Last year's megamergers - and acquirers' current preference for nonbanks - are pushing small banks off the radar screens of potential buyers, analysts say.
That could pressure banks interested in selling to join the wave now, before the remaining buyers lose interest.
"There is a distinct risk of missing the entire parade when you get near the turn of the century," said Thomas M. O'Brien, president and chief executive of North Side Savings Bank in Floral Park, N.Y. North Side last month agreed to sell to North Fork Bancorp. in Mattituck, N.Y.
A recent report by Ryan Beck & Co. says the large bank mergers last year increased the concentration in many major markets, making it harder for large buyers to acquire anything else without coming up against antitrust barriers.
The report, based on Ryan Beck's conversations with buyers and sellers, said many historical buyers have shifted their attention toward nonbanks as they seek alternatives to traditional branch networks, such as new business lines and electronic delivery.
For many community banks, the only choice remaining would be a midsize suitor. That could mean a double dip for shareholders if the buyer were itself bought up or involved in a merger of equals - which "is a big question mark," Mr. Carusone said.
However, the megamergers also took out many of the midsize buyers that normally would have been eyeing community banks. And many of the remaining buyers for small banks, large entrants to a market, might not want to buy into an area unless they'll get a sizable stake right off the bat.
"It creates a hurdle level," said Brian McShane, Ryan Beck first vice president and author of the report, which was released in July. "If these banks aren't bigger than some given asset size, then it's not worth the trouble."
Mr. O'Brien said, "The First Unions of the world and those who would think about moving into a market are not going to be looking at $1 billion or $2 billion" institutions.
"What you're left with are smaller institutions that are less appealing to larger banks," Mr. Carusone said. "Putting together half a dozen community banks is much more time-intensive and labor intensive than putting a deal together with one midsize bank."
Even if the buyers are interested in a new market, they're not going to pay a lot, disappointing many bank and thrift executives accustomed to seeing their neighbors gobbled up, with rich rewards for shareholders.
"They're not willing to pay exorbitant premiums for a nominal market share," Mr. McShane said. "You get the normal kind of sticker shock, where a bank down the street sold two years ago for a monster premium and everybody thinks their bank is just as good."
