604 Banks Disappeared in 2009 - For Good and Bad Reasons

Bank Population Accounting: January 1, 2009 16,374 Add de novos 26 (185 in 2007 before the crunch) Deduct failed banks 140 Deduct acquired banks 464 December 31, 2009 15,796 (This 3.5% net reduction compares to a 2.4% average during the past 16 years)Everyone knows the U.S. still has too many financial institutions, so fewer seems like a good thing, as long as you are not an employee or owner of the failed, acquired, or the member of the FDIC's Bank Watch List.

Just a short couple of years ago, if you owned a corner of real estate in the business neighborhood of any town, you were "holding gold," because banks wanted to put a branch there and rich guys wanted to put their de novo there. Today, the rich guys are sign companies and demolition companies. In Dallas two brand new, never-occupied branches of WaMu just got bulldozed because Chase didn't need them and de novos are like carpets and gas pedals from recalled Toyotas - they're not in high demand. What's interesting about these demolitions is the buildings were brand new but with built-in use restrictions. As the Dallas Morning News reported, "a vault isn't a walk-in refrigerator, and you can't dispense a hamburger through a tube." The only potential tenants these days appear to be the purveyors of gas and fast food.

When banks disappear, it's likely that someone at the top six bank tech companies is going to do a quick scramble, using the now highly sophisticated database capabilities of these companies, to determine the following:

Was the bank our customer? If yes, bad news Is the acquiring bank our customer? If yes, good news Will the increase in volume now justify more interest in discretionary technologies? If yes, better news Is the FDIC our new customer? If yes, OK news as long as the FDIC fund doesn't dry up

To predict which bank tech company gains or loses is something even the Gillis Guess-O-Meter can't figure out. Technology never saved a bank from failure nor has it propelled it to new levels of excellence. People do those things. So to a large extent, the relationship reps of bank tech companies should be working with bankers to relieve the FUD factor so both parties can continue to increase efficiency in banking. To do that bankers have to finish putting out fires, and focus on the next round of risks that surely is lurking in some kind of portfolio with a name that no one understands or can embrace. Anyone interested in "Securitized payday loans for the unemployed, insured by credit default swaps funded by the Stimulus Plan for Contingency Events, established by FEMA, now paying a 12% return based on historical Ponzi Rating Data, and approved by the Congress during August?"

A healthy banking system is the best shot in the arm for tech companies that need even a modest native revenue growth rate of 2% just to stay on the "still here" list. Next week, I'll write about another problem vendors have that has no relationship to health.

Credits: Highline Data is the best numbers cruncher I know, and it supplies the "census" not just every ten years, but whenever I need to know. Thanks, Dave.