FDIC: Community Banks Stronger Than Ever

By Laura Alix


Industry consolidation, the rallying cry against over-regulation, has wrought its greatest effects on the very smallest and very largest banks. Those between the $100 million and $10 billion asset mark, meaning most community banks, have largely resisted consolidation, according to a report released by the FDIC.

In fact, community banks in that range have increased in both number and asset size since 1985, the FDIC said in the aptly-titled “Community Banks Remain Resilient Amid Industry Consolidation.”

The number of banks with assets between $100 million and $1 billion has increased 7 percent between 1985 and 2013, and the number of banks with assets between $1 billion and $10 billion increased 5 percent during that time period. The total assets of banks in the latter category grew 4 percent during that period, while the assets of banks in that smaller range increased 27 percent over those 28 years.

“Our analysis shows that the projected decline of the community banking sector has been significantly overstated. Community banks have, in fact, remained highly resilient amid the long-term trend of banking industry consolidation,” the FDIC wrote.

However, the FDIC also noted that the number of institutions with assets less than $100 million had declined by 85 percent over that time period, while institutions over $10 billion have nearly tripled in number and have seen their assets increase about ten-fold.

In the report, the FDIC attributes those periods that saw the highest rates of voluntary attrition to changes in state and federal banking laws that relaxed restrictions on interstate and intrastate bank banking activities. During the first period, from 1986 to 1992, the annual voluntary attrition rate averaged about 3.4 percent. Between 2002 and 2013, the annual voluntary attrition rate averaged around 3.3 percent. From 1993 to 2001, however, voluntary closings averaged 5.4 percent and exceeded 4.5 percent in every year.

On the other side of the consolidation coin, failures have comprised less than 17 percent of all charter attrition since 1985, with the vast majority taking place during two concentrated waves: in the 1980s and early 90s and then again in 2008, no doubt spurred by the recent financial crisis.

“If the experience of the last banking crisis is any guide, chartering activity can be expected to recover over the next few years as the effects of the crisis recede,” the report’s authors wrote.


Laura Alix is a staff writer for The Warren Group.