Even as the ranks of community banks continue to shrink by the hundreds each year, one forecaster is saying that the number of surviving institutions is about to level off.
Veribanc Inc., a bank research service in Wakefield, Mass., predicted this week that the number of U.S. banks will stabilize at around 8,000.
Though that would be well below the 14,500 of 10 years ago, it would mark a relatively modest decline from the June 30 total of 9,895.
"There's been a lot of speculation that our banking industry could get squeezed down to 1,000 institutions," said Warren Heller, director of research at Veribanc. "But it's very easy to lose sight of the fact that there are a lot of banks out there"-primarily agricultural and small-town banks "that aren't candidates for acquisition."
Not all bankers and analysts buy Mr. Heller's number. Estimates fall all over the map.
Bank analyst John G. Cornwell insists that the only way that a U.S. bank can break into the list of the world's top 10 is through further consolidation.
"Why do we need 9,000 banks?" said Mr. Cornwell of Milwaukee-based Cleary Gull Reiland & McDevitt Inc. "Isn't that a terrible waste of talent?"
Montana banker Jim Bennet said every bank merger creates a new opportunity for independent bankers, suggesting that Mr. Heller's assumption may be a bit low. Through the first two quarters of 1997, 89 community banks had opened in the United States, 22% ahead of the previous year's pace.
"The bigger banks think that service is good if 75% of their telephone calls get answered," said Mr. Bennett, president of Citizens Development Co., the holding company for six Montana banks. "I sure don't and a lot of other folks don't either."
Spokesmen for two of the quintessential superregional acquirers, First Union Corp. and NationsBank Corp., said the 8,000-bank prediction was right in line with their own forecasts.
"Our view has been that there will be a dozen or so national banking organizations and many, many more community banks," said First Union spokesman Jeep Bryant.
Mr. Heller cited three factors in his reasoning:
Acquisition prices are beginning to reach levels considered too high for many potential acquirers.
The bulk of the 6,300 banks with assets under $100 million are not on the "radar screens" of the larger institutions.
There are limits to how much consolidation can occur among multibank holding companies. Of the roughly 10,000 federally insured banks, 3,000 are controlled by 716 holding companies. For the total count, those 716 would be added to the thousands of independent community banks.
Mr. Cornwell argued that the industry will continue to consolidate at a rate of 300 banks a quarter, eventually leaving less than 1,000.
"What if we had 9,000 auto makers?" he said, illustrating how he believes the industry must consolidate for its leaders to be globally competitive. In the auto analogy, "you'd have six guys in Medford, Wis., building 'Medford Mustangs' in their backyard. Is that any way to compete?"