KBRA Financial Intelligence

Credit Card Giants Merge Amid Steep Rise in Utilization Rates

Welcome to KFI’s Monthly Insight. In this edition, we highlight the following key topics:

• A $35 billion acquisition will place Capital One atop the ranks of U.S. credit card lenders, potentially fomenting further consolidation among card-focused institutions.

• Growth in credit card lending doubled the pace of growth in total loans last year, fueling a multi-decade high in utilization of borrower credit limits.

• Mergers and acquisitions (M&A) activity among U.S. lenders continues at a moderate pace with KFI tracking 12 deals announced in April.

Capital One–Discover Merger Shakes up Credit Card Market

More than a year after it was originally announced, Capital One Financial Corp.’s (KFI Score: B) planned acquisition of Discover Financial Services (KFI Score: B) received permission to finally get underway in April, achieving long-awaited approval from regulators at the Federal Reserve and Office of the Comptroller of the Currency (OCC). The all-stock deal will be worth $35 billion and push Capital One to the top spot among U.S. credit card lenders. The combined value of credit card loans at Capital One and Discover Bank’s commercial bank subsidiaries is equivalent to $252 billion, which will surpass nearly $204 billion in credit card loans extended by JPMorgan Chase & Co. (KFI Score: B+). The merger of two of the U.S.’s leading credit card lenders comes as demand for these products has surged over the past several years. Credit card lending surpassed $1 trillion for the first time ever in 3Q 2022, growing at a year-over-year (YoY) rate of more than 16%—the fastest pace recorded in more than a decade.

Annual growth in credit card lending among all banks slowed to 4.5% in 2024, coinciding with a ramping up of interest rates, but that pace still surpassed banks’ total loan growth of just 2.2% for the year. Although most of the new originations were concentrated among larger banks, some smaller banks showed more impressive rates of growth throughout the year. Twenty-six banks with more than $100 billion in assets reported credit card loans in 4Q 2024, and annual growth among that cohort of institutions averaged 3%. In contrast, the 26 largest credit card lenders with less than $100 billion in assets expanded credit card balances by double that rate at 6%. Although larger institutions are still seeing healthy expansion within their credit card businesses and regulators have given a long-awaited green light to financial sector dealmaking of significant scale, deals between ambitious midsize banks could soon materialize to take advantage of their momentum in their credit card segment.

Utilization Rate Jumps to Three-Decade High

However, some concern is beginning to swell around credit card lending. Recent polling results suggest that Americans may be increasingly dependent on amassing credit card debt to fund essential spending on items like gas and groceries. This appears to bear out in the available financial data, as credit card utilization—the ratio of how much borrowers owe on their accounts compared to total available credit—has risen in tandem with balances over the past several years. Between 1Q 2021 and 4Q 2024, credit card loans increased by $406 billion, representing almost 40% of the $1.1 trillion increase in credit limits. This has pushed today’s outstanding credit card utilization rate among all U.S. banks to 20% for the first time since 1992.

Simultaneously, data from the Federal Reserve Bank of Philadelphia’s FR Y-14M reporting suggests payments toward many borrowers’ carried balances are shrinking, with the percentage of active accounts making only the minimum payment on their cards rising to a new series high above 11% in 4Q 2024. An additional 28% of accounts are making payments above the minimum but below the full balance, suggesting that some account holders are gradually increasing their carried balances.

Largest Share of Borrowers Maintain Strong Payment History

The final payment behavior tracked within the FR Y-14M credit card data encompasses those who are paying off the entirety of their balance. This category represents the largest share of accounts at more than 35%—the highest proportion reported in over two years. This cohort of proactive borrowers helps explain why delinquency and charge-off rates on credit cards were largely unchanged throughout 2024.

Although the rate of delinquency impacting all U.S. bank credit card loans jumped to a 12-year high of 3.3% in 4Q 2023, it closed out 2024 at roughly the same level. While delinquency rates are generally higher among smaller banks, that leveling off can be observed in institutions above and below the $100 billion asset threshold. The annualized net charge-off rate on all credit card loans increased as high as 4.8% in 2024 yet ended the year at 30 basis points (bps) lower. KFI highlighted a general decline in the net charge-off rate for total bank lending in 4Q 2024, but noted that a number of banks have recently resumed increasing their allowances for credit losses.

Individual bank and credit union exposure to credit card lending and other loan categories can be identified by utilizing the Data Wizard in KFI’s Excel add-in. The performance of these institutions’ loans, as well as their KFI Scores, can be compared against their peers in the Loan Category and Delinquency Report template from our Template Library. KFI Scores are proprietary quarterly financial assessment scores that measure the financial health of all U.S. banks and credit unions on an A through E scale using Call Report data. Our models incorporate various asset quality, capital adequacy, earnings performance, and liquidity and funding measures for managing counterparty risk and robust peer analysis. To access our full library of KFI Scores and data tools, request a demo with KFI.

Recent M&A

Wichita, Kansas-based Equity Bancshares, Inc. (NYSE: EQBK) (KFI Score: B+) announced in an April 2 press release that it will acquire Oklahoma City’s NBC Corp. of Oklahoma in a cash and stock transaction worth $87 million. NBC’s $903 million commercial bank subsidiary, NBC Oklahoma (KFI Score: B-), will be merged into $5.4 billion Equity Bank (KFI Score: B). The deal is expected to close in 3Q 2025.

Hampton Roads, Virginia-based TowneBank (NASDAQ: TOWN) (KFI Score: B+) announced in an April 3 press release that it will acquire Old Point Financial Corp. (NASDAQ: OPOF) for cash and stock in a deal worth $203 million. Old Point’s commercial bank subsidiary, The Old Point National Bank of Phoebus (KFI Score: B), maintains assets of $1.4 billion, which will add on to TowneBank’s $17.5 billion in assets. The deal is expected to close in 2H 2025.

Pensacola, Florida’s PenAir Credit Union (KFI Score: B) announced in an April 4 press release that they received regulatory approval for an acquisition of Roanoke, Virginia-based Star City Federal Credit Union (KFI Score: E). The value of the deal was undisclosed but merged the $1.6 million Star City Federal Credit Union into $2.6 billion PenAir. The merger officially took effect on May 1, 2025.

San Diego County Credit Union (KFI Score: B) announced in an April 11 press release that it will acquire California Coast Credit Union (KFI Score: B) for an undisclosed value. Both institutions are headquartered in San Diego. San Diego County Credit Union maintains assets of $9.3 billion, increasing to $13.5 billion once the merger is completed. The deal is expected to close in 2026.

Salem, Oregon-based Maps Credit Union (KFI Score: B+) announced in an April 16 press release that it will acquire Oregon City’s Lewis & Clark Bancorp for an undisclosed value. Lewis & Clark’s $383 million commercial bank subsidiary, Lewis & Clark Bank (KFI Score: B+), will merge into $1.4 billion Maps Credit Union.

MidFlorida Credit Union (KFI Score: B+) in Lakeland, Florida, announced in an April 22 press release that it will acquire Tallahassee’s Prime Meridian Holding Co. in a cash deal of undisclosed value. Prime Meridian’s commercial bank subsidiary, $975 million Prime Meridian Bank (KFI Score: B), will be merged into MidFlorida, which maintains more than $8.5 billion in assets. The deal is expected to close in 2026.

Per an April 23 press release, Apple Valley, Minnesota-based Wings Financial Credit Union (KFI Score: B-) will merge with Colorado Springs, Colorado’s Ent Credit Union (KFI Score: B) in a deal of undisclosed value. Wings and Ent institutions are very similar in size at $9.3 billion and $9.8 billion in assets, respectively, but the combined entity will retain the brand name Wings Credit Union. The deal is expected to close in 2026.

Tacoma, Washington-based Columbia Banking System, Inc. (NASDAQ: COLB) (KFI Score: B) announced in an April 23 press release that it will acquire Irvine, California-based Pacific Premier Bancorp, Inc. (NASDAQ: PPBI) (KFI Score: A-) in a $2 billion, all-stock transaction. Pacific Premier’s $18.1 billion commercial bank subsidiary, Pacific Premier Bank, N.A. (KFI Score: B+), will be merged into Columbia’s $51.5 billion Umpqua Bank (KFI Score: B). The deal is expected to close in 2H 2025.

Citizens & Northern Corporation (NASDAQ: CZNC) in Wellsboro, Pennsylvania, announced in an April 23 press release that it would acquire Susquehanna Community Financial, Inc. in an all-stock deal worth $44.3 million. This will merge the latter’s $512 million bank subsidiary, Susquehanna Community Bank (KFI Score: B), into the $2.6 billion Citizens & Northern Bank (KFI Score: B). The deal is expected to close in 4Q 2025.

Boston-based Eastern Bankshares, Inc. (NASDAQ: EBC) (KFI Score: B+) announced in an April 24 press release that it will acquire HarborOne Bancorp. Inc. (NASDAQ: HONE) (KFI Score: B) (also Boston-based) in a cash and stock deal worth $490 million. HarborOne’s $5.7 billion commercial bank subsidiary, HarborOne Bank (KFI Score: B), will merge into $25 billion Eastern Bank (KFI Score: B). The deal is expected to close in 4Q 2025 or 1Q 2026.

Grundy, Virginia-based Miners and Merchants Bancorp, Inc., the parent of $505 million TruPoint Bank (KFI Score: B+), announced in an April 24 press release that it will acquire $209 million First Community Bank of East Tennessee (KFI Score: B+) for an undisclosed price. The deal is expected to close late in 3Q 2025 or early in 4Q 2025.

Tupelo, Mississippi-based Cadence Bank (NYSE: CADE) (KFI Score: B) announced in an April 25 press release that it will acquire Industry Bancshares, Inc. (KFI Score: A+) in an all-cash transaction of undisclosed value. Industry’s six Texas-based commercial bank subsidiaries, The First National Bank of Belleville (KFI Score: B+), The First National Bank of Shiner (KFI Score: B+), Bank of Brenham, N.A. (KFI Score: B+), Citizens State Bank (KFI Score: A-), Fayetteville Bank (KFI Score: A-), and Industry State Bank (KFI Score: A+), maintain a collective $4.7 billion in assets and will be merged into $47.8 billion Cadence Bank. The deal is expected to close during 2H 2025.

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