- Consolidation in the banking industry has been occurring for some time, primarily driven by strategic mergers. The chart on the left shows completed mergers from 2020 through 2025 where the seller is a community banking organization (CBO)._ Bank merger activity slowed from 2022–2024 amid higher interest rates and a decline in the fair value of fixed-rate assets, such as bonds. Acquisitions involving CBO sellers accelerated to 127 completed mergers in 2025, a total that hasn’t been reached since 2021, when 152 completed mergers occurred.
- As illustrated in the chart on the right, selling institutions generally earn less than buying institutions. This chart shows the median Sub-S adjusted ROAA for both buyers and sellers._ For sellers, the median ROAA declined to 0.6 percent in 2025, down from a median of 0.8 percent in 2024. Whereas for buyers, the median ROAA increased to 1.1 percent in 2025, up from 1.0 percent in 2024.
- Subdued loan and core deposit growth have been catalysts in margin compression, which have contributed to the earnings decline at selling CBOs. The median annual loan and core deposit growth for sellers was 0.5 percent and 0.4 percent, respectively, in 2025. For buyers, the median annual growth for loans and core deposits was 4.7 percent and 3.8 percent, respectively, in 2025.
Questions or comments? Please contact KC.SRM.SRA.CommunityBankingBulletin@kc.frb.org
Endnotes
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.