital, but to make the rationale more explicit. If the bank is carrying extra capital, management should explain why and how it will be used, rather than allowing outsiders to see it as unused capacity.
Remove the easy ‘fix-it’ narrative. Several of Nichols’ recommendations are aimed at taking away the obvious M&A pitch. Stress-test deposit betas and runoff assumptions. Diversify larger funding relationships. Boost product design and marketing to grow treasury management and DDAs, which directly reduces funding fragility. Review credit concentrations by industry, geography, sponsor, and borrower type. Address volatile earnings drivers, noncore revenue dependencies, and unusually high expenses—leveraging artificial intelligence and agentic AI to improve operating leverage—before a buyer frames them as a straightforward efficiency play.
Customer loyalty still matters. Nichols argues that a deeply engaged customer base is one of the more underappreciated defenses. The more value a bank adds to customers’ lives, the more business they are likely to bring back. He points to digital account opening, automated loan origination, and experienced bankers acting as trusted advisors as part of that equation.
Use the M&A lens before someone else does. Nichols describes today’s environment as “a barbell-shaped world” in which both outperformers and underperformers draw the most attention. His broader message: management teams that understand their own acquisition profile are better positioned to control their own destiny.
For teams that want more structure around that work, the ProSight Bank M&A Playbook offers checklists, frameworks, data, and guidance spanning the process from initial consideration to closing.
