Fed’s Quarles: Rural Markets Retain Community Bank Presence, but Not HQs

Community bank locations have remained present in rural markets at roughly the same rate over the past two decades, even as consolidation means that bank headquarters have closed in many of these markets, Federal Reserve Vice Chairman for Supervision Randal Quarles said today at an industry event in St. Louis.

Rural markets have averaged around four community banks (those with under $10 billion in assets) consistently since 1997; in these markets, the average number of larger banks grew from one to 1.4 during this period. Urban markets have seen more consolidation and a shift to larger banks; the average urban area had 18 community banks and 8 large banks in 2017, compared with 21 community banks and 6 large banks in 1997.

However, Quarles noted that consolidation has cut the number of bank headquarters in rural markets by 45 percent and in cities by half. “Consolidation has led to a doubling in the number of banking markets — almost all of which are rural — in which no banks are headquartered,” he said. “We hear anecdotally that banks are more attuned to the needs of the communities in which they are headquartered, so the significance of this loss could have an effect on the local markets.”