Banks are thinking even harder about approaching key asset size thresholds as the recent industry tumult spells tougher regulation ahead.

Surpassing total critical asset thresholds such as $10 billion, $100 billion and $250 billion comes with hurdles such as increased regulation and expenses and decreased income. With the prospect of even tougher regulation in the future, banks are more keenly aware of their size and more hesitant to cross those asset thresholds.

$100 billion

Following the recent failures of three regional banks, regulators have made it clear they plan to increase regulation for banks with between $100 billion and $250 billion in assets. Those increased regulations could include tougher capital and liquidity requirements and more regular stress testing.

Comerica Inc. and First Horizon Corp. are among the largest banks sitting below that threshold with $91.33 billion and $80.73 billion in assets at March 31, respectively.

As it approaches that key threshold, Comerica is thinking carefully about approaching $100 billion in assets, and could shrink some in the near term.

"We'll probably be a little bit slightly smaller than that on a go-forward basis," Chairman, President and CEO Curtis Farmer said June 13 at an industry conference. However, "I don't believe that the right thing for our shareholders is to limit our growth as a company. And so I don't want sort of regulatory pressures to be the reason that we would not grow beyond $100 billion," he added.

Growing organically above $100 billion would "take awhile," but Comerica is prepared to "deal with that from a regulatory standpoint," Farmer said.

First Horizon is hoping to stay below the threshold until there is more clarity on the regulatory environment, Chairman, President and CEO D. Bryan Jordan said at the company's recent investor day on June 6.

"Going across $100 billion is not just expensive, it's extraordinarily expensive. And that doesn't add much in terms of customer serviceability or shareholder returns. It really is a pretty big step. I want to see how the regulatory framework plays out," he said.

One bank, New York Community Bancorp Inc., crossed $100 billion in assets during the first quarter.

If regulators drop the threshold for increased regulation to $100 billion, that would reverse a 2018 change which bumped that threshold to $250 billion. When a bank hits $250 billion in assets, they become subject to more stringent regulation such as yearly Federal Reserve stress testing and heightened capital and liquidity requirements.

Six regional banks are sitting below that threshold with more than $200 billion in assets at March 31. Among those, First Citizens BancShares Inc. posted the largest sequential jump in total assets at 96.4% following its acquisition of substantially all loans and certain other assets as well as all customer deposits and certain other liabilities of Silicon Valley Bridge Bank NA in March.

Just one bank, Bank of Montreal, crossed the $250 billion asset threshold in the first quarter.

$10 billion

For community banks, crossing $10 billion brings growing pains such as increased expenses as a result of more regulation, namely from the Consumer Financial Protection Bureau, and decreased income as the Durbin Amendment kicks in and limits interchange fee income.

Seven community banks surpassed that threshold during the first quarter.

Separately, nine community banks reported more than $9 billion in total assets in the quarter, putting them right below the $10 billion mark.

Leaping over with M&A

Due to the increased costs and decreased income that comes with crossing some of these critical thresholds, most banks prefer to leap past them through M&A rather than organically grow right above them in order to mitigate those headwinds.

A number of banks that crossed key thresholds in the first quarter did so through M&A. Among the banks that crossed $10 billion, Brookline Bancorp Inc. and First Commonwealth Financial Corp. completed acquisitions during the quarter.

Among larger banks, New York Community jumped above $100 billion in assets with its purchase of substantially all the deposits and certain loan portfolios of Signature Bridge Bank NA in March while Bank of Montreal leapt above $250 billion when its acquisition of Bank of the West closed in February.

Both First Horizon and Comerica, which are sitting just below $100 billion, plan to focus on organic growth, but neither shut the door on possible M&A.

"We're not afraid to grow through M&A. And if the right opportunities present themselves, we'll figure it out at the time, but our focus right now is operating our business and making the investments," First Horizon's CEO said at the company's investor day.

Similarly, Comerica continues "to focus on running our playbook on organic growth," but "if the right thing came along, cultural fit, strategic fit, good funding source, we would always take a look at it," the company's CEO said at the industry conference June 13.