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2019 U.S. Bank Landscape

2019 U.S. Bank Landscape

September 23, 2019

Authored by: Robert Klingler

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.

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2017 Landscape of U.S. Banking Industry

The U.S. depository industry has continued its path of consolidation, but as of the end of 2017, there are still over 5,600 banks chartered in the United States.  This represents a decline of just under 3,000 charters from 10-years earlier, as mergers, receiverships and a near complete dearth of de novo activity have continued to shrink the number of banks.

As of December 31, 2017, we had 5,679 depository institutions with $17.5 trillion in total assets.  That represents a decline of 243 institutions an increase of $600 million in assets since the end of 2016, and a decline of 2,865 institutions and an increase of $4.4 trillion since the end of 2007.

The four largest depository institutions by asset size (JPMorgan, Wells Fargo, Bank of America and Citi) hold $7.03 trillion (up slightly from $6.84 trillion at the end of 2016).  Those four now represent 40.1% of the industry’s assets, down slightly from 40.5% at the end of 2016; but up from 34.8% ten years earlier.

There are 120 additional banks that have assets greater than $10 billion, holding $7.45 trillion.  Both of those numbers are materially higher than one year earlier; at the end of 2016, there were 111 banks in this category with $6.98 trillion in assets.  The 124 largest banks now hold 82.7% of the industry’s assets.  Ten years ago, there were 119 institutions with more than $10 billion in assets, and they collectively held 77.6% of the industry’s assets.

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Landscape of the U.S. Banking Industry

(A print-ready version of this post is also available: Landscape of the U.S. Banking Industry.)

From 2006 through 2016, the number of insured depository institutions in the United States has fallen from 8,691 charters to 5,922, a decline of 2,769 charters or a 32% loss.  This headline loss number is worth talking about, but is neither news nor new.  The loss of charters is a frequent source of discussions around bank board rooms, stories from trade press, and chatter at banking conferences.  The number of insured charters has also been in steady decline, with at least 33 years of declining numbers.

However, a deeper dive into the numbers reveals some unexpected trends below the headline 32% loss of charters.

the-bank-accountNote:  We’ve also recorded an accompanying podcast for The Bank Account on the Truth About Industry Consolidation.  The podcast contains additional analysis to the numbers presented here, and is a useful addition, but not a substitute, to this content.  In addition to listening to this episode, we encourage you to click to subscribe to the feed on iTunes, Android, Email or MyCast. It is also now available in the iTunes and Google Play searchable podcast directories.

Links to items mentioned in the podcast, or otherwise potentially of interest on the topic:

 

State of Banking Landscape as of December 31, 2016

As of December 31, 2016, we had 5,922 institutions with $16.9 trillion in total assets.

The four largest depository institutions by asset size (JPMorgan, Wells Fargo, Bank of America and Citi) hold $6.84 trillion in assets, or 40.5% of the industry’s assets.

There are 111 additional banks that have assets greater than $10 billion, holding $6.98 trillion.  That’s 1.9% of the total charters, holding 81.9% of the aggregate assets.

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The State of Banking in Atlanta: 2015 vs. 2005

Last week we looked at the state of banking in Georgia based on the FDIC’s latest summary of deposits information, and now we turn our focus to Atlanta.  The overall number of banks in the Atlanta Metropolitan Statistical Area (the 9th largest MSA in the country), fell from 138 to 97, a 30% decline.  As in broader Georgia, this number overstates the decline of independent banking organizations, as the number of holding companies operating multiple bank charters in the Atlanta area fell from 4 to 1, with the number of unaffiliated financial institutions falling from 126 to 96 (a 24% decline).

The total amount of deposits assigned to branches in the Atlanta MSA rose from $95 billion to $146 billion, a 54% increase (as compared to a 43% increase for the entire state, and an increase of only 23% in the state but outside the Atlanta MSA).  The total number of branches in the MSA fell from 1,342 to 1,294, a 4% decline. These effects combined to increase the average amount of deposits per branch in Atlanta from $71 million to $113 million, a 60% increase.

Like Georgia more broadly, between increasing total deposits and industry consolidation, Atlanta saw an increase in the number of larger institutions operating within the MSA.  The number of institutions with more than $2 billion in deposits increased from 6 institutions to 12, while the number of institutions with between $500 million and $2 billion declined slightly from 10 to nine.  The number of institutions with between $250 million and $500 million in deposits fell from 23 to 14, a 39% decline, the number of institutions with between $100 million and $250 million in deposits fell from 41 to 27, a 34% decline, and the number of institutions with less than $100 million in deposits fell from 42 to 30, a 29% decline.  Consistent with these trends by asset size, but potentially inconsistent with a broader message of unending industry consolidation, the number of banks in the Atlanta MSA with more than 1% of the total deposits in the MSA increased from 9 to 14 banks (and the number of Georgia-based institutions with more than 1% of total deposits increased from 5 to 8).

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The State of Banking in Georgia: 2015 vs. 2005

On September 28, 2015, the FDIC published the 2015 summary of deposits information.  Using this data, we compared the deposit data for Georgia, comparing 2015 to 2005.  Without even looking at the numbers, we knew the period would represent significant change, as the Great Recession had a significant impact on the banking industry, particularly in Georgia.

As a headline number, the total number of banks with branches in Georgia fell from 367 to 248, a decline of over 32%.  However, as with many reports showing the number of bank charters, this number overstates the effect of consolidation as it also reflects internal holding company reorganizations in which multi-bank holding companies have consolidated into one bank charter.  These internal consolidations reduced the number of bank charters in Georgia by 51, as the number of multi-bank holding companies fell from 18 to 6 (one of which combined their subsidiary bank charters after the reporting deadline for the 2015 summary of deposits).  Notwithstanding the overstatement by the headline number, consolidation is certainly occurring in Georgia.  The number of independent banking organizations in Georgia fell from 303 to 235, a decline of approximately 22%.

For Georgia, the total amount of deposits assigned to branches rose from $149 billion to $213 billion, a 42% increase, while the total number of branches fell from 2,642 to 2,482, a 6% decline. These combined to increase the average amount of deposits per branch in Georgia from $57 million to $86 million, a 52% increase.

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