Fears confirmed: Your neighborhood bank is disappearing

Safe in shape of dollar sign

Not a huge fan of large, impersonal banks? You're not alone.

But if you're searching for the same kind of friendly neighborhood bank that your grandfather trusted with his money, you'd better hurry because they're disappearing fast.

A new study by Celent, the Boston financial research and consulting firm, reveals what we've already surmised by a quick glance down Main Street: The little guys are losing the battle to the big bank brands.

Fifteen years ago, America's five largest banks, each with assets of well more than $10 billion, controlled 11% of all U.S. deposits. Today? Their share is nearly 35%.

Meanwhile, the number of small banks with assets under $10 million has declined by 5,967, a 43% drop since 1992. In the last two years alone, 518 banks with assets below $500 million bit the pavement.

Yes, to some degree the big fish are swallowing the little fish. But they're not bothering with the small fry; instead, they're gobbling up those middle dwellers between $1 billion and $10 billion in assets.

Perhaps the only check on the size of these whales is an FDIC regulation that prohibits any one bank from having more than 10% of all deposits nationally.

Some consolation: The top five can only control 50% of the market. Celent notes that the top two are already at or above that 10% deposit share.

Put another way, if you're a fan of negative numbers, banks under $100 million in assets are "growing" at an annual rate of -2.9%. Which, I'm tempted to add, is about what I'm earning on my checking account.

Celent figures there's a right size where the little guys can survive and even thrive. Say that three times real fast.

It's a sweet spot where they're small enough to provide the personal service to attract depositors yet large enough to pay for their IT and operational overhead. Get larger than that, you'll get gobbled; smaller, and you won't keep the lights on.

Over the coming few years, Celent expects a 6% annual decline in banks under $100 million in assets and a 2% annual decline in banks with assets of $100 million to $300 million.

Oh, and about that free lobby coffee?

Better get it to go.

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