When we think of bank M&A, we think of the big banks. Often, these are the headline deals. Is bank M&A simply bigger banks swallowing up smaller banks? No!

Yes - small banks generally comprise the largest group of bank sellers. Using a simplistic definition of banks with less than $10 billion in total assets, Community Banks represented 99 percent of all bank sellers during 2020. And Community Banks with less than $1 billion in total assets comprised 88 percent of all bank sellers.

However, as it turns out, Community Banks are leaders - as acquirers - in bank M&A.

During 2020, Community Banks represented 89 percent of all bank acquirers.

Even smaller Community Banks were active acquirers. Community Banks with less than $1 billion in total assets comprised 45 percent of all bank acquirers last year.

Where were these selling banks headquartered?

Fully 67 percent of all selling banks in 2020 were headquartered in counties with populations under 250,000. 40 percent of selling banks were located in communities of less than 50,000 people. And often selling to another Community Bank in an adjacent county.

And, 26 percent of all bank merger activity by sellers were in larger counties of 500,000 or more. Much of the de novo bank activity of the 1990’s and 2000’s occurred in counties of this size and some of these banks eventually sell.

And where were the acquiring banks headquartered?

Perhaps surprisingly, 60 percent of all acquirers were headquartered in counties with populations of 250,000 or less. And 34 percent of acquiring banks were in counties with less than 50,000 people. These are our Community Banks.

Community Banks were also active in larger markets (> 500,00 populations) representing 32 percent of all bank mergers last year.

Community Banks of all sizes and in markets of all sizes continue to implement acquisition strategies as a key element of their strategic plans.

The net impact of Community Bank merger activity resulted in fewer Community Banks across markets of all sizes.

In 2020, the decline was greatest in very small and more rural markets with populations of less than 50,000. These counties lost a net 81 headquartered banks. These markets may continue to be served by branch offices of the acquiring banks.

Larger markets also saw declines. There were 47 fewer Community Banks in markets with populations of 500,000 or more. The current state of de novo banking is insufficient to replenish much of this decline.

At the end of 2020, Community Banks (blue shaded cubes in graph) continue to serve their important roles across markets of all sizes.

They continue to be principal centers of finance in communities with less than 50,000 people.

They also serve a key role in the larger markets. In counties with more than 750,000 population, Community Banks have a major presence and continue to grow in size - in part, through bank mergers.

Expect bank merger activity to continue in 2021. Due to the COVID pandemic, we would expect to see lesser activity during the first half of 2021. However, as vaccinations become the norm and life becomes more normal, the pent up bank merger activity should be slowly released during the last six months of the year.

And Community Banks will continue to participate - both as sellers and as acquirers - in 2021 and beyond. Bank M&A is a strategic tool for Community Banks. And they excel at it!

Note: Primary FDIC data source is the Events & Changes feature in the BankFind Suite.