9 US banks grow total assets beyond $10B in Q1

Nine U.S. community banks grew beyond $10 billion in total assets in the first quarter, the highest number in a quarter since the 10 seen in the same period of 2021.

The threshold brings growing pains to community banks, limiting interchange fee income as the Durbin Amendment kicks in, and drives up expenses as a result of increased regulation from the Consumer Financial Protection Bureau. Most community banks prefer to leap well above this amount to offset the costs of crossing $10 billion.

Recent additions

While Small Business Administration Paycheck Protection Program loans drove up total assets in the first quarter of 2021, M&A was the main reason banks crossed the threshold in the three months to March 31, 2022. Of the nine additions, five closed at least one bank transaction during the period.

Lakeland Bancorp Inc.'s acquisition of 1st Constitution Bancorp boosted its total assets by 25.4% quarter over quarter. Seacoast Banking Corp. of Florida closed two acquisitions in the first quarter, increasing its total assets by 12.6% compared with the previous quarter.

Organic growth pushed the other four community banks above the threshold. Beal Financial Corp. posted the largest quarter-over-quarter total asset growth among the nine banks at 63.4%, with total assets reaching $12.08 billion as of March 31.

Approaching the threshold

A further nine community banks reported more than $9 billion in total assets in the quarter, bringing the $10 billion threshold into sight.

First Commonwealth Financial Corp., whose total assets hovered at about $9.5 billion through much of 2021, reported $9.64 billion at the end of the period. It expects to stay below the threshold until at least 2023, executives said on its first-quarter earnings call.

S&T Bancorp Inc., which reported $9.43 billion in total assets at March 31, also anticipates it will remain below the threshold for a while.

"We're not targeting a specific time frame to hit," CFO Mark Kochvar said on the company's first-quarter earnings call. "We still have $750 million of cash, and with a little bit lighter loan outlook, we're looking at potentially up to two years at that pace before we would naturally cross."

Many community banks prefer to leap above $10 billion in assets, usually through M&A, to offset the costs associated with crossing the asset threshold.

Three banks — Allegiance Bancshares Inc., Brookline Bancorp Inc. and Origin Bancorp Inc. — are expected to surpass $10 billion in total assets soon as a result of pending M&A.

Brookline's announced acquisition of PCSB Financial Corp. will boost its total assets to about $10.63 billion from the $8.65 billion it reported as of March 31. It anticipates the loss of interchange fee income and increased regulation to cost the company about $1.5 million a year, executives said on the May 24 deal call.