Banks approaching $10 billion in assets have a big choice to make: stop or leap.

After the darkest days of the financial crisis, lawmakers and regulators picked $10 billion as a dividing line between small and large banks in areas such as interchange fees, stress testing and consumer protection.

That decision has created an inflection point for banks approaching the mark. They can commit to staying below $10 billion or pursue an acquisition that gets them solidly beyond the threshold. Tiptoeing over the threshold and into a world of more regulation makes little sense at most banks.

There are roughly two dozen banks with $8 billion to $11 billion in assets, according to the Federal Deposit Insurance Corp. Those banks are clearly plotting their strategy, analysts say.

"This $10 billion threshold is a bigger issue than people have realized and I think over time it will garner more attention from the industry," says John Barber, an analyst at KBW's Keefe, Bruyette & Woods.

At $10 billion in assets, a 22-cent cap on interchange fees created by the Dodd-Frank Act's Durbin Amendment goes into effect. Banks at that size also face stress testing, and the Consumer Financial Protection Bureau has started to take a closer look at those institutions.

MB Financial (MBFI) is planning to manage its assets to stay below the threshold for now, Mitchell Feiger, the $9.5 billion-asset company's president and chief executive, said during a conference call earlier this year. Instead, the Chicago company will focus on improving its balance sheet.

"Absent a meaningful acquisition, we'll probably remain under $10 billion for some time, which I view as a positive," Feiger said. "I think it has been very healthy for us to have that limit and it is forcing us to get the absolute maximum amount we can get out of our balance sheet."

Still, MB will have no choice but to cross the mark, Feiger said.

"It will be impossible for us to stay under $10 billion and continue to provide the earnings growth that people want and are entitled to," he said. "At that point we will probably let loose … of our balance sheet size and let it grow."

Like MB, Trustmark Corp. (TRMK) in Jackson, Miss., decided it would not cross $10 billion in assets until it found a meaningful acquisition. Such a deal materialized in May, when the $9.9 billion-asset company agreed to buy the $2.2 billion-asset BancTrust Financial (BTFC) in Mobile, Ala., for $55 million.

Trustmark struck the deal because BancTrust had a good franchise that bridged a gap between Florida and Mississippi, Gerard Host, Trustmark's president and chief executive, said in an interview Tuesday. Putting the bank well above the threshold was another benefit.

"We had intentionally held below that mark until other alternative arrived," Host said. "So it was fortunate it came up."

Host said the biggest impact is the interchange fee cap. Trustmark had calculated that the cap would cost it $7 million of annual revenue, a small fraction of the more than $500 million in revenue Trustmark had last year.

While a relatively small hit, it is a hit nonetheless. "It is revenue that you still have to make up somewhere," Host said.

The $10 billion-asset threshold could also cause more banks to consider selling before they draw more regulatory scrutiny. The $9.7 billion-asset Citizens Republic Bancorp (CRBC) could fall in that category.

The Flint, Mich., company, which has returned to profitability, is believed to have hired an investment bank to help it consider selling, Bloomberg News reported earlier this month.

Citizens declined to comment, but analysts say the company might see the $10 billion mark as an inflection point with a multitude of outcomes. "We don't know if it is for sale, but maybe they are considering options A, B and C and option C is a sale," says Terry McEvoy, an analyst at Oppenheimer.

Citizens could still opt to become a buyer, McEvoy says.

"If they are looking at that $10 billion threshold, I'd expect that they would want to get … to $15 billion quickly to offset some of the earnings pressure," McEvoy says. "It would put them in a position where scale matters."

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