Issues : Bank M&A

Bankers Capitalize on Three Mega-Mergers Reshaping Half of America

Chris Holmes believes two mergers of equals announced in 2019 represent a once-in-a-lifetime opportunity for his $6.1 billion asset bank.

“There may be customers who have not changed their bank in my lifetime [or] in my career, and they will only change once in my career — and this may be it,” says Holmes, the CEO of Nashville, Tennessee-based FB Financial Corp. The bank operates throughout the state, including Memphis and Knoxville, and into Georgia and Alabama; it will soon expand into Kentucky through its acquisition of $253 million asset FNB Financial Corp., based in Scottsville, Kentucky.

What’s causing the change? Two mergers of equals announced in 2019: Memphis, Tennessee-based First Horizon National Corp.’s merger with IBERIABANK Corp., in Lafayette, Louisiana; and BB&T Corp.’s merger with SunTrust Banks, to create Truist Financial.

Holmes sees the potential for big deposit gains. In fact, he’s already gaining business.

For example, a customer in Nashville had a relationship with FB Financial, but for years held their deposits at one of the banks involved in these deals. But now: “That deal is not even closed yet, but they’ve already moved [their account],” he says. “It’s a lot of trouble to move big operating accounts, and [the deal] gave them the opportunity to do it.”

Holmes is in discussions with another big customer, too. “We’ve got a really deep relationship with [them],” he says. “It just gives us a chance to totally displace another bank.”

All told, three big mergers of equals were announced in 2019. The most recent was the pairing of First Horizon and IBERIA, announced on Nov. 4, which will result in a pro-forma company with $75 billion in assets based in Memphis. It will retain the First Horizon name. The Truist merger, announced in February, will result in a $464 billion asset institution based in Charlotte, North Carolina; the deal just received approval from the Federal Deposit Insurance Corp. following a branch divestment and is expected to close by the end of the year. A third deal, between TCF Financial Corp. and Chemical Financial Corp., closed in August. The combined entity has $45.7 billion in assets, is headquartered in Detroit and retained the TCF name.

These three deals alone will impact retail and business customers — and competing banks — in 26 states and Washington, D.C. In addition to Nashville, Memphis, Charlotte, Detroit and Washington, a map of these deals includes key metropolitan areas such as Atlanta, Miami, Chicago, Denver and Phoenix.

States Impacted by 2019 MOEs

In the long run, these deals will produce competitors with deeper pockets to invest in technology.

We really are concerned with how fast these guys are going to leverage their technology and gain operating leverage to drive down the cost of operations. I believe all banks have to get to a 40% efficiency ratio, and these banks are heading there at a faster clip,” says Chris Nichols, chief strategy officer at $17.4 billion asset CenterState Bank Corp., based in Winter Haven, Florida. “They can provide better pricing, better products [and] better technology than we can, because they have the margins to do it.”

But for now, savvy banks throughout the 26 states impacted by these mergers will make the most of this opportunity, gaining customers and talent.

“There is talent that is becoming available,” says M. Terry Turner, CEO of Pinnacle Financial Partners, also headquartered in Nashville. The $27.5 billion asset bank operates throughout Tennessee and North and South Carolina, with additional locations in Virginia, Georgia, Mississippi, Texas and Indiana. He believes Truist’s market overlap, and their move to Charlotte from BB&T’s home base in Winston-Salem and SunTrust’s in Atlanta, will free up employees who don’t want to relocate.

Successful banks will be proactive in their efforts to gain talent and customers — they can’t just wait for the proverbial phone to ring. And bank leaders should evaluate their products and services now to identify opportunities to better serve their communities, advises Nichols.

In short, this wave of mergers represents a rare opportunity for competing banks.