Like any business, banks typically look for solid growth. Yet, based on June 30, 2025 data, 51 banks reported a 13% (or greater) 12 month decline in total assets.

These 51 banks can be found on page 5 of this week's Jumbo Rate News. The more important question is, "Why are these banks shrinking their assets?"

In many of these cases, the reason is either: a) The bank is preparing to be sold; and/or b) The bank is under an enforcement action that limits its growth.

Banks Want to Grow, Why are These Banks Shrinking?

Tupelo, Mississippi may be known as the birthplace of Elvis Presley, but long before the King of Rock ’N’ Roll was born (in 1935), Tupelo was home to The Bank of Tupelo (est. 1876). It has taken 150 years, but what started in the back room of a hardware store is now knocking on the door to becoming one of the largest 50 banks in the nation.

It has been a long road. The Bank of Tupelo started as a community bank intended to serve the banking needs of Tupelo and its vicinity. In 1966, after 90 years, the bank’s name was changed to Bank of Mississippi. It was clear it intended to expand beyond Lee County, and it did.

Statewide expansion began in 1971 with the acquisition of The Bank of Houston, Houston, MS. By March of 1997, Bank of Mississippi had gobbled up a dozen more community banks throughout the state. But it was far from finished.

As if on cue, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 allowed banks to cross state borders for the first time ever. Bank of Mississippi was eager to take advantage, but needed a more encompassing name. In 1997 it became BancorpSouth Bank, and completed its first out-of-state bank acquisition. That bank, Volunteer Bank, Jackson, TN would be the first in a long string of acquisitions through the South.

BancorpSouth Bank made its way into Alabama by acquiring Highland Bank, Birmingham. As it continued to pick up small banks in the states in which it was already operating, it was also looking for new opportunities in more states. By September of 2000, this expansion was in full-swing, bringing the bank into Arkansas, Louisiana and Texas.

Acquisitions slowed during the first few years after that. It had a lot to digest, after all. But momentum started to pick up again in 2004. By the end of 2007, BancorpSouth Bank was also in Florida and Missouri.

It was still not done. In fact, BancorpSouth Bank had its busiest two years to date in 2018/2019, acquiring seven new banks. Then, in 2021, not only did BancorpSouth gain branches in the desirable Atlanta area, it took on the name of a bank it acquired Cadence Bank, Tupelo, MS (currently rated 5-Stars).

It took a little time to let the dust settle on that, but Cadence Bank has stepped up the pace again in 2025. In May it acquired First Chatham Bank, Savannah, GA. Then, in July, it acquired the six bank subsidiaries under the Industry Bancshares umbrella in Texas.

Collectively, these six Industry Bancshares banks divested over 20% of their assets during the year leading  up to their acquisition. (They are highlighted in yellow on page 5.) It is not always the case, but we often see banks slimming down before a takeover, particularly when the banks are “problematic”.

Based on June 30, 2025 data, 51 banks reported a 13% (or greater) 12 month decline in total assets. Not all are looking for a buyer, but several are. These 51 banks can be found on page 5. Those rated 2-Stars or below are  likely to be shopping for a buyer, but they’re not the only ones.

In fact, here’s an interesting one: 2-Star Generations Bank, Seneca Falls, NY (16040) is not listed  on page 5, but its smaller affiliate, 5-Star Generations Commercial Bank, Same City, (59149), is listed. Last September (2024) the larger, Generations Bank, entered into a purchase agreement with neighboring 5-Star ESL Federal Credit Union, Rochester, NY (24563).

More divestiture is often required to prepare for a credit union-bank transaction and in this case, Generations seems to be divesting its entire smaller affiliate. Between 6/30/24 and 6/30/25, Generations Commercial Bank lost 53% of its assets and 99% of its total deposits, making it the largest loser on page 5.

The larger, 2-Star Generations Bank, has been operating under an OCC enforcement action since July 2024. It lost 7% of each (assets and deposits) since June 30, 2024. Assuming the NCUA gives its blessing, this purchase will be effective on January 1st.

The enforcement action against Generations Bank labeled it as “Troubled”. That designation puts its own limitations on the bank. Other actions that are less severe, may also limit growth or require a capital to asset ratio that forces the bank to reduce assets.

That was the case for 2-Star Eastern National Bank, Miami, FL (20026) which has been operating under a consent order since October 2018. Not the same order, mind you. The order has been replaced twice because the bank failed to meet the original terms of the first agreements. The last iteration, dated April 2025, requires a leverage CR of at least 8% and a risk-based CR of at least 11%. To be fair, Eastern NB’s CRs have consistently exceeded those levels, but it has lost money every quarter for the past several years. That has a way of eating away at capital. In calendar 2024, Eastern NB posted a $5.162 million loss, during the same period, its capital dropped by a similar $5.136 million.

At just 8.02%, Eastern NB’s leverage CR came closest to the 8% threshold at year-end 2024. Since then, it lost another 11.5% of its capital. To maintain the new prescribed leverage CR, Eastern NB had to cut its assets. By June 30, 2025, its assets were down by almost a quarter (23.4%). At 9.43%, its  leverage CR is now safely above that new 8% requirement.