Community Bank Market Research Tools

Helpful resources for gaining familiarity with a thrift's local market

So you’ve got a thrift or small-cap bank you’re interested in, but you have little to no knowledge on the tiny market in which it operates. It could be located in a region of the country you visited long ago or perhaps you’ve never even heard of its hometown. What do you do? Well, besides the obvious of checking the SEC filings for a brief description of the home market, here’s a few free resources I use to help familiarize myself with a bank I’m researching for the first time:

FDIC Bank Data & Statistics

The Federal Deposit Insurance Corporation (FDIC) website is a treasure trove of information relating to banks. Covering the breadth of these tools won’t be within the scope of this post since I only want to show you a quick screen to learn about an institution’s deposit market share. A low-cost deposit franchise is one of the few durable sources of competitive advantage a bank can have, enabling them to earn superior returns on equity so it makes sense to get a feel for their positioning in the market. In my opinion, deposits are a topic I don’t see discussed enough by investors when evaluating banks. Don’t be one of them!

The FDIC site can be a bit funky at first, but once you learn to navigate it you can get up to speed on a bank rather quickly. From the link above (in the header), click ‘deposit market share reports’. From there you’ll have a couple options you can customize such as looking at deposits at the state, county or MSA (metropolitan statistical area) level.

Below, I’ve included a report on San Diego County which is where I’m located. You can see the big money-center banks dominate this market with WFC registering nearly 20% of all deposits, a significant share. However, there are also a ton of banks. The list goes on much further than I’ve included. Click on the date within the top red box and you can go back in history five years or more to see how deposit market share has evolved within a community over time.

Wikipedia MSA Page

A real estate syndicator out of New York taught me this trick (thanks Jonathan). He uses it as a quick screen for searching areas with growing populations that he otherwise might not be familiar with. Wikipedia makes it easy with sortable columns in the table at the bottom of the page so you can see which MSAs are the largest, growing the fastest etc. From the Wikipedia page, a MSA is defined as follows:

In the United States, a metropolitan statistical area (MSA) is a geographical region with a relatively high population density at its core and close economic ties throughout the area. Such regions are neither legally incorporated as a city or town would be, nor are they legal administrative divisions like counties or separate entities such as states; because of this, the precise definition of any given metropolitan area can vary with the source.

By filtering for percentage change (based on the population change between 2010 and 2020 US censuses), you can see “The Villages, FL”, “Austin-Round Rock, TX”, and St. George, UT” round out the top three growing MSAs in the country. Click on one of them and you can get more detail about the area such as if it’s a state capital, county seat, it’s economic drivers, politics, demographics and more.

At this point you might be thinking, this is great and all, but why are we talking MSAs and real estate, I thought this was a Substack about thrifts and thrift conversions? Oh but we are!

Thrifts are traditionally pretty vanilla banks that loan largely against real estate collateral, whether residential mortgages or commercial real estate. Wouldn’t it be nice to have some sense of how that real estate might fare over the coming years from a supply/demand perspective. Well, the biggest drivers for real estate markets are largely demographic. Where are people moving, is the population growing, and what’s happening to jobs and incomes? All of this will help you get a quick sense of the market in which your bank under consideration operates.

Hometown Locator

While similar to the data you can get from reading about a MSA on Wikipedia, Hometown Locator may appeal to those who want a quick profile on the quantitative figures all in one place. Information is presented on a per county basis. Below I’ve pasted snapshots from Ada County, Idaho (Boise metro…not to be confused with Boise County). It should probably jump out that Boise’s population is growing much faster than the U.S. average for instance. This is good information to have when evaluating a thrift and/or its market!

Well, that’s it for this week in Conversion Confidential. I hope you’ll find some utility in at least one, if not all of these resources. Happy hunting!