Bank consolidation through mergers and acquisitions is underway
In the world of banking, the second term of the Trump administration has seen a significant shift in the approval process for mergers and acquisitions (M&A). Deregulation efforts have led to a shortening of timelines, as regulatory scrutiny has been reduced, and approval processes expedited.
One of the key factors contributing to this change is the reversal of a July 2021 executive order aimed at promoting competition by increasing regulatory scrutiny on M&A. This move has eased regulatory barriers, allowing for faster deal closures. Agencies like the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) have rolled back Biden-era rules, including a 2024 OCC rule banning expedited merger reviews. The Senate and House voted to nullify these tougher standards, and Trump signed legislation overturning them.
This more constructive regulatory stance towards bank consolidation is evident in the prompt approval of large acquisitions such as Capital One's $35 billion purchase of Discover. Regulatory reforms proposed under this administration, such as easing capital requirements for banks, also free up balance sheet capacity that can support consolidation moves.
In contrast, during the Biden administration, merger reviews were more stringent, with federal agencies often choosing litigation over settlements, leading to lengthier investigations.
Columbia Banking System's $2 billion deal to buy Pacific Premier Bank, which will cement its presence in Southern California, is expected to close in the second half of this year. The deal, which took 9 months to approve, is an example of the shorter timelines now being seen in bank M&A.
Other notable deals include the Columbia Banking System's Umpqua deal, which saw an 11-month Justice Department investigation, and Renasant's acquisition of The First Bancshares, which took 8 months to approve. The Capital One-Discover deal, which awaited regulator approval for 14 months, has now received approval from the Federal Reserve and Office of the Comptroller of the Currency, signaling the start of increased bank M&A activity.
FDIC Acting Chair Travis Hill has prioritized more timely bank merger approvals, and M&A activity is ramping up, particularly among banks that hold $25 billion or more in assets. St. Louis-based Enterprise Bank & Trust will acquire 12 locations from First Interstate Bank in Arizona and Kansas, while Old National's $1.4 billion acquisition of Bremer Bank is expected to close on May 1.
Smaller deals have occurred in Pennsylvania and Tennessee, and Christopher Olsen, managing partner and co-founder of investment-banking firm Olsen Palmer, stated that smaller banks have felt consolidation pressure for several years, and Trump's reelection could accelerate this trend.
The CEO of Columbia Banking System, Clint Stein, mentioned a "seismic shift in the operating or rate environment" during the Umpqua Bank merger integration. Stein characterized the current M&A environment as more "conducive" compared to the Umpqua integration period.
Busey Bank's acquisition of CrossFirst closed in 6 months, instead of the initial 10-month timeline, and Cadence Bank bought Industry Bancshares, a holding company that owns six community banks in Texas, for between $20 million and $60 million in cash. Atlantic Union Bank's $1.6 billion acquisition of Sandy Spring wrapped in just over 5 months.
Eastern Bank and HarborOne announced a merger in a $490 million deal, and Columbia Banking System announced the deal to buy Pacific Premier Bank. These announcements highlight the increased activity in the banking M&A sector under the second Trump administration.
In conclusion, the second Trump administration’s deregulatory policies and efforts to reverse prior restrictions have contributed to shorter timelines for bank M&A by reducing regulatory hurdles and encouraging consolidation in a fragmented U.S. banking system.
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