BANKING INDUSTRY CONSOLIDATION SLOWDOWN CONTINUES INTO Q1 2023

ENTERING 2023, THE BANKING INDUSTRY CONSOLIDATION CONTINUES TO BE LOWER THAN HISTORICAL AVERAGES.

  • Banking Industry Consolidation Rate = 2.6% for L4Q. The pace of industry consolidation was well below the historical average since 1990 of 3.7%. The industry is entering its fourth year of below average consolidation.

  • Bank Merger Rate = 2.5% for L4Q. The pace of bank merger activity was well the historical average since 1990 of 4.5%.

  • Bank Failure Rate = 0.0% for L4Q with only 2 bank failures and reflecting on the strength of the banking industry. The historical average since 1990 is 0.3%.

  • De Novo Bank Replenishment Rate = 9.5% for L4Q - primarily reflecting lower merger activity. The replenishment rate was well below the historical average since 1990 of 20.9%.

NUMBER OF U.S. BANKS:

Overall, the number of U.S. banks fell to 4,672 at the end of Q1 2023 - down 124 from one year ago.

The largest declines continued to occur in Community Banks with less than $500 million in total assets.

And the largest declines of headquartered banks continues to occur in rural markets with populations of less than 50 thousand.

BANKING INDUSTRY CONSOLIDATION RATE:

Banking industry consolidation net activity slowed during 2023 Q1 L4Q. The Banking Industry Consolidation Rate for 2022 was 2.6%. The historical average was 3.7% since 1990.

Community banks consolidated at a rate of 2.7% L4Q with several states showing a consolidation rate of 4% or higher: Massachusetts, Missouri, Wisconsin, Florida, and Pennsylvania.

BANK MERGER RATE:

Bank merger activity slowed significantly for the L4Q through Q1 2023. The Bank Merger Rate was 2.5%. The historical average was 4.5% since 1990.

DE NOVO BANK REPLENISHMENT RATE:

De novo banking activity remains historically low with 11 new charters approved during the L4Q through Q1 2023 and 6 new banks opened. The De Novo Bank Replenishment Rate was 9.5%, or approximately 10 new banks opened to replace every 100 banks lost to merger, failure or liquidation. This rate remains well below the historical average or 20.9%, or 21 new banks opened to replace every 100 banks lost to merger, failure or liquidation.

BANK FAILURE RATE:

There were 3 bank failures for the 12 months ending May 2023. The Bank Failure Rate was near 0.0%.

These bank failures were the result of large, uninsured depositor runs resulting from a loss of confidence caused by significant losses in the AFS and HTM securities portfolios.

Financially, the industry is sound. Earnings were solid. Credit quality continues to look good. And capital levels remain strong.

 

2023 OUTLOOK:

The pace of banking industry consolidation is expected to continue below historic averages.

This pace will result from a below average rate for bank mergers. There is no reason to believe that any unusual resurgence will occur.

The bank failure rate should continue to remain near zero.

And de novo bank activity will continue at less than 10 per year with the de novo bank replenishment rate in the 5-10% range.

BANKING INDUSTRY CONSOLIDATION SLOWDOWN IN 2022

DURING 2022, THE BANKING INDUSTRY CONSOLIDATION CONTINUED TO BE LOWER THAN HISTORICAL AVERAGES.

  • Banking Industry Consolidation Rate = 2.7% for L4Q. The pace of industry consolidation was well below the historical average since 1990 of 3.7%.

  • Bank Merger Rate = 2.8% for L4Q. The pace of bank merger activity was well the historical average since 1990 of 4.4%.

  • Bank Failure Rate = 0.0% for L4Q with no bank failures and reflecting on the strength of the banking industry. The historical average since 1990 is 0.3%.

  • De Novo Bank Replenishment Rate = 10.1% for L4Q - primarily reflecting lower merger activity. The replenishment rate was well below the historical average since 1990 of 21.0%.

Overall, the number of U.S. banks fell to 4,706 at the end of Q4 2022 - down 133 from one year ago.

The largest declines continued to occur in Community Banks with less than $500 million in total assets.

And the largest declines of headquartered banks continues to occur in rural markets with populations of less than 50 thousand.

Banking industry consolidation net activity slowed during 2022. The Banking Industry Consolidation Rate for 2022 was 2.7%. The historical average was 3.7% since 1990.

Community banks consolidated at a rate of 2.8% L4Q with several states showing a consolidation rate of 4% or higher: Massachusetts, Alabama, and Florida.

BANK MERGER RATE:

Bank merger activity slowed from significantly during 2022. The Bank Merger Rate for 2022 was 2.8%. The historical average was 4.4% since 1990.

DE NOVO BANK REPLENISHMENT RATE:

De novo banking activity remains historically low with 15 new charters in 2022. The De Novo Bank Replenishment Rate was 10.1% for L4Q, or approximately 10 new banks opened to replace every 100 banks lost to merger, failure or liquidation. This rate remains well below the historical average or 21.0%, or 21 new banks opened to replace every 100 banks lost to merger, failure or liquidation.


BANK FAILURE RATE:

There were no bank failures during 2022. Hence, the Bank Failure Rate was 0.0%.

Over 860 days have past since the last bank failure - approaching the record of 952 days.

Financially, the industry is sound. Earnings were solid. Credit quality continues to look good. And capital levels remain strong.

2023 OUTLOOK:

The pace of banking industry consolidation is expected to continue below historic averages.

This pace will result from a below average rate for bank mergers. There is no reason to believe that any unusual resurgence will occur.

The bank failure rate should continue to remain near zero.

And de novo bank activity will continue at less than 10 per year with the de novo bank replenishment rate in the 5-10% range.

BANK CONSOLIDATION SLOWS DURING 2022 WITH THE PACE OF MERGER ACTIVITY SLOWING.

THROUGH THREE QUARTERS OF 2022, THE BANKING INDUSTRY CONSOLIDATION CONTINUES TO BE LOWER THAN HISTORICAL AVERAGES. AND, FOR THE LATEST 4 QUARTERS, THE PACE OF CONSOLIDATION ALSO FELL SLIGHTLY BELOW HISTORICAL AVERAGES.

  • Banking Industry Consolidation Rate = 3.4% for L4Q, but only 2.6% for the three quarters of 2022. Both stats are below the historical average since 1990 of 3.7%.

  • Bank Merger Rate = 3.5% for L4Q, but only 2.7% for the three quarters of 2022. Both stats are below the historical average since 1990 of 4.4%.

  • Bank Failure Rate = 0.0% for L4Q with no bank failures and reflecting on the strength of the banking industry. The historical average since 1990 is 0.3%.

  • De Novo Bank Replenishment Rate = 6.7% for L4Q, and 11.4% through three quarters of 2022 - primarily reflecting lower merger activity. Both stats are below the historical average since 1990 of 21.0%.

BANK CHARTERS:

Overall, the number of U.S. banks fell to 4,746 at the end of Q3 2022 - down 168 from one year ago.

The largest declines continued to occur in Community Banks with less than $500 million in total assets.

And the largest declines of headquartered banks continues to occur in rural markets with populations of less than 50 thousand.

BANKING INDUSTRY CONSOLIDATION RATE:

Banking industry consolidation net activity slowed during 2022. The Banking Industry Consolidation Rate for the three quarters of 2022 was 2.6%, which compares to 3.4% for the L4Q . The historical average was 3.7% since 1990.

Community banks consolidated at a rate of 3.5% L4Q with several states showing a consolidation rate of 4% or higher: Missouri, Illinois, Iowa, California, Texas, Oklahoma, Kansas, New York, and Florida.

BANK MERGER RATE:

Bank merger activity slowed from significantly during 2022. The Bank Merger Rate for YTD 2022 was 2.7%, which compares to 3.5% for the L4Q . The historical average was 4.4% since 1990.

DE NOVO BANK REPLENISHMENT RATE:

De novo banking activity remains historically low with approximately 11 new charters annually. The De Novo Bank Replenishment Rate was 6.7% for L4Q, or approximately 7 new banks opened to replace every 100 banks lost to merger, failure or liquidation. This rate remains well below the historical average or 21.0%, or 21 new banks opened to replace every 100 banks lost to merger, failure or liquidation.

BANK FAILURE RATE:

There were no bank failures for the L4Q ending Q2 2022. Hence, the Bank Failure Rate was 0.0%.

Over 770 days have past since the last bank failure.

Financially, the industry is sound. Earnings were solid. Credit quality continues to look good. And capital levels remain strong.

2022 - 2023 OUTLOOK:

The pace of banking industry consolidation is expected to continue below historic averages.

This pace will result from a below average rate for bank mergers. There is no reason to believe that any unusual resurgence will occur.

The bank failure rate should continue to remain near zero.

And de novo bank activity will continue at less than 10 per year with the de novo bank replenishment rate in the 5-10% range.

BANK CONSOLIDATION SLOWS DOWN IN Q2 2022! LATEST 12 MONTHS AVERAGE.

THE BANKING INDUSTRY CONSOLIDATION SLOWED DURING FIRST HALF OF 2022, WHILE LATEST 4 QUARTERS NEARLY MATCHED HISTORICAL AVERAGES.

  • Banking Industry Consolidation Rate = 3.6% for L4Q, but only 2.8% for the first half of 2022. Both stats are below the historical average since 1990 of 3.7%.

  • Bank Merger Rate = 3.7% for L4Q, but only 3.0% for the first half of 2022. Both stats are below the historical average since 1990 of 4.5%.

  • Bank Failure Rate = 0.0% for L4Q with no bank failures and reflecting on the strength of the banking industry. The historical average since 1990 is 0.3%.

  • De Novo Bank Replenishment Rate = 6.3% for L4Q, and 11.7% for the first half of 2022 . Both stats are below the historical average since 1990 of 21.0%.

BANK CHARTERS:

Overall, the number of U.S. banks fell to 4,771 at the end of Q2 2022 - down 180 from one year ago.

The largest declines continued to occur in Community Banks with less than $250 million in total assets.

And the largest declines of headquartered banks continues to occur in rural markets with populations of less than 50 thousand.

BANKING INDUSTRY CONSOLIDATION RATE:

Banking industry consolidation net activity slowed from Q1 to Q2 of 2022. The Banking Industry Consolidation Rate for the first half of 2022 was 2.8%, which compares to 3.6% for the L4Q . The historical average was 3.7% since 1990.

Community banks consolidated at a rate of 3.7% L4Q with several states showing a consolidation rate of 4% or higher: California, Missouri, Florida, Tennessee, Iowa, Oklahoma, Kentucky, Nebraska, and New York.

BANK MERGER RATE:

Bank merger activity slowed from Q1 to Q2 of 2022. The Bank Merger Rate for the first half of 2022 was 3.0%, which compares to 3.7% for the L4Q . The historical average was 4.5% since 1990.

DE NOVO BANK REPLENISHMENT RATE:

De novo banking activity remains historically low with below 10 new charters annually. The De Novo Bank Replenishment Rate was 6.3% for L4Q, or approximately 6 new banks opened to replace every 100 banks lost to merger, failure or liquidation. This rate remains well below the historical average or 21.0%, or 21 new banks opened to replace every 100 banks lost to merger, failure or liquidation.

BANK FAILURE RATE:

There were no bank failures for the L4Q ending Q2 2022. Hence, the Bank Failure Rate was 0.0%.

Over 690 days have past since the last bank failure.

Financially, the industry is sound. Earnings were solid. Credit quality continues to look good. And capital levels remain strong.

2022 - 2023 OUTLOOK:

The pace of banking industry consolidation is expected to continue at near historic averages.

This pace will result from a below average rate for bank mergers. There is no reason to believe that any unusual resurgence will occur.

The bank failure rate should continue to remain near zero.

And de novo bank activity will continue at less than 10 per year with the de novo bank replenishment rate i the +/-5% range.

PACE OF BANKING INDUSTRY CONSOLIDATION CONTINUES - AT HISTORICAL AVERAGES!

The banking industry consolidation continued into Q1 2022, matching historical averages.

  • Banking Industry Consolidation Rate = 3.7% for the latest 4 quarters (L4Q), matching the long term annual rate of 3.7%.

  • Bank Merger Rate = 3.7% L4Q, below the 4.5% rate of the past 3+ decades.

  • Bank Failure Rate = 0.0% with no failures L4Q, showing the financial strength of the industry today.

  • De Novo Bank Replenishment Rate = 4.7% L4Q - remaining low and significantly below the average rate of 21.0% over the past several decades.

BANK CHARTERS:

Overall, the number of banks in the U.S. fell to 4,796 at the end of Q1 2022 - down 182 from one year ago.

The largest declines occurred in Community Banks with less than $250 million in total assets.

And, importantly, the largest declines occurred in rural markets with populations of less than 50 thousand.

BANKING INDUSTRY CONSOLIDATION RATE:

The rate of banking industry consolidation matched the historical average of 3.7%.

For the L4Q, the Banking Industry Consolidation Rate was 3.7%, or approximately 37 banking charters disappeared for each 1,000 banks existing one year ago.

Community Banks consolidated at a rate of 3.8% L4Q with several states showing a consolidation rate of greater than 4%: Missouri, California, Illinois, Texas, Iowa, Minnesota, Oklahoma, and Alabama.

BANK MERGER RATE:

Bank merger activity picked up during the first quarter of 2022. The Bank Merger Rate was 3.6% compared to an average rate of 4.5% since 1990 and above the 3.3% rate during 2021.

DE NOVO BANK REPLENISHMENT RATE:

While de novo banking activity has seen a pick up, it remains significantly below historical averages. The De Novo Bank Replenishment Rate was 5.2% for L4Q, or approximately 5 new banks formed to replace every 100 lost to merger or failure. But this rate remains well below the historical average of 21.1%, or 21 new banks chartered to replace banks lost to merger or failure.

BANK FAILURE RATE:

There were no bank failures for the L4Q ending Q1 2022. Hence, the Bank Failure Rate was 0.0%.

Financially, the industry is sound. Earnings were solid. Credit quality looks good. And capital levels are strong.

2022 OUTLOOK:

Continued moderate pace with banking industry consolidation continuing near historic averages.

This will result from a below average rate of bank mergers. No reason to believe any unusual resurgence.

The bank failure rate should continue hovering at or just above zero.

And de novo bank activity will continue to be nominal in the +/- 5% range.