Magazine article American Banker

'93 Buyouts Thinned the Ranks of Small Banks to 60-Year Low

Magazine article American Banker

'93 Buyouts Thinned the Ranks of Small Banks to 60-Year Low

Article excerpt

The ranks of community banks are shrinking fast.

Last year, the number of banks with assets under $1 billion slipped by 504, to 10,575 - the lowest level in at least 60 years. The number of larger banks, meanwhile, changed little, rising to 382 from 380 in 1992.

Bankers and industry observers pin the drop in small banks on several factors: the loosening of interstate branching regulations, high stock prices and earnings of superregional banks - which has made it easier for them to buy smaller institutions - and the sheer volume of regulations with which bankers must comply.

The experts contend that consolidation of small banks will only pick up as restrictions on interstate branhing and banking are wiped out.

"I think [consolidation] is a freight train coming down the tracks," said Carl J. Schmitt, chairman and chief executive of University National Bank and Trust Co., a $410 million-asset bank based in Palo Alto, Calif.

Tremendous Drop Foreseen

"We are going to see a tremendous reduction of banks and a lot of that reduction is going to come among the banks below $1 billion," said Bert Ely, a banking analyst based in Alexandria, Va.

Mr. Ely projects there will be 5,000 to 6,000 banks and thrifts in 10 years, down from the current 13,221.

Certainly, the number of small banks has been falling faster and faster.

According to the Federal Deposit Insurance Corp., the number of community banks dropped by 417 in 1991, 470 in 1992 and 504 last year. Meantime, the amount of assets held by the group shrank to $27. …

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