M&A broadens as U.S. banking earnings improve

Valley, First Financial and Pontiac agreed to three Illinois-area bank acquisitions. Valley National Bank agreed to acquire Providence Financial for $247 million in stock and cash, with management citing funding diversification, loan diversification and fee-income growth; the deal is slated for early 2027. First Financial Bancorp agreed to acquire Hickory Point Bank and Trust for $111.3 million, adding eight branches in central Illinois and lifting assets to $6.9 billion. Pontiac Bancorp agreed to buy Ottawa Bancorp, with Bank of Pontiac paying $45.5 million in cash for the holding company of the $356 million-asset OSB Community Bank and targeting a first-quarter close.

Banks expected faster M&A under a favorable approval window, and Gulf Winds Credit Union proposed buying Madison County. American Banker reported that banks expect M&A to accelerate under a favorable regulatory regime and cited Bain projections that the group of banks above $1 trillion in assets could rise from four to five to seven by 2030 while large regional banks decline from 49 to 30 to 40. Banking Dive described Gulf Winds Credit Union's proposed acquisition of Madison County Community Bank as the sixth whole-bank purchase by a credit union announced this year, and the credit union said it will rebrand itself after the acquisition.

Canadian-owned U.S. franchises reported stronger earnings paths. BMO said its restructured U.S. banking business made good progress last quarter and still expects to reach a 12% U.S. return target by Oct. 31, 2027 through higher client balances, fee-income growth, cost savings and normalized credit-loss provisions. CIBC Bank USA's U.S. net income rose 23% year over year to $228 million, average loans rose 9% to $41 billion and average deposits rose 14% to $34 billion, even as U.S. net interest margin declined 14 basis points to 3.76%. TD reported CAD 1.07 billion of U.S. division net income in the third quarter, up 41% year over year, with U.S. fee income up 50% to CAD 814 million.

FDIC industry data showed higher Q2 profitability. The FDIC's Q2 2026 Quarterly Banking Profile reported aggregate banking-industry net income of $90.1 billion, up $9.7 billion or 12% from the prior quarter, with return on assets at 1.37%.

Scotiabank beat estimates on markets and international earnings. Bank of Nova Scotia earned C$2.28 a share on an adjusted basis in fiscal Q3 versus a C$2.10 analyst estimate, with global banking and markets net income of C$647 million and international unit earnings of C$725 million both above forecasts.

OCC and FDIC finalized narrower supervisory escalation and lookback rules. The joint rule defines unsafe and unsound practices as conduct contrary to generally accepted standards of prudent operation that, if continued, could materially harm the institution or present a material risk of loss to the Deposit Insurance Fund. It also limits when examiners can require corrective action for policy and process weaknesses and generally caps certain suspicious-activity-reporting lookbacks at one year.

Debit interchange litigation remained a large-issuer revenue risk. Oral arguments in Linney's Pizza v. the Board of Governors of the Federal Reserve are scheduled for Oct. 22 in the U.S. Court of Appeals for the 6th Circuit. The case challenges the Federal Reserve's debit interchange fee regime under the Durbin Amendment, and American Banker reported that JPMorganChase, Bank of America and Wells Fargo are most at risk of a dramatic cut in interchange revenue as the largest debit issuers by purchase volume if merchants prevail.

Second Federal agreed to assume Tioga-Franklin deposits after the failure. Pennsylvania regulators closed Tioga-Franklin Savings Bank and appointed the FDIC as receiver, and Second Federal Savings and Loan Association of Philadelphia agreed to assume all deposits and purchase substantially all assets. Tioga-Franklin Savings Bank reported $68 million of assets and $67 million of deposits as of June 30, and the FDIC preliminarily estimated a $5.5 million cost to the Deposit Insurance Fund.