In spite of increases in loan balances, both from first quarter and from a year ago, total assets at the nation’s banks declined in the second quarter 2022. (Source: FDIC Quarterly Banking Profile (QBP).) This marks the first quarterly drop in assets since June 30, 2015.
Total loan balances increased 8.4% over the year and while the growth was broad based, loans secured by single family homes (1-4 family) led the charge, at least for the second quarter—up 4.2% ($94.7) billion from 1st quarter.
Consumer loans bested real estate in annual growth with an increase of 11.6% from June 30th, 2021. Single family home loans were not far behind with annual growth of 8.6%. The QBP confirmed what we reported last week, that early stage consumer delinquencies are ticking up even as longer term delinquent loans remain very low.
A drop in cash and balances due from other depository institutions combined with a reduction in most types of securities (all except Treasuries) caused a net decrease in second quarter assets (1.1%); full year industry assets were up 4.1%.
Compared to last June, the number of U.S. banks decreased by 3.6% while total industry assets increased 4.1%. Naturally, that means a lot of banks beefed up in size. The 50 Community Banks with the highest percent of year over year asset growth can be found on page 7. About half of them were aided by mergers and acquisitions (M&A). If applicable, that information will be found in the last column.
Three years ago (6/30/19), 5-Star Riverstone Bank, the first bank listed on page 7, was a $47.4 million community bank headquartered in Talmage, NE. It had not changed much since it was chartered as Bank of Talmage back in 1884. The only difference of note was a name change in 2007 to Tri Valley Bank.
A 2020 acquisition of $51.6 million asset 3½-Star Eagle State Bank, Eagle, NE (another single-office bank) doubled Tri Valley Bank’s size and signified a shift in the bank’s philosophy. A much larger acquisition in November 2021, that of 5-Star First State Bank, Scottsbluff, NE, would triple its assets and give it five new offices as well as another new name and headquarters.
This was the transaction that propelled the now 5-Star Riverstone Bank, Scottsbluff, NE to the top of the list on page 7. Its assets grew 320% during the 12 month period ending June 30, 2022.
It is interesting how many of the banks have changed their names recently. 3-Star Lineage Bank, Franklin, TN (the second bank listed) was Citizens Bank & Trust until April 2021. Until that time, it also had kept status quo, operating through a single office in Franklin since 1927. Since then, it has added two new branches (organically). The new name, Lineage, is what it calls the link between tradition and tomorrow’s community banking.
Loan growth has been an instrumental part of Lineage Bank’s growth strategy. In one year total loans at the bank increased from $14.0 million (25% of assets) to $97.1 million (59% of assets). Generally, that would be a good thing. In this case, however, brokered deposits went from zero to 44% of total deposits in a year. That is an extremely high reliance on funds that may not always be available to the bank. That is concerning in any case, but particularly so at this bank that has not posted a profit in two years.
Sometimes banks change names in an attempt to shed a bad reputation. That may be the case for 1-Star Thread Bank, Rogersville, TN. After a several year-stint as a zero-star bank, and even longer as a fixture on Bauer’s Troubled and Problematic Bank Report a group of “seasoned banking and fintech investors and executives” got together and recapitalized the then “significantly undercapitalized” bank. They injected more than $35 million in new capital, changed the name to Thread Bank and are slowly, but surely, breathing life back into it.
Of course, that’s not true of all name changes. Many, most name changes even, have similar goals: to hold on to the bank’s roots while broadening its appeal. Garrison State Bank, for example, had an 87 year history with a single branch in Garrison, ND. A new branch in neighboring Max, ND in 2017 did not spur a name change.
However, in late 2021, the parent, McLean Bank Holding Company, decided to merge its three small community banks into one. The result: 5-Star TruCommunity Bank, Garrison, ND, a community bank with four branches and $311 million in assets. While it is still headquartered in Garrison, its name does not limit its appeal to those within the town’s limits.