A Case for Optimism

By Peter Gwaltney

In North Carolina, 2017 will be remembered for the wave of mergers it brought. This year, more than 20 percent of the banks headquartered in North Carolina either merged with other banks in the state or were purchased by out-of-state banks. We are not unique—mergers are taking place across the country at an accelerated pace.

Mergers of equals and other in-state mergers have enabled four smaller North Carolina community banks to achieve scale and better shoulder the disproportionate regulatory burden brought on by Dodd-Frank and other pressures on profitability. This will continue until Congress and the federal regulatory agencies provide meaningful regulatory relief and supervision that is tailored to the size and complexity of the financial institutions.

On the other end of the spectrum, a significant number of our larger state-headquartered community banks were acquired earlier this year in rapid succession over the course of a few months—eight of the 20 largest banks in North Carolina, totaling $32 billion in assets with the exception of one $800 million institution, were acquired by out-of-state banks, bringing the total number of North Carolina-chartered banks to less than 50. From the perspective of a state bankers association, a wave of mergers of this magnitude was, to use a technical term, scary.

The press has been enamored with the merger activity, most likely because of the pace and the size of the transactions. Each announcement has resulted in calls from reporters on which I’ve addressed questions about the impact of the mergers on consumers and communities and a host of other issues. After reading an article in which I was quoted, a friend observed that I lean toward optimism. I laughed, because I think his comment was a diplomatic way of suggesting that I might not have the best grasp on reality. I agreed with his assessment of my chronic optimism and I assured him that my grasp on reality is just fine. I understand that unless we adjust and adapt to a membership that has consolidated significantly, we could find ourselves in a bind.

Consolidation is having an immediate impact on the NCBA and state associations across the country. It’s affecting revenue, participation in meetings, utilization of products and services and engagement in advocacy efforts, all at a time when state associations and ABA are working closely together to bring about meaningful regulatory reform in Washington and doing our normal blocking and tackling in our state legislatures. State associations serve a vital purpose for the banking industry, and we will adapt, because that’s what we do. Bankers will likely see their state associations doing things differently as consolidation continues among our members. We might jettison programs that were successful five or 10 years ago, or we might jointly sponsor a conference or convention with another state association. Change is rarely easy, but it is going to be necessary for the long-term strength and viability of the banking industry’s network of bankers associations: the ABA-State Association Alliance.

I love banking and am honored to serve our industry as a state association executive. I chose banking as a career nearly 30 years ago, after my mentor, former boss and friend, Hartie Spence, explained to me how bankers help people. I’m grateful to Hartie for sharing his passion for serving others with me. Over my career, I’ve witnessed the incredible resilience of bankers and seen our associations adapt through recessions, natural disasters and other disruptions. Putting all of that into perspective, a merger wave does not seem so scary and makes me optimistic about the future of our industry and the associations that serve it. Yes, I lean toward optimism.

PETER GWALTNEY is president and CEO of the North Carolina Bankers Association.