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View from CBA March 7, 2014
Community Bankers: Acquire or be Acquired
According to the Federal Deposit Insurance Corporation (FDIC), the number of federally insured financial institutions nationwide shrank to 6,891 in 2013 - falling below 7,000 for the first time since federal regulators began keeping track in 1934. Those numbers are not lost on members of the Independent Community Bankers of America (ICBA), who recently held their annual convention in Honolulu, HI. Below are some key points made by community bankers:
- Banks below the $1 billion-asset mark likely will not survive in the long-term
- Banks should consider increasing deposit fees to maintain and find new income
- Community bankers see big banks, not regulators, as their biggest threat
These quotes from ICBA’s conference attendees, reported by American Banker, show just how concerned they are for the future of their segment of the banking industry:
“"I think local banks need to combine,’ says Robin Cummings, chief executive at the $559 million-asset Peoples Bank of Alabama in Cullman. He believes…the oft-mentioned $1 billion-asset mark is the minimum threshold for survival.”
“"Either we acquire or we get acquired,’ Alan Thian, the president and chief executive of Royal Business Bank in Los Angeles says. The $718 million-asset bank has made three acquisitions since it was formed five years ago. ‘Regardless of niche, you have to get to a certain size. Eventually, whether on your own or through merger, you need to get to $700 million to a $1 billion. I don't see a niche bank surviving if they are smaller than that.’”
The FDIC data also shows only 500 financial institutions are above the $1 billion-asset mark. The trend of fewer bank branches and banks will continue for the foreseeable future and the regulatory uncertainty of Dodd-Frank has exacerbated the situation. Add in the adoption of new technology by consumers, and it is easy to see how many banks are not as well positioned to weather the storm. I remain bullish on CBA’s member banks who recognized these trends and are quickly moving to keep pace with the demands of the marketplace.
Small Dollar Credit Still in Demand by Consumers
At the end of 2013, the Center for Financial Services Innovation (CFSI) released its 2012 Financially Underserved Market Size Study. The study is especially relevant given the virtual elimination of Deposit Advance Products and increased CFPB scrutiny of payday lenders. According to the study, subprime consumers spent an estimated $41.2 billion on small-dollar credit in 2012. CFSI estimated 15 million consumers used at least one of five common products – payday, pawn, auto title, nonbank installment and deposit advance. Of those consumers, about one-third regularly spent more than they make.
Just because a product is eliminated, does not mean demand is eliminated as well. Consumers still need to find ways to make ends meet, as 70 percent of all consumers live paycheck-to-paycheck. We believe it should be done inside the heavily regulated banking industry. There is no telling how many of these consumers have turned to financial providers outside those recognized by the study – think the Tony Sopranos of the world.
CBA LIVE Hotel Room Group Rate Expires Today, March 7th – Book Now
We have record banker attendance for CBA LIVE 2014 and the group rate for hotel rooms expires on March 7, 2014. Please make your hotel reservation today online or by calling the Gaylord directly at (301) 965-4000. Remember to mention you are attending CBA LIVE so you receive the group rate.
We are glad to welcome eOriginal, Garnet, and CMC as the 25th, 26th and 27th newest associate members for 2014.
News and Notes
Mitsubishi UFJ Financial Group, Inc. (MUFG), has announced effective July 1, 2014, it will integrate The Bank of Tokyo-Mitsubishi UFJ U.S. branch banking operations with Union Bank, N.A., and operate the combined U.S. banking operations under the new name MUFG Union Bank, N.A. Tim Wennes, Union Bank Vice Chairman and Chief Retail Banking Officer and CBA’s Chairman-Elect, will become West Coast President, effective July 1, 2014.