Bank consolidation has intensified, with a pair of bank mergers announced just a day apart: Columbia Banking System, Inc. announced plans to acquire Pacific Premier Bancorp, Inc. for $2 billion and Eastern Bankshares, Inc. intends to merge with HarborOne Bancorp for $99 million. Both deals’ press release tout the “bigger is better” refrain that has become commonplace in the sector:
| “The acquisition enhances Columbias position as a leading regional bank throughout the West with over $57 billion in deposits, including nearly $21 billion in deposits in California, $17 billion in Oregon, and $16 billion in Washington,” according to Columbia Banking/Pacific Premier’s joint press release. “The combined company will benefit from enhanced scale in key market areas.” Similarly, HarborOne Bancorp touts its union with Eastern Bankshares, stating “Partnering with Eastern brings further scale, resources, and innovation to deliver long-term value and enhanced banking experiences to our customers and local communities.” This is a common refrain as banks fight for deposits. |
Source: Kunle
As reported in this column, the Federal Reserve swiftly raised interest rates over 2022-2023 in an effort to curb rampant inflations. These higher rates forced banks to scramble for liquidity in order to pay their depositors with this additional interest. During the banking bedlam of 2023, Silicon Valley sold their low-interest Treasury Bonds in order to free up cash in order to pay current liabilities; however, this lead depositors to worry about its solvency, resulting in a bank run that lead to the bank’s demise. While the contagion spread over to also-vulnerable Signature Bank and First Republic Bank, the banking system stabilized over the course of 2023. But pressure on banks to gather deposits continues to this day.
America has traditionally loved its community banks, however. The U.S. banking system remains rather diffuse compared to other developed countries. Of the over four thousand FDIC-insured institutions, the vast majority are community banks. Although the top 10 banks wield 53% of assets, these giants account for a mere 24% of bank branches across the country. With these mergers, they will continue to disappear.
