Commercial and Retail Banking

A bank borrows from depositors who can leave the same day and lends to households and companies who repay over years. It earns the spread between the two, and it charges fees for moving and keeping money. The business looks simple. What makes it hard is that each side of the balance sheet behaves differently when interest rates, confidence or the economy turn. In mid-2026 the US had about 4,238 FDIC-insured banks and savings institutions, down from more than 14,000 commercial banks in the mid-1980s, and together they earned a reported $90 billion in a single quarter at an industry net interest margin of about 3.3% (FDIC Quarterly Banking Profile, Q2 2026). Most of that profit goes to a few very large banks; most of the institutions are small community banks. This section explains how retail and commercial banks make money (net interest income, deposit franchises, fee income), why scale matters more than it used to, how money-centre, regional and community banks differ, how digital deposit competition and the 2023 regional bank failures changed the deposit business, how US banks serve (or fail to serve) the unbanked and small towns, and, briefly, how the model compares abroad. A worked example computes net interest margin, deposit betas and unrealized securities losses through a rate shock; a checklist sets out how to analyze a bank.