Community Bank Mergers Since the Financial Crisis: How Acquired Community Banks Compared with Their Peers

An increase in mergers and a dearth of new charters in the post-crisis period have renewed the interest of researchers in banking industry consolidation. This analysis focuses on community banks acquired between 2010 and 2016 in voluntary, inter-bank transactions and compares their characteristics with selected peer institutions. It refines the peer-group selection used in previous research by applying the FDIC’s community bank definition and controlling for asset size, geography, and lending specialty—a method that can be applied to future peer group analyses. A comparison of acquired community banks with their peers shows that acquired institutions were typically less profitable, reported lower capital ratios, and reported higher core deposit-to-asset ratios but lower ratios of nonperforming assets. The results of this research are consistent with past findings that acquired community banks generally underperform their peers.

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