Regional banks Comerica, First Horizon and Zions are at the greatest risk of being acquired by larger rivals, analysts warn, as industry faces shake up following collapse of Silicon Valley Bank – is yours at risk?

Regional banks Comerica, First Horizon and Zions are at risk of becoming takeover targets by larger rivals, according to a new report.

Since the collapse of Silicon Valley Bank in March, the US banking sector has been primed for a reconfiguration that could see smaller regional banks wiped out.

That’s because the collapse of SVB, and later Signature Bank, was a warning that new regulations might be needed to prevent another potentially more dangerous banking crisis.

Because regulations typically apply to banks of a certain size, many will now seek to adjust their own size to place themselves in desirable regulatory categories, according to a research note from Keefe, Bruyette & Woods (KBW) analysts.

Specifically, banks with assets between $80 billion and $120 billion will be the worst positioned, as new regulations will impose costs that larger banks will find it easier to afford, the report said. As such, larger banks will want to take them on in a ‘race for scale’.

Comerica was another bank that could be acquired by more profitable competitors, according to the KBW note

The total number of FDIC-insured banks in the U.S. has steadily declined from more than 10,000 in the mid-1990s to just over 4,000 last year, according to FDIC data

According to the report, the larger banks likely to cannibalize these banks are those with strong returns, such as Huntington, Fifth Third, M&T and Regions.

This trend of bank mergers is part of a broader and long-term trend of “necessary consolidation” that has affected the U.S. banking industry in recent decades.

The total number of FDIC-insured banks in the U.S. has steadily declined from more than 10,000 in the mid-1990s to just over 4,000 last year. Experts predict that this trend will continue.

In the event that a bank is taken over, its existing customers will not lose deposits but may receive new bank cards and be subject to different fees and interest rates on savings accounts.

“Banking is a naturally consolidating sector with an annual consolidation rate of approximately 4 percent,” the report said.

“While recent activity has been fairly subdued, we believe M&A will once again play an active role for banks on both sides of the profitability ledger in the coming years.”

The ideal size for banks has changed over the years with the introduction and abolition of regulations.

After the 2008 financial crisis, rules were introduced to prevent banks from exceeding $50 billion in size, as they were considered systemically important financial institutions (SIFIs) at the time.

As a SIFI, they had to hold additional capital against losses because their collapse would be too damaging to the wider banking system.

Then, in July 2018, the Trump administration took deregulatory action, raising the threshold from $50 billion to $250 billion.

Since then, 15 banks — including First Horizon and Zion — have crossed the $50 billion threshold, the KBW report said.

Huntington, Fifth Third, M&T and Regions were named as banks likely to acquire smaller banks in a ‘race for scale’

The declining value of these bonds played a major role in the collapse of Silicon Valley Bank in March, which had to sell them to absorb withdrawals

Since the collapse of SVB, regulators have questioned whether the deposit insurance cap should be raised from the current $250,000 per depositor.

But the latest regulations, proposed in July, months after the regional banking crisis, do make a difference increased requirements for all banks with at least $100 billion in assets.

One of the main factors behind the collapse of SVB and Signature Bank in New York were unrealized losses on their balance sheets and a lack of insured deposits.

In the case of the SVB, more than 90 percent of the deposits were uninsured. according to the FDIC. After its failure, regulators have questioned whether the deposit insurance cap should be raised from the current $250,000 per depositor.

Banks are now waiting for clarity on regulations and interest rates before making deals, so exact outcomes are uncertain.

“We’ve seen it in the history of banking: when there are lines in the sand around assets of a certain size, banks make up the rules,” said one of the report’s authors, Christopher McGratty. told CNBC.

‘There are still too many banks and they can be more successful if they build up scale.’