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Insights and Expertise

• BSA/AML risk
• Third-party risk The market rewards
• Operational risk
• Reputation risk diversification; regulators
• Capital and liquidity implications during stress scrutinize concentration.

For that reason, I like to compare processing volume to
total assets. Some banks process modest multiples of their
assets. Others are much more aggressive: Each reports non-interest income levels materially high
relative to asset size, consistent with meaningful fee-based
• Pathward: ~28x assets activity. The market rewards diversification; regulators
• Esquire Bank: ~17x assets scrutinize concentration.
• Axiom Bank: ~15x assets The outlier: Vermont State Bank
• FFB Bank: ~10x assets Tiny Vermont State Bank, which ranked last, at 41 in the
• Vermont State Bank: ~10x assets 2024 and 2025 FFIEC Call report data, deserves attention.

This is not inherently problematic. It is a strategic choice. • Assets: ~$31 million
But it raises a governance question: Has the bank formally • Processing volume: ~$304 million
defined the maximum processing-to-asset multiple • Growth: +36.5%
it is willing to tolerate? Establishing a policy ceiling
accomplishes two things: • Processing-to-Assets: ~10x
1. It communicates that sponsor capacity is finite and • Non-interest income: ~$9.5 million
valuable.
2. It mitigates income and risk concentration. That is an extraordinary profile relative to size. It is
validation that small banks can compete, but the margin
for error narrows as multiples expand.
Contraction and regulatory context Final observations
Two institutions in the table experienced meaningful The 2025 Call reports highlight three emerging themes:
volume declines:
• Axiom Bank: -22% 1. Sponsor volume is fungible. When one bank exits,
others rapidly absorb capacity.
• FFB Bank: -9.6% 2. Processing-to-asset multiples are expanding at
several institutions.
Both institutions were subject to formal regulatory
action within the past two years (OCC formal agreement 3. Regulatory alignment and third-party risk
for Axiom in 2024; FDIC consent order for FFB in 2025). management remain critical.
Correlation is not causation, but when processing volume
significantly exceeds asset size, Regulators will inevitably Merchant acquiring remains one of the most capital-
scrutinize governance, BSA controls and third-party efficient fee businesses available to banks, but it remains
oversight. Processing growth is celebrated. Processing regulator-sensitive. Growth without governance is
oversight is required. temporary.
Non-interest income: The tell
As founder of Humboldt Merchant Services, co-founder of Eureka
Traditional banks generate earnings primarily from net Payments, and a former executive for such payments innovators as
interest income or the spread between loans and deposits. WePay, a division of JPMorgan Chase, Ken Musante has experience in
Acquiring revenue shows up in non-interest income. all aspects of successful ISO building. He currently provides consulting
Acquirers with significant sponsor programs often services and expert witness testimony as founder of Napa Payments
report elevated non-interest income. While not broken and Consulting, www.napapaymentsandconsulting.com. Contact him
out solely by acquiring in Call reports, the relationship is at kenm@napapaymentsandconsulting.com, 707-601-7656 or www.
directionally informative. linkedin.com/in/ken-musante-us.

Examples not shown in the table include:
• Pathward
• Woodforest
• Community Federal Savings Bank

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