In three decades, the number of commercial banks has decreased significantly, from 14,400 institutions in 1985 to just more than 6,300 institutions as of the second quarter of 2015.

From 2007 through 2013, the number of independent commercial banks shrank by 14 percent—more than 800 institutions, according to the Federal Reserve Bank of Richmond. Community bank numbers have also decreased, and only partially because of failures. This particular downturn has been driven by an unprecedented collapse in the number of new banks entering the industry. Since 2010 roughly three new banks have entered the market each year, down from an average of 100 in 1990.

Mergers and acquisitions have also played a substantial role in recent years. For bankers responsible for their institution’s ALLL calculation, the process has become increasingly complex when their institution acquires another institution or portfolio. Accounting for purchased loans introduces fair value accounting and classifies loans into ASC 310-20 (FAS 91) and ASC 310-30 (SOP 03-3) categories in the ALLL calculation.

Not only are there about half as many banks as there were 30 years ago, but physical locations for these institutions are down as well. According to data from Abrigo Bank Information, the overall number of brick-and-mortar bank branches in the U.S. has declined 3.5 percent over the past five years, from more than 98,000 in 2010 to less than 95,000 in 2014. It’s not just megabanks that are consolidating their number of physical locations – the overall number of U.S. bank branches is currently at a ten-year low.

However, the decline in branches doesn’t necessarily reflect turmoil in the banking industry, simply a shift in strategy influenced by consumer appetite for online banking. By some measurements, financial institutions are currently performing well and seeing their lowest levels of risk since the recession.

Much of the banking landscape has been reshaped since 2010, as a direct result of the financial crisis. With tighter capital requirements, new regulations and an increasingly competitive landscape, the bank market is likely to continue its trend of consolidation.


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As banking M&A heats up, it pays to know acquisition accounting

Excerpt Pulled From Blog:

"Some banking industry experts expect M&A activity will pick up in the coming months, making it critical financial institutions have a solid grasp of acquisition accounting. David Heneke, principal in CliftonLarsonAllen LLP’s financial institutions practice, describes the importance of properly accounting for purchased loans and addresses some of the related challenges. "

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Accounting for Purchased Loans

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