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January 21, 2019 Biz Money

Could 2019 see more bank mergers? Some forecasters say 'yes'

Maine's banking community has been relatively stable in recent years, without a lot of major upheaval from bank mergers.

But there are a growing number of reports speculating that we could see a return of regional banks getting snapped up by larger competitors.

Corporate tax reductions have given companies more cash. Some of the most stringent bank regulations that came out of the 2008 financial collapse could be scaled back, so that banks with assets of $250 billion or less would be subject to less scrutiny than in the past.

“The floodgates could open for larger banks to make big deals,” Yahoo Finance reported.

David Wright, managing director of Deloitte's banking regulatory practice, told Yahoo Finance he has had conversations with banks between $50 billion and $200 billion on preparing for future mergers. The four out-of-state banks with the largest presence in Maine are TD Bank ($244.1 billion in assets), KeyBank ($105 billion), Bank of America ($1.3 trillion) and People's United ($31.4 billion). (The largest Maine-based banks are in the neighborhood of $4 billion in assets.)

“We know that there are regional banks that are actively preparing to be able to execute if and when the numbers work for them,” Wright said.

Ernst & Young LLP also issued a report citing the possibility of more banking deals this year, fueled by easing regulations and the U.S. tax overhaul, Bloomberg reported.

Rural banks could be at risk

Another report, by the American Bankers' Association's Banking Journal, also addresses the likelihood of more bank mergers this year.

“As larger banks focus their efforts on metropolitan and suburban markets, an opportunity has arisen for well-performing smaller banks,” according to the ABA report, which was published in December. “Many of these banks are situated in exurban and rural markets and are armed with a wealth of well-priced and stable deposits. With this solid funding base, these banks will look to move into suburban markets through acquisitions of banks that are either too small to attract attention from more established acquirers or that prefer the opportunity of combining with a smaller, community-oriented institution.”

But the report, which was compiled by Jonathan Hightower and Robert Klingler of Bryan Cave Leighton Paisner in Atlanta, also points to another area that could have particular significance in Maine: Rural banks or banks with a strong rural presence.

“Many of us have observed with considerable trepidation the plight of small, rural banks situated in markets with declining populations and deteriorating economic outlooks. These banks are now surviving on the margins, focusing on efficiency to enhance operating results. While such tactics can result in acceptable earnings and risk profiles, opportunities for a liquidity event through a sale transaction appear bleak for many of these banks,” the ABA report states.

With those words, we'll see what 2019 brings the banking industry in Maine.

Editor's note: Read the entire ABA Banking Journal report online here. 

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