[caption id="attachment_36224" align="alignright" width="317" caption="Russ Colombo, Ray Byrne, Bill Schrader"][/caption]
SANTA ROSA -- The high cost of complying with burgeoning regulation will be the cause of even more bank consolidation than has occurred as a result of the recession, experts say.
Since mid-2008, what most would call the beginning of the banking crisis, the North Bay has lost 30 percent of its locally based banks.
Tamalpais Bank, Sonoma Valley Bank and Charter Oak Bank were shut down by regulators. Napa Community Bank was sold to Rabobank.
“Obviously, there have been a couple of failures in the market,” said Russell Colombo, president and chief executive officer of Bank of Marin. “There were none in these markets for many years.”
Bank of Marin is headquartered in Novato and has $1.3 billion in assets. It acquired Charter Oak in February of this year in a whole-bank purchase, which was assisted by the Federal Deposit Insurance Corp. The acquisition followed a decision by the California Department of Financial Institutions to close Charter Oak Bank and appoint the FDIC as receiver.
Mr. Colombo said he didn’t think there would be more local failures, but he does think there will be more consolidation.
This is not singular to the North Bay. Nationwide, in the same three years, 365 banks have been closed down, or one bank every three days. In the eight years previous to that, only 31 banks were closed throughout the country.
And of the 365 banks that were shut down in that time, 189 institutions acquired them, almost exactly half. These numbers do not take into account the many banks that have gone through mergers in that time that were not failing.
Mr. Colombo said he thinks that most of the future consolidation will be due to regulations becoming more stringent and the cost of compliance rising, particularly in the North Bay.
“In the North Bay, there is the people factor. The people are the biggest expense and to get the number of people with experience to lead the compliance could become a problem," said Mr. Colombo. “Smaller banks may have one person. All of a sudden they will need three or four and they may not be able to afford the hires, if they can even find people to find out what the challenges are going to be.”
“For banks under $500 million, it will be tough to deal with regulatory oversight and compliance will be tough,” he said. “It will be costly and I think some will say they have had enough, not because they are failing but because they will not be able to make it worthwhile for the bank and its shareholders.”
In 1985, there were over 17,000 banks in the United States. In 1986, there were changes in regulations and banks were allowed to enter into interstate banking.
“We saw the bigs get bigger and the regionals acquire smaller community banks,” said Ray Byrne, president and chief executive officer of North Coast Bank.
North Coast Bank operates under parent company American River Bankshares of Sacramento, a $573 million bank.