The landscape of the banking industry in the United States continues to be highly concentrated when looking at asset sizes, but with the vast majority of the depository institutions continuing to be smaller institutions. As of June 30, 2019, approximately 84% of the assets held by depository institutions are held by less than 3% of U.S. banks.
85% of the banks in the United States, or 4,511 institutions, have less than $1 billion in total assets. 73% (or 3,855 institutions) have less than $500 million in total assets. 53% (or 2,799 institutions) have less than $250 million in total assets. 23% (or 1,230 institutions) have less than $100 million in total assets.
The concepts reflected above aren’t new. We showed the same thing in our Landscapes as of the end of 2016 and the end of 2017. In both of those reports, we attempted to look at the historical trends of consolidation (and that trend certainly continues). But this year, we’re taking a different tack and trying to dig deeper into the FDIC data. All of the data presented is based on the underlying data in the FDIC’s Statistics on Depository Institutions as of June 30, 2019.
As with all statistical reports, I’m well aware that all statistics can be massaged, with relatively innocuous adjustments, to tell different stories. Certainly, extremes can disrupt averages and otherwise minimize the value of the outcomes (or suggest that median or modal outcomes are more important than mean outcomes). Even if you never took a statistics class or have blocked all statistics concepts from your mind, I encourage you to check out Planet Money’s Modal American episode. The modal U.S. bank would have total assets of between $100 million and $250 million, would be taxed as a C-corporation, have a holding company and be a state-chartered, non-member bank. By comparison, the “average” bank would be $3.4 billion and the media bank would be the $228 million Bank of the Lowcountry, in Walterboro, South Carolina.
I am also reminded that no bank desires to be “average,” nor are investors generally looking for an “average” return. That said, I believe there is value in understanding what average is, and recognizing that expectations should be different for different institutions.