Since President Joe Biden's administration has taken office, banking regulators appear to have taken a much stricter tone toward large bank mergers and acquisitions, with several deals failing to receive full regulatory approval on their projected timeline.

Not only does this call into question whether all of these deals will be approved, but it also raises doubts about whether they will be able to meet all of the financial assumptions initially laid out to investors when the deals were announced.

Let's take a closer look at three large pending bank mergers that are now in question.

Three people standing across from another three people, all of them holding their hands out to shake.

Image source: Getty Images.

1. First Citizens' acquisition of CIT

More than a year ago, First Citizens BancShares (FCNCA -0.38%) announced its plan to purchase CIT Group (CIT) for $2.2 billion and create a bank with roughly $110 billion in assets. Investors cheered the deal. Because First Citizens was purchasing CIT at an extremely low valuation, the deal is expected to be very attractive financially. Management projects that once the acquisition is complete, CIT will increase First Citizens' tangible book value (TBV, what a bank would be worth if it were liquidated) by 30%. Bank stocks in general trade relative to their TBV, so a growing TBV is usually good for the stock price, and 30% TBV growth is massive in a bank deal. The addition of CIT is also expected to grow earnings per share at First Citizens by a whopping 50% in 2022. First Citizens' stock price is up more than 85% over the last year, in part on speculation about the deal closing.

Recently, however, First Citizens announced the merger agreement with CIT would be extended from Oct. 15 of this year to March 1, 2022, because the bank still had not received regulatory approval from the Federal Reserve. Management initially had projected this transaction to close in the first half of 2021, so it's really been delayed twice now. Analysts in research notes suggested the delay is likely due to the Fed's changing attitudes toward large bank mergers, but they ultimately believe the deal will go through because it has already received approval from the FDIC and the Office of the North Carolina Commissioner of Banks. Still, there does seem to be at least some possibility that the deal doesn't happen considering how delayed the closing is.

2. New York Community Bancorp and Flagstar Bancorp

In April, New York Community Bancorp (NYCB) announced its intention to acquire Flagstar Bancorp (FBC) and create an $87-billion asset bank. Investors and analysts also liked this deal because it would help New York Community Bancorp, whose stock price has declined 11% over the last five years, change the composition of its balance sheet. Currently, it consists of a higher-cost funding base and a large fixed-rate multifamily loan portfolio. The bank wants to change this composition to reflect more of a modern-day balance sheet that has lower-cost deposits and more lending diversity, including growing its commercial loan portfolio.

The acquisition was supposed to close this year, but on New York Community Bancorp's recent earnings call, CEO Thomas Cangemi said: "At this point, it appears that regulatory approval will not be received in time to close the merger during the fourth quarter. We now estimate an anticipated closing assumed in 2022."

The news sent shares of the bank down roughly 8%, as a failure of the merger would likely be a disaster for New York Community Bancorp. It's unclear at this time what exactly is holding up approval, but there could be a backlog of deals awaiting approval at the Fed, so it might have nothing to do with this deal in particular.

3. Old National Bancorp and First Midwest Bancorp

In June, Old National Bancorp (ONB 1.35%), a small regional bank in the Midwest, announced its plan to merge with First Midwest Bancorp (FMBI), a Chicago-based bank, and create a regional bank with $45 billion in total assets. While there have been no indications yet that the deal will be delayed, the Fair Housing Center of Central Indiana recently sued Old National Bancorp for allegedly redlining, which is the practice of refusing financial services such as loans to people because they live in a low-income area. In its lawsuit, the fair housing center cites data that shows between 2019 and 2020, only 37 of Old National's 2,250 mortgages went to Black people in Indianapolis.

Although the deal has not been delayed and was announced only four months ago, banks are all subject to the Community Reinvestment Act (CRA), which essentially requires them to lend in low- to moderate-income areas of their geographic footprint. Banks must stay in good standing with their regulators regarding the CRA in order to do things like add new branches and make acquisitions. With the Fed sharpening its knife on large bank mergers, I could see this lawsuit creating problems for Old National in getting this deal approved.

Still too early to tell

There is still a good chance that all of these deals get approved even if there are delays. Notably, the Fed has recently approved PNC Financial Services Group's acquisition of Banco Bilbao Vizcaya Argentaria's U.S. banking operations. The Fed has also approved Huntington Bancshares' acquisition of TCF Financial. Both PNC and Huntington are much larger than any of the banks mentioned above.

But remember: Delayed merger closings can impact financial projections in deals and could affect banks' appetite to do mergers and acquisitions. Watching how these deals play out will certainly be a good indicator for the industry as a whole.