M&A Strategic Conference: Community Banks vs. Too Big To Fail Banks


Posted by LLJ43 | Posted in College Savings | Posted on 13-05-2017

While the Federal Reserve System includes both large and small banks, is there a difference in how they are treated? CEO and President of NexBank John Holt might have discussed this topic at the Texas Bankers Association’s Annual Strategic Opportunities Conference. Could the M&A landscape be described as “Community Banks vs. Too Big To Fail (TBTF) banks?”


“TBTF Banks Have Assets Above $100 Billion”


As banking continues to grow, the thresholds for classification must continually be adjusted. Since 2012, the large bank category for M&A, which could threaten system risk, was at $25 billion. On March 17, 2017, the Fed raised this to $100 billion. Therefore, is the new “Too Big To Fail” category – any bank above $100 billion?


With any banking M&A, the Fed must approve of the transaction. The average time for Fed M&A assessment is from 6 to 12 months. Unfortunately, some take significantly longer – the M&T Bank acquisition of Hudson City Bancorp took more than 36 months. Perhaps, the Fed envisions more M&A activity in the pipeline and wants to speed up the process. Or, it might also be setting the next TBTF threshold for a future bailout.


“Community Banks Grow Through Innovation”


Perhaps, the American banking industry has different rules for small and large banks. Ironically, the new TX M&A Strategic Conference panel called “Reinventing Community Banking: Perspectives on Competing by Innovation” had NexBank CEO John Holt as a panelist. Generally, a small bank will not be able to do many acquisitions; of course, NexBank did acquire College Savings Bank in 2015, but that is the exception to the rule.


With its acquisition, NexBank gained access to student loans. NexBank had an asset value of $4.6 billion in December 31, 2016. Community banks have different needs than the “Too Big To Fail” banks.