Bank M&A

Do you need $1 billion in assets to survive?

Community bankers at Bank Director’s Acquire or Be Acquired Conference this week in Scottsdale are hearing over and over again: you need to have more than $1 billion in assets to survive.

But is that true? And what about those community bankers who think they will survive just fine, thank you, despite the increased costs of government regulation and an earnings environment where big banks seem to have all the advantages.

Bill Hickey, co-head of investment banking at Sandler O’Neill & Partners, caused some consternation Monday morning when he told a crowd of nearly 300 bankers that they needed at least $1 billion to survive, explaining that the costs of regulation following Dodd-Frank’s passage is going to make it tough to make a profit as a small community bank.

A small bank will have to add employees to handle all the compliance issues and added paperwork for everything from Dodd-Frank to existing legislation such as the Bank Secrecy Act, he said later.

Alan Walters, the president of First Commercial Bank, a $275-million asset institution in Jackson, Mississippi, said organizations such as his will survive if they have a good niche.

He said speakers at the conference throwing around the $1 billion minimum are “way off the mark.” His bank will survive by providing a personal touch in competition with bigger banks such as Wells Fargo and Regions Bank, he said. People like it if their bankers know them by name, he said.

Where his bank has trouble competing with the big banks is providing loans at the $15 million range and above, but he said he focuses on small businesses and professionals such as doctors and lawyers with the funding they need to operate their offices.

Many banks are not expected to survive the next few years, in part because of increased regulation but also because many banks want to improve efficiency in the face of increased costs and low margins.

John Duffy, the chairman and CEO of investment bank Keefe, Bruyette & Woods, predicted that there will be 5,000 banks by the end of the decade, about 3,000 fewer than now.

Several bankers also said they thought regulators want the nation to have fewer banks. Former Comptroller of the Currency John Dugan, who also spoke at the conference Monday, said he never heard regulators say they want fewer banks in all his five year tenure at the OCC, which ended last year.

John Freechack, an attorney who advises financial institutions for Barack Ferrazzano, provided some reassurance to small, community bankers.

He said people have been predicting the demise of community banks for 20 or 30 years. In particular, the cost of new technology in banking was supposed to have put many of them out of business by now.

“From a board’s perspective, you need to make a determination of whether or not you’re going to be able to survive,’’ he said.  But he added after the session: “This is a very resilient industry.”

That would be good news for a lot of community bankers. About 90 percent of all the banks in this country have less than $1 billion in assets, according to James McAlpin, a partner in law firm Bryan Cave LLP.


Naomi Snyder


Editor-in-Chief Naomi Snyder is in charge of the editorial coverage at Bank Director. She oversees the magazine and the editorial team’s efforts on the Bank Director website, newsletter and special projects. She has more than two decades of experience in business journalism and spent 15 years as a newspaper reporter. She has a master’s degree in journalism from the University of Illinois and a bachelor’s degree from the University of Michigan.