Three U.S. banks surpassed $10 billion in total assets during the fourth quarter of 2021, a critical threshold that comes with growing pains for community banks.
Crossing $10 billion in total assets brings additional regulatory oversight from the Consumer Financial Protection Bureau and eats at community banks' revenue as the Durbin amendment kicks in and limits interchange fee income.
Crossed in Q4'21
Two banks crossed the threshold as a result of M&A during the last quarter of 2021.
First Foundation Inc. closed its cross-country deal for Florida-based TGR Financial Inc. on Dec. 17, 2021. The deal pushed Dallas-based First Foundation just above the threshold to $10.20 billion in total assets, but the company may not be stuck there for long as it hunts for more M&A in both Texas and Florida, CEO Scott Kavanaugh told S&P Global Market Intelligence in an interview last month.
Southern Pines, N.C.-based First Bancorp also crossed as a result of M&A after closing its acquisition of Select Bancorp Inc. in October 2021. The deal boosted First Bancorp's total assets to $10.52 billion.
On the other hand, Dallas-based NexBank Capital Inc. surpassed $10 billion in total assets during the last quarter of 2021 as a result of organic growth. The company's total assets jumped 11% quarter over quarter to $10.83 billion as of Dec. 31, 2021.
Additionally, three U.S. community banks — Seacoast Banking Corporation of Florida, Lakeland Bancorp Inc. and Allegiance Bancshares Inc. — are expected to surpass $10 billion in total assets soon as a result of pending M&A.
Approaching $10 billion
Thirteen community banks sat right below the threshold, reporting more than $9 billion in total assets in the fourth quarter of 2021.
OFG Bancorp's total assets sat above $10 billion throughout 2021, but dropped back below during the fourth quarter of 2021, allowing the Puerto Rico-based bank to avoid the impact of the Durbin amendment until at least 2023, CEO Jose Fernandez said on the company's Jan. 19 earnings call. When it does come into effect, the company estimates the Durbin amendment will decrease its fee income by about $4.2 million for half the year, or about $10 million annually.
A 36.5% decline in OFG Bancorp's Small Business Administration Paycheck Protection Program loans quarter over quarter likely contributed to the company's 6.7% decline in total assets since the third quarter of 2021.
First Commonwealth Financial Corp. plans to stay below the critical threshold through the end of 2023 despite sitting at $9.55 billion at Dec. 31, 2021, CFO James Reske said on the company's fourth-quarter 2021 earnings call on Jan. 26.
"Organically, we think the balance sheet won't grow that much in 2022," Reske said. "I think we can stay below at the end of 2023 as well. And then God willing, this M&A could help us leap across."
