The Bank Recovery Room

[mrholty]

Absolutely agreed. I realized after I posted the message that you were taking the numbers out of the article. As you said the trend is correct and continuing. The trend is your friend in that the smaller guys will consolidate over time. The banks aren't going away they are merging and its a good business plan to invest in low BV and profitable banks that will get gobbled up by others.

I know more about the Credit Union side that they feel that the consolidation they are seeing is only accelerating which counters what people would naturally think about what would happen. People naturally assume the consolidation would happen in the recession and then slow down. Its actually the opposite. During the recession nobody can buy anybody as they are all worried about their own book and ratios.

Then you see a little bit of consolidation coming out and then growing the last two years. The first wave of consolidation is the survivors buying the very weak through some sort of deal either with gov't assistance (think FDIC or NCUA) or just outside it. Then the deals in the last year or so are as boards are seeing that the margins (spread) are not coming back like pre-Recession.

Historically small community banks made their money by collecting deposits and loaning to commercial property. Credit Unions did the same but lending was focused on the automotive side. Credit Unions used to have deals with local dealerships for offering loans, now with the automakers having their own credit companies that business is shrinking.

Add in the cost of compliance and its taking a huge hit.