Cost and Effect: What Regulation Does to Growing Banks
April 27, 2016 8:30 AM
A number of banks have recently crossed $10 billion in assets, where caps on interchange fees and mandatory stress testing kick in, and more are set to pass the threshold shortly. Here is a look at the annual toll regulation will take on many of those institutions.
Chemical Financial: $12 million
The Midland, Mich., company has projected that crossing $10 billion in assets will cost it $10 million in revenue in 2018 due to caps on debit card interchange fees, while increasing annual compliance costs by $2 million. The $9.3 billion-asset company, led by CEO David Ramaker, hopes to offset the hit by buying Talmer Bancorp .
United Community Banks: $11 million
United Community CEO Jimmy Tallent has estimated that the Blairsville, Ga., company could lose $9 million in interchange income and add up to $2 million in compliance-related expenses when it reaches the $10 billion-asset mark. The company has about $9.6 billion in assets now, with an acquisition pending .
Bank of the Ozarks: $10.7 million
The Little Rock, Ark., company crossed the $10 billion-asset threshold in the first quarter. The now-$11.4 billion-asset company, led by CEO George Gleason, expects to lose nearly $5.4 million annually because of the Durbin Amendment's cap on interchange fees. Compliance costs are expected to be $5.3 million higher in 2017 than they were last year.
Pinnacle Financial: $10 million
The Nashville company will approach $10 billion of assets after it buys Avenue Financial . It will likely cross that mark in the next year or two and, once it does, could lose nearly $8 million in annual interchange revenue. CEO Terry Turner has also estimated that Pinnacle faces more than $2 million in new compliance costs tied to stress testing and higher FDIC assessments.
First Midwest Bancorp: $4.1 million or more
The $10.7 billion-asset First Midwest, led by CEO Michael Scudder, has said that a cap on interchange fees that should take hold in mid-2017 could cost it $4 million to $5.7 million in annual revenue . The company hasn't said how much its compliance costs could increase.
BBCN Bancorp: $1.5 million or more
BBCN, led by CEO Kevin Kim will surpass $10 billion in assets when it buys Wilshire Bancorp. BBCN, which doesn't rely much on interchange, expects annual revenue to fall by $1.5 million when it crosses the regulatory threshold. It is unclear how BBCN's compliance costs will change once it starts reporting stress test results in mid-2018.
