In the first quarter 2024, we lost 16 banks to mergers or acquisitions and welcomed just one de novo. In all of 2023, 121 banks were lost with just six new banks opening to replace them.
The process of opening a new bank has become particularly arduous over the years, especially for industrial loan banks, but it's not impossible. Square Financial opened its industrial bank in 2021.
You will find Square Financial on page 5 of this week's issue of Jumbo Rate News along with 47 other banks that either opened in 2021 or later, or are somewhere in the de novo process.
Why Does the Banking Industry Keep Shrinking?
In the past ten years, the banking industry has shrunk by nearly one-third (32.1%). In the first quarter 2024, we lost 16 banks to mergers or acquisitions and welcomed just one de novo. In all of 2023, 121 banks were lost with just six new banks opening to replace them.
Opening a new bank has become an arduous process, and one that can take years to get approved, let alone open. We see far fewer de novo banks than we would like. Even so, page 5 includes three sections delineating banks in the process.
The first section consists of the 31 de novo banks that have opened since January 2021 (alphabetically by state). The middle section includes four banks that have been approved for deposit insurance but have not yet opened. (One is slated to open later this year; the others have no tentative opening dates, at least that they have made public.)
The final part lists 13 proposed banks. The proposers have each submitted applications for FDIC deposit insurance, but there has not yet been any decision made on the application. (One of them, Ford Credit Bank, has submitted three such applications over the years, and is still in limbo.)
The Ford situation is unique in that it wants to open an Industrial Bank (or Industrial Loan Company; ILC) which the current administration in Washington is opposed to, as a rule.
Ford sweetened its application with enticing promises that deposits could be used for electric vehicles and they could be made available to lower income borrowers. That does not seem to have swayed anyone as the application remains, unstamped.
Late last month regulators proposed new rules for parent companies of ILCs that are intended to mitigate risks to the deposit insurance fund. As it stands now, unlike other banks, ILCs are allowed to exist without consolidated supervision and without consolidated reporting requirements. That means that any problems at the parent have the potential to trickle down into the arena of FDIC-insured deposits.
Understandably, regulators (and lawmakers) want to eliminate this possibility. If approved, Ford would still have the option of creating a holding company for the ILC but that holding company (as well as the bank) would be subject to bank regulation. Whether it would still be interested is anyone’s guess.
Only a handful of states allow the ILC charter and the vast majority (16) are headquartered in Utah. Although, Nevada has four of what it calls “Thrift Companies”, California has three Industrial banks and Hawaii and Minnesota are each home to one ILC. The last one to receive a charter was 5-Star Square Financial Services, Inc., Salt Lake City, UT which opened for business early in 2021.
Of the approved applications (section 2 on page 5), Greater Gotham Bank in White Plains, NY began a stock offering as soon as it was able and should be well on its way to raising the $50 million in capital it needs to open. This is the bank that expects to open next quarter. It intends to be a bank for small businesses in the community.
As for Thrivent Bank, you could say it has long suffered from an identity crisis. It was originally a bank, then a credit union, now it’s going to be an ILC. Its latest application was submitted on February of 2021 and was finally approved less than a month ago.
Thrivent Financial for Lutherans, Appleton, WI was originally established in 1978 as a savings and loan holding company. It became the holding company for AAL Trust Company, FSB, also of Appleton, WI, which was a federal savings bank. In 2001, AAL first changed its name to AAL Bank and Trust, FSB (June) then it acquired AAL Credit Union and AAL Member Credit Union (both in July).
The following year, after another acquisition, (of LB Community Bank & Trust, FSB) the institution changed its name again. This time to match the name of its holding company, Thrivent Financial for Lutherans, aka TFL. Its new name: Thrivent Financial Bank.
Fast forward 2012, (Dec.) Thrivent Financial Bank transferred not all, but the majority of its assets to a newly formed Thrivent FCU, Appleton, WI. Today, 4-Star rated Thrivent FCU continues to serve its 52,500 members through that office in Appleton.
What remained of Thrivent Financial Bank then became Thrivent Trust Co. and continued to exist. Today, it is no longer an FDIC-insured bank. Thrivent FCU, however, wants to become an FDIC-insured bank, (ILC, more specifically). Regulators have approved the application but are requiring $280 million in initial capital. That is considerably more than most de novos are required to start with.
The other pending de novo we want to mention today is Integrity Bank, SSB, Houston, TX, which received FDIC approval for deposit insurance in March 2024. This is not the first Integrity Bank, SSB to be headquartered in Houston and we don’t want any confusion. Many banks have similar names, but it is unusual to recycle the same name in the same city, especially so quickly.
The previous Integrity Bank, SSB was established as a Texas State Savings Bank in 2007. However, that Integrity Bank, SSB was acquired in 2018 by 5-Star Independent Bank, McKinney, TX and ceased to exist.
