The banking industry has undergone a sea change in the last 30 years. Regulatory changes and technological advances have led to dramatic increases in the size and market share of large banks, while banks have shifted their activities notably away from commercial lending toward real estate lending. While these broad trends are true of banks in the Third District served by the Federal Reserve Bank of Philadelphia, our regional banking market also differs in some interesting ways. Our small regional banks are larger and concentrate much more heavily on residential real estate lending and less on commercial lending than small banks in other regions around the nation do. Our region’s banking markets are also significantly more integrated — that is, they face much more competition from banks headquartered outside the market — than markets elsewhere. Why do banks in our region differ in these ways? What regional market forces are bankers here responding to? Before we narrow down the possibilities, it will help to understand the extent of these regional differences and how much the wider banking world has changed.

This article appeared in the Third Quarter 2015 edition of Business Review. Download and read the full issue.