BANKING INDUSTRY CONSOLIDATION TRENDS
(Data updated quarterly as Call Reports are filed; Click on any image to enlarge.)
In the Banking Industry Consolidation Trends, we highlight key elements of the industry consolidation. This consolidation trend has been ongoing since the late 1980s. The current rate of Banking Industry Consolidation is at a pace comparable to historical averages since 1990. The components of the banking industry consolidation are found on our webpages: Bank Merger Trends, De Novo Bank Chartering Trends and History of U.S. Bank Failures.
Data is as of Q4 2023 from FDIC Call Reports.
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The BANKING INDUSTRY CONSOLIDATION BY STATE report shows the national and state-by-state consolidation of the banking industry on a year-over-year basis and segmented by bank asset size.
(Click on the image to open a PDF copy.)
The metric for measuring this consolidation is the Banking Industry Consolidation Rate. It is calculated by dividing the change in the number of banks during the year by the number of banks in existence at the beginning of the year.
RECENT BANKING INDUSTRY CONSOLIDATION TRENDS COMPARED TO HISTORICAL AVERAGES.
BANKING INDUSTRY CONSOLIDATION PACE IS LESS THAN HISTORICAL AVERAGE.
BANK MERGER PACE IS BELOW HISTORICAL AVERAGE.
BANK FAILURE RATE IS BELOW HISTORICAL AVERAGE.
DE NOVO BANK REPLENISHMENT RATE IS WELL BELOW HISTORICAL AVERAGE.
LTM BANKING INDUSTRY CONSOLIDATION REMAINS BELOW HISTORIC RATES.
Bank Charters LTM: For the latest twelve months, the number of banking institutions declined by a net 119. The rate of decline - Banking Industry Consolidation Rate - was 2.5%. This rate is below the annual average of 3.6% since 1990.
De novo banking: Six (6) new banks opened compared to annual average of 100 new banks over past 27 years. For a variety of reasons, including regulatory process and increased capital requirements, it is unlikely that de novo banking will return to its past levels. The De Novo Bank Replenishment Rate was 4.8% - that is, less than 5 new banks opened for every 100 banks that merged, liquidated or failed. This was significantly below the historic average of 21.3%.
There were five (5) bank failures during latest four quarters. The Bank Failure Rate was 0.1%, below the historic average of 0.3%.
Bank M&A continued with 107 bank charters eliminated by mergers; this is well below the annual average of nearly 400 over the past 27 years. And the pace - Bank Merger Rate - was 2.3%, below the historic average of 4.4%.
Bank Charters Since 1990: There has been a net reduction in bank charters or number of banking institutions of over 11,200, or 70 percent. On average, the number of banking institutions declined - Banking Industry Consolidation Rate - by 3.6% annually.
De novo banking: Over 3,000 new banks were started since 1990 with ~100 de novo banks chartered annually on average. The De Novo Bank Replenishment Rate averaged 21.3% - that is, 21 new banks opened for every 100 banks that merged, liquidated or failed.
Nearly 1,500 banks and thrifts failed with the Bank Failure Rate averaging 0.3% annually.
Industry consolidation and bank M&A activity averaged nearly 400 bank charter reductions annually. Over 12,200 banks were acquired or merged since 1990. The Bank Merger Rate averaged 4.4%.
BANK CONSOLIDATION: FEWER SMALL BANKS, MORE LARGE BANKS; ACROSS ALL STATES.
Bank Consolidation by Asset Size: Industry consolidation continues at slow pace over latest four quarters. And the consolidation continues to occur in the smaller community banks - net reduction in number of community banks under $500 million in total assets.
Bank Consolidation by State: And the consolidation continues in those states with the most number of smaller community banks.
CONSOLIDATION OCCURING OVER DECADES; ANNUAL CONSOLIDATION RATE VARIES.
Bank Charters Outstanding by Year: Bank charters continue downward trend primarily due to mergers and acquisitions. Bank failures and de novo banking are also impacting this trend. The decline in the number of bank charters has been at a 3.6% annual rate since 1990.
Bank Charter Reductions by Year: Over the past several decades, the average annual reduction in bank charters has fallen from ~560 during the 1990’s to ~280 during the 2010’s. So far during the decade of the 2020’s, the average drop in bank charters was ~150.
CONSOLIDATION TRENDS VARY OVER PAST SEVERAL DECADES.
Over the past several decades, the banking industry consolidation was significant and varied.
Banking Industry Consolidation Rate = 3.6%
Bank Merger Rate = 4.4%
Over 12,200 banks and thrifts merged.
Bank Failure Rate = 0.3%
Nearly 1,500 banks and thrifts failed.
De Novo Bank Replenishment Rate = 21.3%
De novo banking added over 3,000 banks, replacing 21 of every 100 banks merged, liquidated or failed.
THE DECADE OF THE 1990'S.
MERGER MANIA AND THE "URGE TO MERGE"
Banking Industry Consolidation Rate = 4.3%
The pace of industry consolidation picked up during the decades of the 1990’s.
Bank Merger Rate = 4.7%
Bank M&A activity was at record levels with over 6,000 banks and thrifts merging.
Bank Failure Rate = 0.6%
The bank failure rate rose and over 900 banks and thrifts failed.
De Novo Bank Replenishment Rate = 20.9%
De novo banking added nearly 1,500 banks, replacing 21 of every 100 bank mergers, liquidations or failures.
THE DECADE OF THE 2000'S.
AMIDST M&A MANIA, DE NOVOS RISE TO THE OCCASION!
Banking Industry Consolidation Rate = 2.4%
Pace of industry consolidation slowed significantly.
De Novo Bank Replenishment Rate = 38.7%
De novo banking flourished, adding nearly 1,400 banks and replacing 39 of every 100 bank mergers, liquidations or failures.
Bank Merger Rate = 3.8%
Pace of bank mergers slowed significantly from the prior decade with over 3,300 banks and thrifts merged.
Bank Failure Rate = 0.2%
Banks and thrifts failures declined to just over 200.
THE DECADE OF THE 2010'S.
M&A SHOWS ITS STAYING POWER, BUT WHERE ARE THE DE NOVOS?
Banking Industry Consolidation Rate = 4.3%
Pace of industry consolidation accelerated.
De Novo Bank Replenishment Rate = 1.5%
De novo banking added only 43 banks, replacing less than 2 of every 100 bank mergers, liquidations or failures.
Bank Merger Rate = 3.5%
Pace of M&A activity matched the prior decade; and there were over 2,300 banks and thrifts merged.
Bank Failure Rate = 0.5%
With the hangover of the Great Recession, the bank failure rate remained high early in this decade and dropped significantly later; over 360 banks and thrifts failed.
THE DECADE OF THE 2020'S.
COVID PANDEMIC SLOWS M&A AND CONSOLIDATION, WHEN WILL IT RECOVER?
Banking Industry Consolidation Rate = 3.0%
Pace of industry consolidation continues slowly.
De Novo Bank Replenishment Rate = 6.1%
De novo banking added 38 banks, replacing only ~6 of every 100 bank mergers, liquidations or failures.
Bank Merger Rate = 2.9%
Pace of M&A activity slowed; and there were ~574 banks and thrifts merged so far during this this decade.
Bank Failure Rate = 0.0%
The bank failure rate remained quite low early in this decade; only 9 banks and thrifts failed.
BANKING INDUSTRY CONSOLIDATION NOT OFFSET BY DE NOVO BANK REPLENISHMENT.
Banking Industry Consolidation Rate: The consolidation of the banking industry has been on-going for decades. And it continues. The LTM Banking Industry Consolidation Rate stands at 2.5% - below the historical average.
Bank Merger and Acquisition Activity: Bank merger activity has slowed considerably compared to the 1990's. However, bank mergers and acquisitions continued at a steady pace during the 2000’s - approximately 209 bank mergers annually. During current decade, the pandemic has slowed acquisition activity. Acquisition activity stems from a variety of factors, including expansion into contiguous markets or into new market, strategic decisions for family-owned banks to cash out for estate planning and diversification goals or to leverage operating platform across larger asset base.
For more analysis and information on U.S. bank mergers, go to Bank Merger Trends.
De Novo Bank Replenishment Rate: Prior to the Great Recession, de novo banks replaced approximately 32% of banks and thrifts loss to bank mergers, liquidations and failures. Since the Great Recession, the De Novo Bank Replenishment Rate stands at only 3.5%. That is, less than 4 new banks have been formed to replace every 100 that have merged, liquidated or failed compared to the 32 new banks formed prior to the Great Recession. For latest four quarters, the rate was 4.8%.
For more analysis and information on De Novo banking, go to De Novo Bank Chartering Trends.
De Novo Banking Activity: One of the most noteworthy impacts of the change in banking regulation arising out of the Great Recession is the lack of de novo banking activity. Where historically there averaged approximately 153 de novo bank start-ups annually, today there are only a nominal number of new banks being formed. This is a topic that the FDIC and other bank regulators are reviewing for action. However, there were sixteen (16) de novo banks opened in 2022, while only six (6) banks opened in 2023.
Trends in FDIC De Novo Bank Applications Since 2000: De novo bank applications saw a significant change prior to the Great Recession and after the Great Recession. FDIC actions dropped from 1,387 for the nine years from 2000 to 2008 to only 106 for the +10 years from 2009 to 2022.
Trends in FDIC De Novo Bank Applications for Leading States Since 2000: The same trend occurs by the leading states for de novo activity before (Green) and after (Red) the Great Recession. Defining characteristics of states with de novo activity: growing populations, strong local economies and history of bank merger and acquisition activity.
BANK FAILURES NOMINAL SINCE GREAT RECESSION - MORE OF THE "ONE OFF" EVENTS.
For more analysis and information on U.S. bank failures, go to History of U.S. Bank Failures.
Bank Failures: Since the Great Recession, the number of bank failures had declined significantly. While there were no bank failures in 2018, there were four (4) bank failures in 2019 and in 2020. There have been no bank failures in 2021 or 2022. There were five (5) bank failures during 2023.
Total Assets of Bank Failures: And the dollar level of bank failures has also declined until the three (3) large bank failures in 2023.