When the current torrent of bank mergers and acquisitions is over, I think we will see two kinds of community banks still standing: Those that are comfortable with their status and those that will have missed the boat.

What is involved in being comfortable as a community bank in a world of giants?

The basics have been discussed time and again.

They have loyal customers who value service more than saving a few cents.

They have loyal employees who know the customers and make them feel they are all part of a big family.

They have accurate, if not state of the art, operations so that customers are not infuriated by glitches and errors.

They set fair fees and do not try to gain more revenue through maddening small-service charges.

Most important, they have good borrowing customers among the smaller businesses in their region-customers who consider speed of decision-making, creative thinking, and being known without telling their story to an endless array of new bankers to be more important than cost of funds.

Though the above description should apply to a large number of community banks, many without these vital features will try to remain independent. These banks are bound to flounder, with share prices reflecting this, as shareholders look back on the days of offers of three times book or more as only a pleasant memory.

Which banks will fit this scenario?

In many instances it will be those whose management and directors have an inflated view of their bank's worth.

Will larger institutions continue to pay such high multiples for acquisitions?

The traditional motive-territorial expansion-is losing its luster.

With home banking, in-store banking, and the Internet, exclusive location of offices is becoming less and less valuable all the time.

So if there are no economies of scale or opportunities for the acquirer to sell profitable new services that are not already available in the community, why should a big bank buy? Every time a giant buys a community bank, there is less reason to buy the region's other community banks.

On top of this, some banks are now being priced so expensively by the market that would-be acquirers feel they are not worth pursuing. The irony is that their high prices are largely the result of investors' and analysts' feeling that these are the next takeover candidates and thus worth holding.

As a result, we have seen a number of community banks turn down attractive offers because they do not involve a jump over current prices, when in truth the stocks already are priced to reflect this acquisition premium.

So when the bank turns down an offer, the stock drops back to where it was before analysts started touting it as an attractive acquisition candidate.

Sadly, there will also be a number of banks that miss the boat and remain independent without the strengths listed above only because the CEO likes his position and places his own happiness over the interests of shareholders.

'The CEO of an American corporation today is the closest thing we have ever had to a feudal lord," one top corporate executive told me.

And CEOs know it. So when an offer comes in, no matter how attractive it may be, some instinctively think, "Why change anything? I like things as they are."

And with most boards sympathetic to the CEO's feelings, since he probably put them on the board in the first place, we see acquirers make offers, get rejected, and leave.

And the shareholders lose an opportunity not likely to pass their way again.

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