M&A Moves: CFI Growth Through Community-Focused Consolidation

In 1998, two major players — NationsBank and BankAmerica — merged to form what we now know as Bank of America. At the time, it was the largest bank merger in US history, signaling a new era of consolidation in financial services.Beyond the headlines, the deal demonstrated the long-term potential of strategic bank mergers: expanding into new markets, leveraging proprietary technologies, and building resilience through scale.While community financial institutions (CFIs) operate on a much more local scale, they face similar pressures and opportunities today. The right merger — done for the right reasons — can transform a CFI’s reach and relevance, without compromising its community roots.Regulatory TailwindsRecent moves by the FDIC suggest a shift toward a friendlier environment for consolidation. Acting Chairman Travis Hill has announced efforts to streamline regulations, including rescinding the 2024 bank merger policy in favor of a more transparent, rules-based approach. These changes aim to remove ambiguity and reduce friction in the M&A process.Congress is also stepping in. The House Financial Services Committee is advancing several bills, such as the “Promoting New Bank Formation Act,” to make it easier for CFIs to grow and innovate. Leaders emphasized the importance of giving community banks the regulatory breathing room to thrive — highlighting M&A as one pathway to ensure sustainability.With these policy signals, the stage is being set for a resurgence in deal-making across the financial sector.Access to Capital, Markets, and TechWhile big-bank mergers dominate headlines — like Capital One’s $35.3B acquisition of Discover — CFIs are increasingly active.In Texas, multiple community banks have announced merger deals this year, aiming to pool resources, expand footprints, and enhance services. These mergers don’t just add size — they bring strategic advantages, including diversified loan portfolios and access to new markets.One growing M&A trend involves acquiring fintech capabilities. As digital transformation becomes a must-have, many CFIs are using M&A to add payment capabilities, automation tools, or online lending platforms to their arsenals.With more than 60% of banks exploring fintech partnerships just for cross-border payments, according to a PYMNTS study, acquiring these tools outright can jumpstart innovation — provided the integration is thoughtfully executed.Caution Amid OptimismDespite the favorable climate, the M&A path isn't without challenges. Regulatory approval times are still lengthy — averaging 100 days in H1 2024 for bank mergers, with deals over $500MM often stretching closer to 10 months.CFIs must be prepared for rigorous due diligence, especially around capital adequacy, technology integration, and cultural alignment. A misstep in any of these areas can delay approvals, derail synergies, or disrupt customer relationships.Moreover, CFIs must carefully evaluate whether a merger aligns with their long-term mission. Preserving the local identity, trust, and personal service that define community banking is crucial. Poorly executed integrations can alienate customers and staff alike.Community-Focused M&A Tips for CFIsFor CFIs, M&A deals offer more than just a path to scale — they’re an opportunity to evolve thoughtfully and strategically. Done right, a merger can unlock new technology, diversify product offerings, and strengthen market presence.However, these gains only matter if a CFI preserves what sets it apart: deep relationships, local insight, and mission-driven service. Here are key considerations for CFIs evaluating M&A opportunities in 2025 and beyond:

For CFIs considering consolidation, the path forward involves balancing scale with soul. Evaluate potential deals not only for what they add to your balance sheet, but also for how they will impact your customers, communities, and internal culture.