A Significant Threshold
Last week, the number of FDIC-insured banks quietly dropped below 5,000.
“We have been watching for a year, knowing it was coming,” FedFis CEO Dave Mayo tells me. On Jan. 20, the data firm announced that the industry passed this threshold; the FDIC still lists the number of banks at 5,033 institutions as of Sept. 30, 2020.
Banks took an M&A breather in 2020 — one that’s continued into January. Prior to that, industry consolidation at a roughly 4% or so annual clip, combined with a dearth of de novo bank formation, resulted in the disappearance of more than 3,000 banks over the past decade.
I suspect bankers approach this number with a mixture of pragmatism and anxiety. A few years ago, more than half of bank executives and directors in our 2018 Bank M&A Survey believed that the pace of consolidation was good for the industry. M&A activity often benefits community banks, due to the customer and employee attrition that accompanies an acquisition.
But fast forward to Bank Director’s 2020 Governance Best Practices Survey, conducted early last year: 39% cited industry consolidation and the growing power of big banks as a top concern relative to the long-term viability of their bank.