Three large bank acquisitions announced in the closing quarter of 2020 may signal a fundamental shift in how a growing number of regional banks envision the future.

While each deal is its own distinct story, there is a common thread that ties them together: the growing demand for scale in an industry undergoing a technological transformation that accelerated during the pandemic. Even large regional banks are hard pressed to afford the kind of technology investments that will help them keep pace with mega-banks like JPMorgan Chase & Co. and Bank of America Corp., which spend billions of dollars a year between them on their own digital transformation.

In October, First Citizens BancShares acquired New York-based CIT Group. Valued at $2.2 billion, the deal will create a top 20 U.S. bank with over $100 billion in assets, and combines the Raleigh, North Carolina-based bank’s low-cost retail funding base with CIT’s national commercial lending platform.

The two companies are a good strategic fit, according to H. Rodgin Cohen, the senior chair at Sullivan & Cromwell, who represented CIT. “If you look at it from CIT’s perspective, you can finance your loans at a much-cheaper cost,” says Cohen in an interview. “From a First Citizen perspective, you have the ability to use that incredible funding base for new categories of relatively higher-yielding loans.”

But digital transformation of banking was an underlying factor in this deal, as increasing numbers of customers shift their transactions to online and mobile channels. The fact that the pandemic forced most banks to close their branches for significant periods of 2020 only accelerated that trend.

“There is enormous pressure to migrate to a more digital technology-driven approach — in society as a whole — but particularly in banking,” Cohen says. “The key is to be able to spread that technology cost, that transformational cost, across the broadest possible customer base.  It doesn’t take a lot of direct savings on technology, simply by leveraging a broader customer base, to make a transaction of size really meaningful.”

A second scale-driven deal is PNC Financial Services Group’s $11.6 billion acquisition of BBVA USA, the U.S. arm of the Spanish bank Banco Bilbao Vizcaya Argentaria. Announced in mid-November, the deal will extend Pittsburgh-based PNC’s retail and middle-market commercial franchise — now based in the Mid-Atlantic, South and Midwest — to Colorado, New Mexico, Arizona and California, with overlapping locations in Texas, Alabama and Florida. In a statement, PNC Chairman and CEO William Demchak said the acquisition provided the bank with the opportunity to “bring our industry-leading technology and innovative products and services to new markets and clients.”

The deal will create the fifth-largest U.S. bank, with assets of approximately $566 billion. But Demchak has made it clear in past statements that PNC needs to grow larger to compete in a consolidating industry dominated by the likes of JPMorgan and Bank of America.

Lastly, in a $6 billion deal announced in mid-December, Columbus, Ohio-based Huntington Bancshares is acquiring Detroit-based TCF Financial Corp. to form the tenth largest U.S. bank, with assets of approximately $170 billion. Chairman and CEO Stephen Steinour says the two companies are an excellent fit with similar cultures and strategies.

“It’s a terrific bank,” Steinour says in an interview. “I’ve known their chairman for a couple of decades. Many of our colleagues have friends there, or family members. We compete against them. We see how they operate. There’s a lot to like about what they’ve built.”

The acquisition will extend Huntington’s retail footprint to Minnesota, Colorado, Wisconsin and South Dakota, while deepening its presence in the large Chicago market. And with extensive overlapping operations in Michigan, Huntington expects the deal to yield approximately $490 million in cost saves, which is equivalent to 37% of TCF’s noninterest expense.

But this deal is predicated on much more than just anticipated cost saves, according to Steinour.

“What Apple and Google and Amazon are doing is teaching people how to become digitally literate and creating expectations,” he says. “And our industry is going to have to follow that in terms of matching those capabilities. This combination is an opportunity to accelerate and substantially increase our digital investment. We have to do more, and we have to go faster, because our customers are going to expect it.”

Steinour hedges on if these recent deals also signal that banking is entering a new phase of consolidation, in which regionals pair off to get bigger in a new environment where scale matters. But last year’s $66 billion merger of BB&T Corp. and SunTrust Banks Inc. to form Truist Financial Corp. — currently the fifth-largest U.S. bank, although the post-merger PNC will drop it down a peg — was also driven by a perceived need for more scale. Senior executives at both companies said the primary impetus behind the deal was the ability to spread technology costs over a wider base.

But clearly, the need for scale was a factor for Huntington as well. “We’re investing heavily in this opportunity to combine two good companies, get a lot stronger, accelerate our investments and spread that over a much bigger customer base,” he says. “That makes eminent sense to us.”

As Steinour comments later, “We’ll be stronger together.”