Texas Strategic Banking Conference: Fed M&A Regulation Change

“What is the best way for Texas banks to grow?” This was the primary agenda item of the Texas Bankers Association 5th Annual Strategic Opportunities and M&A Conference, which took place in November 2016. This topic dove tails nicely with March 2017 Fed changes, which made the M&A approval process easier.

 

“Banking Growth: Innovation or M&A”

 

The Texas Bankers Association listed several ways to grow banks, including organic growth, branching or M&A activity. The NexBank CEO & President John Holt was a panelist on the new group called “Reinventing Community Banking: Perspectives on Competing by Innovation.” NexBank had an asset value of $4.6 billion in December 31, 2016.

 

Innovation could include technological, like online banking or product mix, such as special mortgage tranches for institutional investors. Dallas based NexBank offers commercial banking, mortgage banking, and institutional services. Its clientele are primarily institutional investors, large corporations, middle-market companies, and real estate investors.

 

“Less Fed Scrutiny Increases M&A”

 

Doesn’t it seem like the plate of the Federal Reserve continues to get larger and larger? After the 2008 Sub Prime Crisis, the Fed found itself as a primary driver of the economy. It Zero Interest Rate Policy (ZIRP) was a way to pump prime the capital markets. Perhaps, the March 17, 2017 decision to increase the M&A scrutiny threshold from $25 billion to $100 billion was also a form of stimulus. “What does this mean?”

 

Basically, the Fed is admitting that it will allow smaller bank mergers to be completed faster. Instead, it will concentrate on the larger bank mergers (Too Big Too Fail aka TBTF) over $100 billion and force them to adhere to a tighter investigation process before approval. This could be good news for a relatively small bank, such as NexBank. But, does this suggest the Fed foresees more failures?