KBRA Financial Intelligence

Five Charts That Defined Banking in 2024

1. Bank Failures Decline, Assets of Failed Banks Drop 99%

In 2024, only two U.S. banks failed, a significant drop from the five failures recorded in 2023. The total assets of failed banks fell dramatically from a historic $548.7 billion in 2023 to just $6.1 billion in 2024. Most of this total stemmed from Pennsylvania-based Republic First Bank, which entered FDIC receivership in April before being sold to Fulton Financial Corp. (NASDAQ: FULT) (KFI Score: B). The other failed institution, The First National Bank of Lindsay, headquartered in Oklahoma, was shut down by the Office of the Comptroller of the Currency (OCC) due to “false and deceptive bank records and other information suggesting fraud,” implying management may have been misreporting financials prior to the closure. An FDIC investigation is ongoing.

2. KFI Score Adjustments Reflect Mixed Institutional Performance

With data available for the first three quarters of 2024, KBRA Financial Intelligence (KFI) has so far adjusted the KFI Scores of 3,291 banks, bank holding companies (BHC), and credit unions. Of those, 1,861 (57%) had their score reduced, while 1,430 (43%) saw their scores increase. The scores of the remaining 6,047 institutions (those labeled in gray in the charts) in our database remain unchanged. The KFI Score is a financial assessment score (FAS) measuring an institution’s overall financial condition and its ability to meet its credit obligations on a scale of A to E. A total of 137 institutions are currently scored as a D or E, the lowest scores on KFI’s scale. Under our criteria, a D denotes that an institution is relatively weak and its ability to meet financial obligations could be affected by adverse economic, financial, or business conditions. Institutions scored as E are likely to have financial problems and poor financial ratios. More than 96% of banks that failed from 2010 through 2023 had a KFI Score of D or lower in the quarter prior to the FDIC date of failure. To access our full library of nearly 10,000 KFI scores, request a demo now.

3. Publicly Traded Banks Add More Than $745 Billion in Market Cap

A cohort of 350 publicly traded banks tracked by KFI saw their collective market cap rise by almost 30% throughout 2024. More than a quarter of that annual gain came in the wake of November’s presidential election. President-elect Donald Trump will enter office with a Republican majority in both the House and Senate. As KFI noted in the wake of the election, a Republican-controlled Congress would support the deregulatory legislative agenda outlined during Trump’s campaign and the second-term President would also have the ability to influence how new capital requirements for banks will be implemented. Additionally, profits earned by banks may benefit from a Trump White House as it will likely stave off an increase in corporate taxes previously proposed by the Biden administration. A recent KFI analysis found that U.S. banks saved an estimated $188 billion in tax payments since the Tax Cuts and Jobs Act of 2017 (TCJA) was signed by President Trump in his first term. That is equivalent to approximately $31.3 billion per year from 2018-2023.

4. Bank Deposits Rebound for the First Time Since 2021

Commercial bank deposits posted a modest rebound in 2024, increasing by a net $415 billion throughout the year. However, deposits remain roughly $361 billion lower than their 2022 peak. The decline in bank deposits throughout 2022-23 was spurred on by the Federal Reserve’s aggressive rate-hiking cycle and multi-trillion-dollar reduction of its balance sheet, which withdrew vast sums of liquidity from the economy. The decline in liquidity created the largest-ever contractions in the M1 and M2 monetary aggregates. The initiation of monetary easing at the Fed has helped deposit growth turn the corner, primarily through the growth of interest-bearing deposits, as depositors look to lock in elevated rates for months or years to come. KFI recently explained how this trend could create a significant deposit cost overhang for a number of U.S. banks. Persistently elevated funding amid a rate cutting regime could suppress their net interest margins and, in turn, force them to take on riskier, higher yielding loans to maintain profitability.

5. Banks Continue to Provision Reserves to Counter Expected Losses

The rate of delinquency on all bank loans has ticked up steadily, reaching a more than three-year high, throughout the first three quarters of 2024. Similarly, banks’ accumulation of allowances for loan and lease losses has also continued apace. These loan loss reserves (LLR) serve as a contra-account that banks use to offset future losses on outstanding loans that may eventually be charged off. LLRs tend to rise when banks anticipate adverse economic developments that could threaten the health of their lending assets. As funds are provisioned as LLRs, they are recorded on the income statement as an expense since there is a chance that the funds will be needed in the future to counter lending losses. However, if banks overprovision in anticipation of greater losses that never materialize, LLRs can be released and reclaimed as income in later quarters. From March 2021 to June 2022, U.S. banks released a significant portion of their LLRs, reducing them by $58.76 billion—equivalent to 27.2%. While banks had largely expected the onset of the COVID-19 pandemic and subsequent lockdown measures to tank economic growth and increase the rate of charge-offs they would need to account for, unprecedented stimulus measures reversed a short-lived 2020 recession and supported aggressive GDP expansion across numerous quarters. The net charge-off ratio remained quite stable throughout 2024, despite the rise in LLRs and delinquency.

KFI’s 2024 Product Upgrades

KFI enhanced its offerings with:

1. Calculation audit functionality within KFI’s web app

2. GAAP loan dimensional data for hundreds of publicly traded entities

3. Enhanced datapoint/mnemonic search within our Excel add-in and data dictionary

4. Four new Excel templates available for download:

• Bank Merger and Acquisition Analysis

• Bank Peer Comparison CRE Composition and Delinquency Analysis

• Bank Loan Category and Delinquency Report (031/041/051)

• Credit Union Loan Category and Delinquency Report (5300)

5. KFI’s News & Research Blog, featuring exclusive banking industry analysis

Finally, we have just launched a beta version of our expanded and revamped dashboard with new datasets, including enforcement actions, CRA ratings, and 2024 deposit and branch mapping tools. KFI is requesting your feedback during this beta phase so that we may optimize your user experience and refine the accessibility of our new tools. Simply send us a message so that we may schedule a brief call with you between January 6th - January 17th to demonstrate the new Dashboard features and hear your insights. We are available anytime from 8:00 AM to 6:00 PM EST.

Recent M&A

South Carolina-based United Community Banks, Inc. (NYSE: UCB) (KFI Score: B) announced in a December 3 press release that it will merge with Florida’s ANB Holdings, Inc., acquiring its wholly owned subsidiary American National Bank (KFI Score: B+). The deal is an all-stock transaction with an aggregate value of approximately $80 million. The merger is expected to be completed in the 2Q 2025.

Independent Bank Corp. (NASDAQ: INDB) (KFI Score: B+) announced in a December 9 press release that it will acquire Enterprise Bancorp, Inc. (NASDAQ: EBTC) (KFI Score: B-) in a cash and stock transaction for total consideration valued at approximately $562 million in aggregate, or $45.06 per share based on INDB’s closing price of $71.77 on December 6, 2024. Independent anticipates issuing approximately 7.5 million shares of its common stock and paying an aggregate amount of $27.1 million in cash in the merger. The latter’s Enterprise Bank & Trust Co. (KFI Score: B) will merge into INDB subsidiary Rockland Trust Co. (KFI Score: B). Both banks are headquartered in Massachusetts and the merger is expected to close in the second half of 2025.

Heritage Bancshares, Inc., the parent company of Heritage Bank (KFI Score: B), announced in a December 13 press release that it will acquire Fidelity State Bank and Trust Company (KFI Score: A-). The two Topeka, Kansas-headquartered banks did not disclose terms of the deal, which is expected to close in 2Q 2025.

Berkshire Hills Bancorp, Inc. (NYSE: BHLB) (KFI Score: B) announced in a December 16 press release that it will acquire fellow Massachusetts-based bank Brookline Bancorp, Inc. (NASDAQ: BRKL) (KFI Score: B-) in an all-stock transaction valued at approximately $1.1 billion, or $12.68 per share of Brookline common stock. In conjunction with the planned merger, Berkshire also announced it entered into subscription agreements with investors to raise capital to support the merger. In aggregate, $100 million of Berkshire common stock will be issued at $29 per share. The transaction is expected to close by the end of the second half of 2025, but the capital raise closed on December 19, 2024.

Ohio-based Northwest Bancshares, Inc. (NASDAQ: NWBI) (KFI Score: B+) announced in a December 17 press release that it will acquire Pennsylvania’s Penns Woods Bancorp, Inc. (NASDAQ: PWOD) in an all-stock transaction valued at approximately $270.4 million. Penns Woods commercial bank subsidiaries include Jersey Shore State Bank (KFI Score: B) and Luzerne Bank (KFI Score: B). The companies expect to complete the transaction in 3Q 2025.

Pennsylvania-based First Commonwealth Financial Corporation (NYSE: FCF) (KFI Score: B) announced in a December 18 press release that it will acquire Ohio’s CenterGroup Financial, Inc., as well as its commercial banking subsidiary, CenterBank (KFI Score: B), in an all-stock transaction valued at approximately $54.6 million in the aggregate. The deal is expected to close in the first half of 2025.

Massachusetts’ Hanscom Federal Credit Union (KFI Score: B-) announced in a December 20 press release that it will acquire Peoples Bancorp, Inc. (OTCPK: PEBC), as well as its commercial banking subsidiary The Peoples Bank (KFI Score: B+), in an all-cash transaction. Exact financial details were not disclosed, but the transaction is expected to be completed in the second half of 2025.

Van Hesser’s 3 Things in Credit

December 6: Spread Risk, U.S. Bubble, Holiday Spending

December 13: Peak Trump, Animal Spirits, and Debt Warning