'Too Big To Fail' Explained

 | Feb 05, 2013 | 1:00 PM EST
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I've written quite a few columns about various aspects of the financial condition of U.S. banks, mostly concentrated on the money centers JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC). While preparing a series based on fourth-quarter call reports for U.S. banks, it occurred to me an overview of U.S. banking would be a good reference column.

At the end of 2012, there were about 6,500 banks operating in the U.S. with about 97,900 total branches. Each quarter for the past three years, the number of banks has declined at the rate of about one bank every other day. There are about 622 fewer banks today than three years ago, with about 2,000 fewer branches.

Meanwhile, the number of bank employees has increased along with the value of deposits, loans and assets held. There are roughly 2.1 million full-time bank employees in the U.S., with the big four banks (JPM, BAC, C and WFC) each employing about 10% of this workforce, or about 200,000 each. The big four combined also represent about 44% of all assets under management, with about $6.3 trillion of the $14.2 trillion total. To put this into perspective, the fifth largest bank in the U.S., U.S. Bancorp (USB), employs a third as many employees as any of the four largest, with about 62,000 employees.

Banks in this category are called super-regionals, which means they operate in multiple states but not all. There are two sub-categories ranked by assets, with the one group comprising 13 banks with assets between $100 billion and $1 trillion, and 18 banks with assets between $50 billion $100 billion. The first group employs about 345,000 and the second about 136,000 -- about 23% of the entire bank force. The first group has about 20% of all bank assets and the second about 10%. That means the 35-largest banks employ two-thirds of the banking workforce and control three-quarters of bank assets.

The next group is the regionals, which divides roughly into two sub-categories: banks with assets between $5 billion and $50 billion, of which there are 120, and banks with assets between $1 billion and $5 billion, of which there are about 470. They usually operate in two to five contiguous states. The first of these has roughly as many assets under management as the 18 banks above them, at about $1.5 trillion total. The second group has about $1 trillion in assets.

Below the regionals are local banks, which usually operate in a single state. This group is typically divided into three sub-categories of $500 million to $1 billion under management, $100 million to $500 million, and less than $100 million. There are approximately 670, 3,200, and 2,000 banks in each respective category. Although this group represents 90% of all banks in the U.S., they hold only 9% of all assets under management.

Although there are multiple considerations concerning banking, this is a good starting point for determining the concentration of U.S. banking activity.

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