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Number of Banks in the U.S. – Understanding the Decline and What the Future Holds

Introduction:

Banks play an integral role in our daily lives, offering a secure place for our money, facilitating electronic transactions, and providing financial assistance when needed. The U.S. banking landscape has undergone significant changes, prompting the question: How many banks are there in the United States? The answer is multifaceted, encompassing the current count, the kinds of financial institutions involved, and the historical trends that have shaped the industry.

How Many Banks Are There in the U.S.?

As of the end of 2021, the number of commercial banks in the United States that are insured is 4,844, according to the Federal Deposit Insurance Corporation (FDIC). This count includes both commercial banks and savings banks (thrifts). The number is subject to change annually as the FDIC provides updated figures.

Types of Financial Institutions:

The FDIC’s count comprises two main types of institutions: commercial banks and savings banks (thrifts). Commercial banks offer a broad range of financial services to consumers and businesses, including deposit accounts, secured and unsecured loans, and credit products. Savings banks focus more on consumers, often specializing in mortgages and offering higher interest rates on savings deposits. Both types are FDIC-insured, ensuring protection for up to $250,000 deposit per account type per institution.

Exclusions from FDIC Count:

It’s important to note that the FDIC count doesn’t consist of credit unions, which are insured and tracked separately by the National Credit Union Administration. Additionally, fintech apps not chartered as banks or directly insured by the FDIC are not part of this count. However, many fintech apps collaborate with FDIC-insured banks to ensure the safety of user deposits.

Regional Distribution of Banks:

The distribution of banks across states varies, with Texas, Illinois, Iowa, Minnesota, and Missouri having the highest number of banks as of 2021. In contrast, Alaska, Hawaii, Vermont, New Hampshire, and Maine have fewer banks. Interestingly, the number of banks in a state doesn’t strongly correlate with its population.

Historical Trends and Decline:

Since the 1980s, the U.S. has experienced a consistent decline in the number of banks. Factors contributing to this decline include bank failures, mergers, and a lack of new banking charters. The crisis regarding savings and loans in the late 1980s resulted in a significant wave of bank failures. Subsequently, ongoing consolidation among existing banks and regulatory challenges, particularly post the Great Recession, have accelerated the decline. The number of newly chartered banks has drastically reduced, with only single-digit formations in recent years.

Future Outlook:

The trend of declining numbers is likely to persist in the future due to ongoing consolidation and the scarcity of new banking charters. While there may be fluctuations, the fundamental conditions driving the decline are unlikely to change soon. Factors such as strict regulations, competitive pressures, and the high cost of starting a new bank contribute to the challenges faced by smaller institutions.

Conclusion:

Despite the appearance of a dynamic financial landscape with the rise of fintech apps, the U.S. banking industry is, in reality, undergoing a sustained contraction. Understanding the nuances of this trend is crucial for consumers and industry observers. While innovative financial solutions continue to emerge, the core banking infrastructure remains dominated by fewer, larger institutions.

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