FDIC study indicates community banks holding their own, while smaller banks dwindle

As the banking industry has consolidated during the past 30 years, community banks have “remained resilient,” according to a study released Wednesday by the Federal Deposit Insurance Corp., while ultra-small banks have dwindled in number.

The FDIC identifies community banks as those with $100 million to $10 billion in assets.
Banks of this size have increased in both number and in total assets since 1985, according to the study. A subset of this group, those banks with $100 million to $1 billion in assets, increased by 7 percent from 1985 to 2013, while those with $1 billion to $10 billion increased by 5 percent.

Small banks, those with assets of less than $100 million, have fared less well. The number of institutions of this size has declined by 85 percent over the course of the study period, according to the FDIC.

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More than 90 percent of FDIC-insured institutions operate as community banks, and that share has “steadily increased” since the mid-1980s, according to the study.

This has occurred in part because when community banks fail or voluntarily close, they are often purchased by another community bank. Recent examples of this in Northern Colorado are the May 2013 acquisition of Greeley-based New West Bank by Fort Collins-based Bank of Colorado and the July 2011 acquisition by Julesberg-based Points West Community Bank of Windsor-based Signature Bank, which was declared insolvent by regulators.

The years following the recession have led to a spate of mergers and acquisitions in Colorado and nationwide, as banks that were suffering were bought up by larger, healthier banks. In the past five year, there have been 22 mergers and acquisitions of Colorado banking institutions.

But along with merger activity, lending has picked up and deposits have grown, with many banks in the Northern Colorado and Boulder Valley region seeing double-digit increases in commercial lending at the end of 2013, and total deposits in Larimer, Weld, Boulder and Broomfield counties increasing 6 percent, from $15.8 billion to $16.8 billion year-over-year, from June of 2012 to June of 2013.