Recent Bank Merger Activity Provides New Opportunities To Lend

If you have been watching the headlines in the Banking industry, you will see many large Bank mergers and acquisitions taking place all across the United States as the consolidation in the Banking industry continues.  The current consolidation rate is around 3%, meaning 3 out of every 100 Banks in the Country are likely to be involved in a merger or acquisition this year.  Recently some very large Bank mergers have been announced, including the following:


  • PNC Bank acquiring BBVA in Houston, TX
  • M&T Bank acquiring Peoples United Financing in Bridgeport, CT
  • Huntington Bank acquiring TCF Bank in Detroit, MI
  • Webster Financial acquiring Sterling Bancorp in NY
  • South State Corp acquiring Centerstate Bank Corp in Winter Haven, FL
  • New York Community Bank acquiring Flagstar Bank in Troy, MI
  • Old National Bancorp acquiring First Midwest Bank in Chicago, IL


These mergers are just the seven largest announced in the last sixty days or so, and with most of these institutions operating across multiple states, the impact of these mergers will be felt by many individuals and business owners.  This list is only the tip of the iceberg with over 138 bank acquisitions already announced in 2021.  At the start of 2010 there were 7,658 separately charted Banks in the United States.  As of today, that total is down to 4,978 charters, a decrease of 35%, and will be even lower once many of the announced acquisitions close later this year or in early 2022.  This merger pace is expected to continue going forward, with the average bank merger rate over the last 40 years sitting at 4% per year.   


All of this acquisition activity continues to create a major void in the market, which is becoming hard to fill.  In the 1990’s and the early 2000’s, De Novo Bank (newly chartered banks) startups largely matched the pace of merger activity.  However, since 2010 De Novo Bank startups have slowed down dramatically with only 57 new banks having been chartered since 2010. Currently there are 11 new bank charters approved and another 14 in for approval, but even if all are approved and open this year, these 25 new charters will come nowhere near close to matching the already announced mergers of 138 in 2021, and the year is not even over yet. 


As we have discussed in previous articles, whenever Banks’ merge, the total capacity in the market for loans typically decreases.  Plus, as Banks get bigger, in order to support future growth, they typically need to focus on larger transactions.  Lastly, in order to achieve cost savings goals from the merger and better efficiencies, larger Banks usually cut back on small business lending or streamline that lending into an underwriting process that does not provide much if any flexibility.   These adjustments make it even harder for small business owners to get the capital they need to grow. 


However, it is not all doom and gloom.  Although it may be harder to find Banks to work with as the industry consolidation continues, there are still plenty of community and mid-sized Banks focused on working with small business owners.  There are even some Banks that focus on higher risk credits in order to achieve higher returns (typically those Banks feel they can get a slightly higher interest rate when the loan is higher risk).  Credit Unions have stepped up and greatly expanded the amount of commercial lending they do (historically Credit Unions did very little commercial lending), providing additional loan capacity for the marketplace.  The expansion of SBA lending has provided another strong solution for business owners.  There has been an explosion in non-bank lending solutions that come from a wide variety of funding sources, whether private equity, publicly traded companies that have created a lending arm, or organizations created to make commercial loans and then package and sell them as Commercial Mortgage-Backed Securities into the equity markets.  Lastly, even though it might be harder to qualify for small business commercial financing with a large bank, if you do qualify the interest rates and terms are usually outstanding.  


All of this consolidation has also created opportunities for those who work in and around the Commercial Lending industry.  Whether you are Banker who has commercial loan borrowers who do not meet the qualifications of your institution, or you are a Realtor, Attorney, CPA, Residential Mortgage Broker, or other professional that has clients struggling to find the commercial financing they need, there is a tremendous opportunity for you in this market to help direct them to solutions that can help them.  Here at Commercial Lending X we have over 350 active funding partners that include both traditional Banks and Credit Unions as well as many non-bank lending solutions, providing us the ability to find a solution to fit just about any customer need.  In addition, with our referral programs, there is an opportunity for you to share in the success we bring to the market. 


Whether you are a borrower looking to maneuver through the merging banking industry or just looking to find a fresh solution, or a professional who has clients that need assistance, please never hesitate to reach out to us.  We have a highly trained team ready and willing to help you or your clients with all of their commercial financing needs and a proven track record of finding the right solutions for our clients.