Mid-year update on banking industry consolidation and Community Banks - "Are there too many banks"?

The question still lingers - “Are there too many banks?”

So let’s do a mid-year update on the status of the banking industry consolidation - with a focus on the impact on Community Banks across the United States.

The consolidation trend within the banking industry continues late into another decade. The consolidation across the banking industry has been ongoing for decades. The starts and stops within the consolidation cycle are influenced by economic conditions, regulatory environment and bank performance.

Since 1990 the number of U.S. banks has dropped significantly.

  • 5,542 banks today compared to 15,158 banks in 1990

  • 9,616 banks, or 63% of the industry, have gone away

During these more than three decades, de novo start-up banks totaled over 2,700 offsetting some of the declines due to bank mergers (~11,000) and to bank failures (+1,000).

This pattern of banking industry consolidation has continued into 2018.

  • There was a net loss of 245 banks chartered across the U.S. over the latest 12 months.

  • This was a 4.2% decline - on par with the past 10 years and slightly faster than the 3.5% annual average since 1990.

Bank failures have been nearly non-existent since the Great Recession of 2008 with only 2 failures over the past twelve months - and no failures to date in 2018.

Bank merger activity remains strong with 251 mergers completed. This level is comparable to the past 10 years and the percentage impact consistent with the past several decades.

One missing link has been de novo bank start-ups which have been negligible. There were only 8 new banks started over the latest 12 months compared to an average of over 100 per year over the past several decades. This trend of replenishing the banking industry through de novo banking appears to have all but ended.


Most of this banking industry consolidation has occurred within the Community Bank segment. This chart depicts this trend of “larger” acquiring the “smaller”.

The total number of Community Banks declined by 258 over the latest 12 months, or 4.6%.

Of this decline, 211 banks under $250 million in total assets were merged into larger banks, primarily into other Community Banks. Boards and management of Community Banks have developed and successfully executed on acquisition programs under their long term strategic plans.

The recent consolidation activity also reflects some geographic focus. In six states, the number of headquartered banks has fallen by 10 or more institutions.

  • Florida showed the largest decline in number of banks with 17.

  • Missouri had 14 fewer banks.

  • Illinois banks dropped by 13.

  • California and Kansas each had declines of 12 banks.

  • And Minnesota had 11 fewer banks.

Over the latest 12 months, 40 states showed a drop in the number of banks headquartered in these states.


Even as this consolidation trend continues, banks of all sizes remain chartered (or headquartered) and serve markets across population areas of all sizes. For this discussion, we use counties.

The “blue” shaded bars represent Community Banks, or banks with total assets of less than $10 billion. The “red” shaded bars represent larger regional and national banks, or banks with total assets of more than $10 billion.

The regional and national banks (in “red”) are primarily headquartered or chartered in larger population centers. Community Banks (in “blue”) are chartered across all county sizes, but are primarily headquartered in counties with populations of 100,000 or less - and predominantly in counties with populations of less than 50,000.

There are several key take-aways from this data.

There are many more Community Banks across the U.S. than larger banks.

  • Community Banks hold approximately 98% of all banking charters.

Community Banks are predominantly located and serve smaller, more rural counties across the U.S. compared to the larger banks.

  • 61% of Community Banks, or 3,275, are headquartered in U.S. counties with populations of less than 100,000.

Community Banks are the key to providing financing and capital to these local markets.

And as the banking industry continues its ongoing consolidation, these smaller counties / population centers are seeing much of this impact. While counties of all population levels saw net reductions in number of banks:

  • Counties with populations of less than 50,000 lost 96 banks

  • Another 39 bank charters were eliminated in counties with populations of less than 100,000

The nature of the industry merger dynamics - “larger” acquiring “smaller” banks - continues across markets of all population sizes but primarily is impacting Community Banks. In and of itself, this dynamic is not necessarily negative. It depends upon how the acquiring bank manages the employees and serve the customers in these new markets that they have accessed through the merger.


Community Banks continue to serve customers locally across the U.S.. Community Banks remain a critical component of our local markets and economies. Here are some important statistics on the impact of Community Banks:

  • # of States with Community Bank Headquarters 50

  • # of Employees 531 thousand

  • Total Banking Assets $2.9 trillion

  • Total Banking Capital $337 billion

  • Total Loans $2.0 trillion

  • Total Deposits $2.4 trillion

Community Bank contributions in various markets are highlighted in the table below.

For example, there are 2,650 Community Banks headquartered in counties with populations of less than 50,000. Here is how Community Banks impact these markets:

  • serve markets with total population exceeding 28 million people

  • employ over 147 thousand staff

  • hold total assets exceeding $664 billion, and

  • have capital strength supported by over $73 billion in shareholder equity capital.

Community Banks continue to prosper and bring a competitive presence across all states. They remain highly profitable with strong capital positions and superior asset quality. They continue to be important partners for local families, businesses and governments. Sometimes a Community Bank is the only bank headquartered in a county.

The banking industry consolidation trend will continue - and will so for mostly sound, strategic reasons: population declines, slow or no growth local economies and estate or succession planning.

Community Banks show that the question should not be “Are there too many banks?”. The better question would be “Is your local bank contributing to your community and its economy?”. Community Banks continue to be successful at this and remain important contributors to the communities that they serve.

For more on the banking industry trends, visit our website: BankingStrategist.com.